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Money laundering industry

Money laundering industry
Highlights

The post-demonetisation India has seen a flourishing money laundering industry. There is a frantic bid to convert illicit demonetised notes into legal currency. 

The post-demonetisation India has seen a flourishing money laundering industry. There is a frantic bid to convert illicit demonetised notes into legal currency.

The illicit business in gold, diamonds, foreign exchange and even new notes is in full spate, making a windfall due to demonetisation the most unlikely thing to happen.

Demonetised notes are converted into foreign exchange by paying inflated price for dollars through hawala transactions. Such illegal operations in foreign exchange can distort the rupee exchange value, making our external sector vulnerable.

The government has provided certain exemptions for the convenience of the people. But, these are increasingly turning out into an opportunity for money laundering.

Petrol pumps, hospitals, bullion, jewellery, diamonds etc., are used as channels for laundering black money held in cash.

The demonetised notes are reportedly even smuggled to neighbouring countries like Nepal and Bhutan where Indian currency is widely used and exchanged.

There are even reports on real estate deals in demonetised notes. The legal limit of Rs 2.5 lakh served as a window. Even Jan Dhan accounts are not spared.

Temples are also being used for this purpose as donations in old notes to religious institutions are exempted from the ban.

Some banks and post offices are also acting as places of money laundering. The reports of even CBI investigating such cases are an illustration of this unholy nexus.

People with political and economic clout in connivance with authorities concerned could get large volumes of new notes in exchange for withdrawn currency. What is being reported in the media is only a tip of the ice berg.

Hoarders of undeclared cash are exchanging it at a commission. Intermediaries are organising such middlemen who can take legally explainable cash to the banks acting as benamis for those who have unexplainable currency notes rendered to be illegal tender.

Income from agricultural operations is not taxable in India. Many black money holders already acquired huge tracts of land as it is the most vulnerable sector.

The same people can now show their cash as income from farming. Intermediaries who can show the cash as income from agriculture are also operating as agents for hoarders of unexplainable cash. All such people can deposit such cash with impunity.

Honest Indians are caught in cash chaos. Livelihoods are disrupted. Economies are getting contracted due to squeezing of cash.

But, money laundering networks are spreading across the country, though all kinds of markets are adversely hit. The agents of money laundering are more creative than Indian monetary authorities.

Reports indicate that even planeloads of banned cash are transported to North Eastern states which enjoy exemption from restrictions and taxes.

The reports even indicate that firms with high turnover are also operating as agents of money laundering as they can show it as revenue.

This problem is because of the way the menace of black money is addressed. The demonetisation attacks only the wealth held as stock in the form of cash.

But, it does not address the flow of black income. Precisely these channels of flow are now exploited to subvert the avowed benefits of demonetisation.

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