In which way Money Laundering is happening in India?

Hawala is an alternative or parallel remittance system. It exists and operates outside of, or parallel to 'traditional' banking or financial channels. It was developed in India, before the introduction of western banking practices, and is currently a major remittance system used around the world. In hawala networks the money is not moved physically.

A typical hawala transaction would be like a resident in USA of Indian origin doing some business wants to send some money to his relatives in India.The person has option either to send the money through formal channel of banking system or through the hawala system.

The commission in hawala is less than the bank charges and is without any complications for opening account or visit the bank, etc. The money reaches in to the doorstep of the person’s relative and the process is speedier and cheaper.

The insurance sector is a relatively less haunted sector compared to banks and other avenues of financial services.  However, there has been a gradual increase in laundering activity in insurance as well. The Laundering in insurance is either internal or external in nature.       

The internal channels of laundering money are agent/broker premium diversion, reinsurance fraud and rented asset schemes etc. Phony insurance companies, offshore/unlicensed Internet companies, staged auto accidents, viatical and senior settlement fraud are external channels of money laundering.

1. Reduce Taxes. Make Income Tax a flat 10%. Bring more people into the tax bracket. Then Black money that would be needed to be laundered would reduce.
2. Use UID : Use Electronic Smart Cards for future transactions. This way, the govt. can keep track of the transactions and also reduce bribery.
3. Bribery Control : Tuff Laws, better law enforcement and check and balance and control mechanism, etc., all these and more

or

  a total shift in the way we tackle bribery – i.e. make it official with a   rate cards for each work :-)

Hawal transactions are one of the most effective tools of finacial model, which has made the banking sector huffing and puffing.

Its the same as counterfeit brands/ pirated software/music or illegal immegrants.

One of the curse of such a system is that it wrecks havoc to legitimate business process but we cant ignore it.

India and specially countries where there is a huge parallel economy, which is funded by illegal source of money, Haval transactions can not be curtailed only by governmental agencies, but it can be minimised only through international cooperation between all the countries.

There are several ways by which money laundering is taking place. We might not be able to count all the no of ways. Some of them are OPPENING OF MULTIPLE BANK A/CS, BANK A/CS IN COOPERATIVE BANKS, TAKING MEMBERSHIP OF GROUP HOUSING SOCIETIES, ISSUE OF FAKE PURCHASE BILLS, SHOWING IN THE BOOKS THAT YOU HAVE TAKEN A LOAN FROM YOUR FRIEND OR RELATIVE, OPERATING BOGUS EXPORT OR IMPORT SOLE PROPRIETORSHIP COMPANIES, HAWALA OFCOURSE, BETTING THROUGH CONTACTS, AND THE LIST GOES ON. AND ON.

This is prevalent in transactions between traders, companies placed in different countries

Money launderers have traditionally targeted banks, which accept cash and facilitate domestic and international funds transfers. However, the securities markets, which are known for their liquidity, may also be targeted by criminals seeking to hide and obscure illicit funds. Money launderers can target any of the various types of businesses that participate in securities industry. Broker-dealers, for instance, provide a variety of products and services to retail (usually individual) and institutional investors—buying and selling stocks, bonds, and mutual fund shares.

This is moreover possible due to the instruments like Hedge Funds and Participatory Notes which have very limited disclosures as to the source. These funds can be effectively used as Laundromats. Although the number of documented cases in which broker-dealer or mutual fund accounts have been used to launder money is limited, law enforcement agencies are concerned that criminals may increasingly attempt to use the securities industry to launder money. This is a new area which requires a serious thought processing.

In India, there are so many agents, mediators are available for any work. Same in this case a lot of agents are hired by people to shifting money from one place to another..