Money Laundering and FEMA Violations

The Foreign Exchange Management Act, 1999 (FEMA) is an Act of the Parliament of India "to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India". Under FEMA, any violation can lead to only a civil liability as contemplated under section 13 of the said Act. The DOE, has no power of arrest or to seek the presence of a person for custodial interrogation. The powers of the officers of DOE are akin to those available under section 131 of the Income Tax Act, which invest an officer with the same powers, which are vested in a civil court. In this behalf reference was made to Sections 30(b), 31 and 32 of the Code of Civil Procedure, 1908 (in short the CPC)

Money laundering is the process in which the proceeds of crime are transformed into ostensibly legitimate money or other assets. However, in a number of legal and regulatory systems the term money laundering has become conflated with other forms of financial crime, and sometimes used more generally to include misuse of the financial system (involving things such as securities, digital currencies, credit cards, and traditional currency), including terrorism financing, tax evasion and evading of international sanctions. Most anti-money laundering laws openly conflate money laundering (which is concerned with source of funds) with terrorism financing (which is concerned with destination of funds) when regulating the financial system.

Money obtained from certain crimes, such as extortion, insider trading, drug trafficking, illegal gambling and tax evasion is sometimes tried to be pushed into the economic system. It needs to be cleaned to appear to have derived from non-criminal activities so that banks and other financial institutions will deal with it without suspicion. Money can be laundered by many methods, which vary in complexity and sophistication. Money Laundering usually happen through business or trade. Adjusting invoice prices up or down to disguise the movement of money. Other favorites include shell companies, round-tripping, bank captures, casinos, and many more.

The elements of the crime of money laundering are generally: