$1 trillion laundered every year in India: Report

August 5th, 2008 - 7:09 pm ICT by IANS  

A file-photo of KPMG

Mumbai, Aug 5 (IANS) Over $1 trillion is being laundered every year by drug dealers, arms traffickers and other criminals in India, according to a report by audit and consulting firm KPMG released here Tuesday. The report comes close on the heels of the murky cash-for-vote controversy that erupted in parliament during the trust vote July 22, reflecting the country’s parallel economy.

Quoting from the 2008 International Narcotics Control Strategy Report, prepared by the US Department of State, KPMG said India’s emerging status as a regional financial centre and informal cross-border money flows are the main contributors to growing money laundering in the country.

“Some common sources of illegal proceeds in India are narcotics trafficking, illegal trade in endangered wildlife, trade in illegal gems (diamonds), smuggling, trafficking in persons, corruption, and income tax evasion. India continues to be a drug-transit country,” the US narcotics survey has said.

KPMG feels that in future, the major challenge for the finance sectors like banking, brokerage houses and insurance companies would be combating money laundering and terrorist financing.

KPMG’s report also highlighted the vote of confidence in parliament, which exposed the prevalence of unaccounted for money in the country.

“A few politicians threw a large sum of cash in parliament and alleged that there was an attempt to bribe them for their vote. This confirms the continued existence of a parallel banking system popularly called as ‘hawala’,” it said.

“According to Indian observers, funds transferred through the hawala market are between 30 to 40 percent of the formal market,” the report said, and noted that the central Reserve Bank of India estimated official remittances to the country to be around $28.2 billion.

The report suggests for India to reduce the informal money transfer channels it needs to focus anti-money laundering (AML) policies and procedures, formal monitoring of AML systems and controls, and ensuring sanctions compliance.

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