The Effectiveness of the Prevention of Money Laundering Act, 2002 in the AI Era: A Legal and Technological Analysis

Written by: Aniket Chakraborty, B.A.LL.B , School of Law, Lovely Professional University

Abstract

Socio-economic crimes like money laundering, financial frauds, and white-collar crimes not only compromise the stability of financial institutions but also reduce public trust in regulatory bodies. In India, the Prevention of Money Laundering Act, 2002 (PMLA) is the key legislation to combat socio-economic crimes. However, with the changing dynamics of financial activity, strict traditional compliance is no longer enough to address emerging concerns. Implementation of Artificial Intelligence (AI) in Fintech and regulatory platforms has created opportunities to track illicit behaviours, increase compliance and detect red flags in real time. This article analyses the efficacy of the PMLA in India to fight money laundering and implications of AI applications for Fintech regulation and investigations. Methodology of the study is doctrinal and analytical supplemented by a comparative study of the international standards regarding money laundering. It also includes such AI applications as blockchain assessments, digital tracking of transactions, forensic accounting and aspects of the ethics of surveillance and the privacy of others and responsibility. Finally, this paper demonstrates that, in addition to the fact that PMLA is already well-suited to serve as a basis for regulation, it also should, in fact, work in tandem with AI foundations, transparency and compliance. The closing section reiterates the significance of policymaking, investment in technology and global standards to enhance India's capacity to deal with socio-economic crimes in AI era.

Keywords: Money Laundering, Cryptocurrency Frauds, White Collar Crimes, Artificial Intelligence

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Volume 1 | Issue 6