This is Presentation on Demonetization and Money Laundering. In which topic explanation is given and its impact on economy is described.

1. Demonetization and Money
Laundering

2. Topics Covered under Demonetization :
 Introduction of Demonetization.
 Demonetization History and Background in India ?
 Why Demonetization is Required?
 Government’s Demonetization Strategy
 Negative Impact of Demonetization.
 Ways used to convert black money after demonetization.
 Impact of demonetization

3. Demonetization :
 Demonetization is the withdrawal of a particular form of currency from circulation.
 It is the process by which series of currency will not be legal tender.
 The series of currency will not acceptable as valid currency.
 It occurs whenever there is a change of national currency .

4. Demonetization History and Background in
India ?
 First time in India it was done in year 1946 with complete ban of ₹ 1,000 and ₹ 10,000 notes to
deal with the black money.
 Second time it was done in year 1978 by the govt. headed by Shri. Morarji Desai when ₹ 1,000 , ₹
5,000 and ₹ 10,000 were demonetized.
 Last year on 8th November, massive step of demonetization was taken by the government,
demonetizing the currency notes of ₹ 500 and ₹ 1,000.

5. Why Demonetization is Required?
Benefits pertaining to demonetization are :
 To control and combat the Black money presented in the economy.
 To combat with corruption and crime an ill effect of society.
 Fight from the terrorism and prevent terrorist funding.
 To eliminate counterfeit currency which have been used by terror groups to fund terrorism in India.
 Control the inflation which is high due to lot of illegal and counterfeit currency in the market.
 To discourage cash – dependent economy and promote digital transactions.

6. Government’s Demonetization Strategy
 Boost deposit base and savings.
 Improve monetary transmission and reduce lending rates.
 The demonetization drive of higher denominated notes should give a push to cash deposits in Jan
Dhan accounts.
 Benefits from higher income tax collections.
 Support government finance.

7. Ways used to convert black money after
demonetization.
 Converting black money into Gold .
 Donations in temples and others .
 Multiple bank transactions .
 Booking large number of tickets in railways and airways .
 Depositing money in the accounts of their parents.
 Deposits of money in various accounts ( Jan dhan, Dormant Account)
 Relatives and friends.
 Enticing people with some percentage of money for exchange.

8. Negative Impact of Demonetization.
Some of negatives are associated with demonetization.
 Adverse Impact on Informal Sectors.
 Plight of Primary Procedures.
 Non-acceptance of old currency regardless government orders.
 Excessive burden on bank employees.
 Decrease in Demand.

9. Impact of demonetization
 Eradication of Black Money and Corruption .
 Rise in Cash less economy : High jump in usage of digital transactions.
 End of Terrorist, Maoist and Naxalites Activities.
 Hawala transactions : Demonetization has crippled the hawala rackets.
 Prevent Human Trafficking.
 Identification of large no. of Shell Companies .
 Taxpayers base increased.

10. Topics Covered under Money Laundering:
 Introduction of Money laundering.
 Money laundering Process.
 Process : Placement, Layering and integration.
 Ways used to Launder money.
 Measures and Initiative taken by government.
 Demonetization is used as a tool in money laundering and other illegal activities.

11. Money Laundering
“Cleaning of money”

12. Money laundering
 Money laundering is the practice of conversion of profits from illegal activities into financial assets
which appears to have legitimate origins.
 Money Laundering as per section 3 of the Prevention of Money Laundering Act,2002:-
“Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or
is actually involved in any process or activity connected with the proceeds of crime and projecting
it as untainted property shall be guilty of offence of money laundering.”.

13. Money Laundering of proceeds and profits
from unauthorized economy
ROBBERY
DRUG
TRAFFICING
PROSTITUTIO
N
TERRORIS
T ACT
HUMAN
TRFFACKIN
G
CORRUPTIO
N
CRIMINAL
ACTIVITIE
S
KIDNAPPIN
G
SMUGGLING
EXTORTIO
N
GAMBLING

14. Money laundering Process
Placement
Layering
Integration

15. Placement
• Getting
currency into
the financial
system so as
to convert
illegal funds
from cash
straight into
financial
instrument or
bank account.
Layering
• The
movement of
funds from
institution to
hide the
source and
ownership of
the funds,
obscure the
audit trail and
server the link
with the
original crime.
Integration
• The
reinvestment
of those funds
in an
ostensibly
legitimate
business so
that no
suspicion of
its origins
remains and
to give the
appearance
of legitimizing
the proceeds.

17. Ways used to Launder money.
 Stock Markets
 Agricultural Products (as there is no income tax and mostly the transactions are on cash basis)
 Property Market .
 Creating Bogus Companies
 Showing Loans.
 False Export Import Invoices.

18. Measures and Initiative taken by
government
 Enactment of Prevention of Money Laundering Act, 2002 to prevent money laundering activities.
 Board and management oversight of AML risks.
 Giving investigative powers to the CBDT (central board of directive taxation) to investigate possible
cases of tax evasion.
 Creation of various SIT (special investigative teams) for the sole purpose of tackling problems of
black money.
 Internationally, India has signed DTAAs with many nations thereby controlling tax evasion by
investors from other nations.
 India is also a full member of the FATF - Financial action task force

19. Demonetization is used as a tool in money
laundering and other illegal activities.
The impact of Demonetization has been observed across the political and economic environment in
India.
 After Demonetization , corrupt officers, money launderers are under threat as income tax
department is taking all the measures to track such people.
 Tax Payment most of the business man who have hiding such business income are ready to pay
advance tax as current year income. Tax payers who have been hiding some income can come
forward to declare income and pay tax on the same.
 Required to submit PAN for any deposits above 50000 Rs. In cash.
 Transparency increases.
 End of huge donation.
 Huge denomination used by Naxalites , Terrorist for funding.
 Corrupt people frightened due to demonetization.

20. Conclusion
 Demonetization is used as an effective tool for minimizing money laundering and other illegal
activities.
 The government has succeeded in employing digital transactions which can be traced and
government can keep an eye on every transactions.
 This gave rise to e-wallets which facilitated people in doing online transactions.

21. Thank You
Thank you for your passionate listening .
“Clean City Clean India”
Prepared By:
Palash Jain