“First conviction for the crime of money laundering in India.” Looks like India is growing in a lot of aspects. Another interesting thing in understanding the crime of money laundering is the concept of Hawala transactions.
Hawala in simple words is “trust”. It is nothing but a parallel illegal banking system running in the entire globe with widespread roots all around.
In fact, Hawala transactions appear to be logically correct but are a serious crime. To illustrate this type of transaction, consider this example:
Lets say X studies in Europe, while his parents are in India. X needs immediate money and X’s father Y in India has loads of black money. Now, because of the black money he cannot wire him through an authorized medium.
So, he approaches a Hawala agent in India and hands over the money. The Hawala operator now contacts his counterpart in Europe and asks him to hand over the money to X. In between, the agent in India and Europe earns a commission out of this transaction.
And this is how it’s a win-win situation for everyone. X got money within no time from his parents, Y could send the money to his son without any legal transaction and the agents on both sides earned without actually doing nothing but a phone call to his counterpart.
This is illegal because lot of black money transactions are involved in this system and this where the PMLA (Prevention of Money Laundering in India Act) comes into the picture.
In the case of Hawala transactions, there is no change in the foreign reserves of a country. Moreover, through this mode of transaction, you can transfer black money across nations.
This is illegal as per laws because through Hawala, a country wealth stored in the form of black money is being transferred to some other country and it is a very difficult task to even trace it, forget about bringing it back.
Adding to this, since this kind of transaction is strictly illegal, it also encourages and brings other illegal things into the picture like trade of drugs and/or smuggling. These things deteriorate a nation in all aspects. In some cases, they even trade drugs or smuggle things in order to compensate higher amounts.
Picture Courtesy: Google Images
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