Q21. Money laundering poses a serious threat to a country’s economic sovereignty. What is its significance for India and what steps are required to be taken to control this menace?

Model Answer:

Introduction

Money laundering involves the illegal process of making large amounts of money generated by criminal activity, such as drug trafficking or corruption, appear legitimate. It is a serious threat to a country's economic sovereignty, as it undermines the financial system, attracts criminal activity, and erodes public trust.

Body

Significance of Money Laundering for India

• Economic Impact: Facilitates corruption, tax evasion, and the illegal flow of funds, affecting the nation’s GDP and financial stability.
• Loss of Foreign Investments: Countries with weak anti-money laundering (AML) frameworks risk being labeled as havens for illicit financial activities, deterring foreign investments.
• Terrorism Financing: Money laundering often supports terrorist activities, threatening national security.
• Undermining the Rule of Law: It perpetuates illegal activities and weakens legal and regulatory frameworks.

Steps to Control Money Laundering in India

• Strengthening Legal Frameworks: Enforce stricter laws like the Prevention of Money Laundering Act (PMLA) to combat financial crimes.
• Enhancing Monitoring Mechanisms: Increase surveillance of financial transactions, particularly in the banking and real estate sectors, to identify suspicious activities.
• International Cooperation: Collaborate with global bodies like the Financial Action Task Force (FATF) to monitor and control cross-border illicit financial flows.
• Public Awareness and Education: Conduct campaigns to educate citizens and businesses about the risks and prevention measures for money laundering.

Conclusion

‍Money laundering threatens India’s economic and security integrity. A robust legal framework, improved enforcement, international collaboration, and public awareness are essential to effectively tackle this menace and safeguard the nation's economic sovereignty.

‍

Instant Mains Evaluation with SuperKalam

‍