Money Laundering and Betting Apps

India has established a comprehensive legal framework to combat money laundering, regulate financial transactions, and address issues arising from illegal betting activities and informal remittance systems like hawala. Below is an overview:

Money Laundering in India

  • Definition: Process of disguising the origin of illegally obtained money by passing it through a complex sequence of banking transfers or commercial transactions.
  • Stages of Money Laundering:
    • Placement – Introducing illegal money into the financial system.
    • Layering – Moving money through multiple transactions to obscure its origin.
    • Integration – The money is reintroduced into the economy as legal assets.

Laws Related to Money Laundering

  • Prevention of Money Laundering Act (PMLA), 2002
    • The primary law to combat money laundering in India.
    • Enforced by the Enforcement Directorate (ED) .
      Punishment: Up to 7 years of imprisonment and confiscation of property.
    • Financial institutions are required to maintain records and report suspicious transactions to the Financial Intelligence Unit (FIU-IND) .
    • 2023 Amendment: Expanded the scope to cover financial technology (FinTech) firms, crypto exchanges, etc.
  • Foreign Exchange Management Act (FEMA), 1999
    • Regulates cross-border movement of money.
    • Violations include illegal remittances, unauthorized foreign exchange trading.
  • Benami Transactions (Prohibition) Act, 1988 (Amended in 2016)
    • Prevents illegal transactions where property is held in someone else’s name.
  • Companies Act, 2013
    • Section 447 deals with fraud, shell companies, and illegal financial transactions.
  • Indian Penal Code (IPC), 1860 & Code of Criminal Procedure (CrPC), 1973
    • Section 420 (cheating), Section 120B (criminal conspiracy), Section 406 (criminal breach of trust).
  • Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
    • Targets unaccounted wealth stored abroad.

Hawala Transactions

  • Definition: An informal and illegal method of transferring money without actual movement of cash, based on trust networks.
    Key Features:
    • Operates outside the formal banking system.
    • Used for money laundering, terror financing, and evading taxes.

Laws Governing Hawala Transactions

  • PMLA, 2002 – Treats hawala as a method of money laundering.
  • FEMA, 1999 – Prohibits unauthorized foreign exchange transactions.
  • Unlawful Activities (Prevention) Act (UAPA), 1967 – Used if hawala is linked to terror financing.
Money Laundering and Betting Apps

Money from Betting Apps

  • Problem:
    • Online betting platforms operate in a legal grey area.
    • Funds from betting apps often go through hawala or cryptocurrency transactions to evade detection.
    • Money laundering through offshore accounts and shell companies .

Acts to Prevent Betting & Online Gambling

  • Public Gambling Act, 1867
    • Outlaws physical gambling houses but does not explicitly cover online betting.
  • Information Technology Act, 2000
    • Section 67 prohibits the publication/transmission of obscene or illegal content, which extends to illegal betting apps.
  • FEMA, 1999 : Prohibits unauthorized transactions involving foreign betting companies.
  • Law Commission of India’s 276th Report (2018)
    • Suggested legalizing and regulating betting to curb illegal transactions.
  • State-Level Laws: States like Telangana, Andhra Pradesh, Tamil Nadu, and Karnataka have banned online gambling.
    • Meghalaya and Sikkim have legalized and regulated online gambling.
  • Central Government Regulations (2023)
    • MeitY (Ministry of Electronics and IT) was assigned to regulate online gaming and betting apps.
    • Mandated self-regulation for gaming platforms, restricting real-money gambling apps.

Enforcement & Agencies Involved

  • Enforcement Directorate (ED) – Investigates PMLA violations.
  • Financial Intelligence Unit (FIU-IND) – Monitors suspicious financial transactions.
  • Reserve Bank of India (RBI) – Regulates financial institutions and cross-border transactions.
  • Income Tax Department – Investigates undisclosed income and tax evasion. Cyber Crime Cells – Investigates digital financial frauds, including betting apps.
  • SEBI (Securities and Exchange Board of India) – Monitors stock market frauds linked to laundering.

Recent Developments (2024-2025)

  • Crackdown on Social Media Influencers & Celebrities
    • ED and IT Department are investigating influencers endorsing illegal betting apps.
    • Huge transactions linked to offshore accounts have been detected.
    • Bollywood and regional actors questioned for brand endorsements.
  • ED Action Against Online Betting Apps
    • Raids on operators of Chinese-controlled betting apps laundering money.
    • Assets worth hundreds of crores seized.
  • Global Coordination
    • India working with Interpol and FATF (Financial Action Task Force) to combat international money laundering networks.

Way Forward

  • Strengthen Laws – Need a dedicated law to regulate online gambling.
  • Strict KYC Norms – Enforce stronger KYC for digital payments.
  • International Cooperation – Work with FATF, Interpol to tackle cross-border hawala.
  • Financial Literacy – Educate the public about financial frauds in betting apps.
  • Regulation, Not Just Bans – Some experts suggest regulating betting with taxation rather than blanket bans.