An eye-opener on money laundering

BOOK REVIEW

When a huge parallel economy - the so-called "black-economy" - co-exists with the legitimate economy of a country, it stands to reason that there will be attempts to legitimise the illegal money. And this is what money laundering is all about.

Ashok Arya's book on Money Laundering makes a successful attempt to look into the genesis of money laundering in the country and what can be done to minimise this menace.

The book takes a close look at why how and why money laundering is so rampant in the country and whether the various enforcement authorities have been able to do anything about it.

Arya is eminently placed to author the book since he is the Additional Commissioner of Customs and Central Excise and is currently working as the deputy director with the Directorate of Enforcement, Ministry of Finance in the central government.

He has also been with the Directorate of Revenue Intelligence. With such an impressive background, he brings to bear his combined experience in the various departments in order to delve into the difficult subject.

It is interesting to note that India - where the term `black-money' is used very loosely and freely - did not have any specific law on money laundering till early last year. It was only in January 17, 2003 that the President of India gave his assent to a law on money laundering called, Prevention of Money Laundering Act dealing specifically with money laundering.

Incidentally the now-defunct FERA (Foreign Exchange Regulation Act) which was criminal in nature was more effective in deterring foreign exchange hawala racketeers than its replacement Foreign Exchange Management Act (FEMA) which is civil in nature.

For those who feel that if illegal money is being legitimised then it should actually boost the economy the author has the answer - infusion of laundered money drives up purchase prices, it may ben engaged in non-productive consumption and the main negative concequence would be on the stability of the financial system.

"Large scale money laundering operations can put at risk s smaller nation's entire financial system through the loss of credibility and investor confidence."

The book provides some interesting insights into the process of money laundering and its various constituents. While `hawala' is a much maligned word in the Indian financial and corporate circles it is interesting to note that the word actually means `trust' or `exchange' and it is a very efficient alternative remittance system enabling transfer of funds without their actual physical movement. The book however suffers from some gaps.

For instance, there is no data on money laundering in the Indian context. The book would have been far more richer if there had been some anecdotal examples of actual money laundering in India and it would have made interesting reading too.

The chapter on combating money laundering in India merely deals with the various extant laws in place rather than actual real life examples and how they can be beefed up to combat the menace.

Summing up, the book is an interesting read from the point of view of a reader who wishes to get a good overall grasp of the subject of money laundering. It comprehensively covers most of the points and further is written in a lucid language with as minmum of jargon, other than what is inevitable. A difficult subject has been handled with absorbing simplicity.

Money Laundering by Arya Ashok Kumar
Publisher: Taxmann; Rs 195