What Are The Harmful Effects of Money Laundering?

You are right Sangram....Laundering does promote terrorism. Besides that I would like add another idea here. Across the world, banks have become a major target of Money Laundering operations and financial crime because they provide a variety of services and instruments that can be used to conceal the source of money. With their polished, articulate and disarming behaviour, Money Launderers attempt to make bankers lower their guard so as to achieve their objective.

The dilemma of the banker in the context of Money Laundering is to sift the transactions representing legitimate business and banking activity from the irregular / suspicious transactions.

Launderers generally use this channel in two stages to disguise the origin of the funds first, when they place their ill gotten money into financial system to legitimize the funds and introduce these funds in the financial system and second, once these funds have entered the banking system, through a series of transactions, they distance the funds from illegal source.

Terrorism is an evil which affects each and everybody. Now and then we can find terrorist attacks being made by terrorists. These attacks definitely cannot be done without the help of money. Money Laundering serves as an important mode of terrorism financing. Terrorists have shown adaptability and opportunism inmeeting their funding requirements.

Terrorist organizations raise funding from legitimate sources, including the abuse of charitable entities or legitimate businesses or self- financing by the terrorists themselves.

Terrorists also derive funding from a variety of criminal activities ranging in scale and sophistication from low-level crime to organised fraud or narcotics smuggling, or from state sponsors and activities in failed states and other safe havens.

Whitewashing of 'tainted money' to legitimate one is Money Laundraying.These are done by :-

--- Illegitimate arms delalers

--- High sea dacoits and abducters

--- Drug trifickeers

--- Human ( read : women ) trafickeers

--- Terrorist Groups  etc

They use Banking channels to accumulate, often in numorous accounts, in small amounts and then tranfer such fund to a 'destination a/c' often accross the boarder as good money. Money Laundering and fund thus created is a threat to world peace, may de-throne a Govt. and may make turmoil in our society.