Explain what do you understand by the term 'Money Laundering'.

In the Prevention of Money Laundering Act, 2002, money laundering is defined as "any process or activity connected with proceeds of crime including its concealment, possession, acquisition, or use and projecting or claiming it as untainted property. Laundering means acquiring, owning, possessing or transferring any proceeds (of money) of crime or knowingly entering into any transaction related to proceeds of the crime either directly or indirectly or concealing or aiding in the concealment of the proceeds or gains of crime. It is a process for conversion of money obtained illegally to appear to have originated from legitimate sources. Generally, there are three stages through which money laundering takes place. The first step is called the Placement , whereby the cash is deposited in the domestic banks or is used to buy goods such as precious metals, work of art, etc. The second step is called the Layering . Once the funds enter into the financial system (banks), the funds are converted by transfers to different destinations. This stage is called as layering. At different locations bank accounts are opened and the funds are transferred as quickly as possible (some time breaking into series of small transactions to escape from the limits set up by banks for cash transactions). The movement of fund sometimes spread across countries. The last stage is called the Integration . In this stage, the launderer attempts to justify that the money obtained through illegal activities is legitimate. Through different methods attempts are made at this stage like using front offices of the companies, using the tax haven and off shore units, using these funds as security for loans raised, etc. Money laundering is considered as criminal offence in most of the countries.