One of the most important reasons why i am fascinated by ML is that how it can affect decision making at the government level and its impact on policy making.

Consider this:

The government collects data from various sources. According to the info from this data, it frames policies and takes decisions regarding various aspects of governance, almost all of them leading to some or the other financial impact on the public resources.

Now, what ML does is that it distorts the situation and the true picture never emerges.

Thus, there are chances that the decisions made are wrong and the scarce resources are wasted. To replenish the funds wasted, the Govt increases or introduces newer forms of taxes to collect funds from the public. Since the intention of the Govt is to raise as much money as possible, it introduces simplified tax schemes such as VAT, Service tax etc, under which the Govt is more than willing to accept numbers related to financial performance as declared by the business owners. Although there are very good reasons for such simplified tax schemes, these schemes ultimately become routes under which the launderers carry on thier business much more easily. This leads increase in ML activity and ultimately, to more and more distortion of the true picture of the economic condition of a place. And so, the cycle continues.

It has been proved in many research studies that the local Govt actually benefits from a lax financial system which does not catch the launderers or treats them lightly, because of the tendency of the launderers to pay more and more in taxes (for no questions being asked). For a developing country or a poor country for that matter, this becomes a source of money. And hence they turn a blind eye to the phenomenon, not to mention the benefits of these channels being made available to the corrupt politicians and administrators of the country.

Thus, whenever a country passes an Anti-Money Laundering law, i tend to doubt the sincerity. The implementation as always is very poor. Does anyone remember any politician in this country being implicated for money laundering?? I don't!!!

Another reason why ML fascinates me is that everyone is aware of it. But nobody is willing to do anything to either curb it or to catch the people involved in ML.

ML has been present for ages. The ancient traders used it to avoid taxes levied by kings. Even the British East India Company used it during the Opium Wars with China. Even today, covert Govt operations use the same laundering processess to each money to their agents in the different parts of the world. Had it been just businesses cleaning up money to reduce their tax burden, i am sure the society would be tolerant enough to allow it to continue, as after all it is a fight between the Govt and the Business houses. One is chasing increase in tax revenues and the other is trying to avoid the tax burden. But when you factor the possibility of a terrorist network or a drug network using the same money channels to transfer funds, then these channels become tools of destruction. I am yet hear a single news story of the financial channels of such terrorist networks being cracked here in India. (Please let me know if you have.... would be interesting reading!!). And this worries me!!!

If you bring in the chances that an un-suspecting investment banker may be fooled into being a conduit (since one can NEVER ask the investor about the source of HIS money), i just get worried that may be there are not enough professionals in the industry who can distinguish between a possible ML operation and a genuine investment flow of funds. Factor in the CA community, which i know for a fact is sometimes hand-in-glove with ML operators (with all due respect to all the CA's i know.... they were the ones who opened my eyes to this reality and trained me to keep my eyes open) and you have a dangerous mix of people who either knowingly or unknowingly are part of ML operations and vrey much a part of the "White Collar Society"!!

Whom to trust under these circumstances???