Q5.Money laundering poses a serious threat to a country’s economic sovereignty. What is its significance for India and what steps are required to be taken to control this menace?

Money laundering, legitimizing illicit funds through placement, layering, and integration, gravely threatens economic sovereignty by fostering a parallel economy and eroding financial integrity.

• Economic Impacts: It creates a parallel economy, facilitates tax evasion, distorts financial markets, deters FDI, fuels inflation, and undermines legitimate economic growth.
• Security and Governance: Funds terrorism, drug trafficking, and organized crime, destabilizing national security. It also promotes corruption, weakens state institutions, and erodes public trust.

• Domestic Framework: India utilizes the PMLA 2002, enforced by the ED, with support from FIU-IND and strict KYC norms.
• Global Cooperation: Adherence to FATF recommendations, robust international cooperation, intelligence sharing, and technological solutions are vital.

Combating money laundering demands a comprehensive strategy combining strong domestic legislation, vigilant enforcement, and proactive global collaboration to protect India's economic stability and national security.