Day 73 – Q 3. Discuss the security threats emanating from money laundering activities. What steps have been taken by the government to check money laundering? Discuss. (15 marks)

  • IASbaba
  • April 13, 2022
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TLP-UPSC Mains Answer Writing
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3. Discuss the security threats emanating from money laundering activities. What steps have been taken by the government to check money laundering? Discuss. (15 marks)

धन शोधन गतिविधियों से उत्पन्न सुरक्षा खतरों की चर्चा कीजिए। धन शोधन को रोकने के लिए सरकार ने क्या कदम उठाए हैं? चर्चा करें।


Candidates need to explain the security threats emanating from money laundering activities. Also mention the steps taken by the government to check money laundering.


India is extensively gripped under crime of money laundering. Money laundering is usually used by criminals to hide money made through illegal act. It is the process by which huge amount of money obtained unlawfully, from drug trafficking, terrorist activity or other severe crimes. India is among the high-risk areas for money laundering. Therefore, the Indian government needs to take Anti-Money Laundering measures together with their developing economies. 

The security threats emanating from money laundering activities. 

  • Even though the use of emerging technologies like artificial intelligence, machine learning, and big data for countering financial crimes, insufficient anti-money laundering systems are contributing to increasing money laundering and terrorist financing activities. 
  • As we navigate through the debate on crypto’s future in India, mere imposing a 30 per cent tax on digital assets is not enough as money laundering and hawala-based transactions are growing significantly via cryptocurrencies on the Dark Web, putting India’s national security at risk.
  • Grave concerns are there over the misuse of digital coins on the Dark Web for terror acts and drugs trafficking by militant organisations, and for money laundering and hawala-based transactions — posing a serious threat to national security and a big challenge to the security agencies in the country.
  • We have to realise that if we do not take effective appropriate steps fast, this crypto-based tech is going to be extensively used by terrorists for the purpose of targeting the sovereignty, security and integrity of India.

Steps taken by the government to check money laundering

  • Governments have taken specific measures in the past to prevent money laundering. The purpose of these measures is to prevent financial crimes and ensure the administrative and economic stability of the country.
  • The governments of India aim to protect the country from money laundering risks through laws and legal mechanisms. 
  • India enacted the Prevention of Money Laundering Act in 2002. 
  • The laws and regulations prior to this law were insufficient to combat money laundering. 
  • The Prevention of Money Laundering Act has entered into force to combat money laundering and prevent money laundering. 
  • The money laundering crime in India has huge penalties. According to AML laws in India, people committing money laundering offenses are sentenced to up to 10 years in prison.
  •  The Financial Intelligence Unit of India (FIU-IND) is the organization responsible for the fight against the financial crimes of India under the Ministry of Finance. Businesses with AML obligations report to the Financial Intelligence Unit.
  • RBI also has some regulatory powers to prevent money laundering.
  • In addition, India is among the countries that are members of FATF. FATF is a global organization established to prevent money laundering all over the world. 
  • By publishing AML guidelines, FATF aims for countries to fight financial crime more effectively. The FATF member states’ AML regimes must comply with FATF recommendations.


There is a lot to consider regarding AML trends and typologies. The fight against money laundering and cybercrime has been an arms race since the dawn of the internet. Failure to take the necessary measures increases money laundering crimes in India and undermines India’s reputation in the international arena. Now more than ever, it’s essential to stay up to date. 


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