Black Money

The term ‘Black Money’ has increasingly become part of the global financial lexicon. While its connotation may vary regionally, the core issue it represents – illicit finances – is universal. This blog aims to define ‘Black Money’ and explore its implications in the Anti-Money Laundering (AML) realm.

07/06/2023

Definition

‘Black Money’ generally refers to funds earned on the black market, on which income and other taxes have not been paid. It also refers to money that is illegally obtained or not declared for tax purposes. These funds can be generated through illegal activities, corruption, tax evasion, or unreported employment.

The existence of such money is detrimental to economies, as it represents a leakage from the formal economic system and can lead to decreased tax revenue, increased income inequality, and distorted economic statistics.

Practical Example

Let’s illustrate this with an example:

An individual runs a successful business but under-reports their income to evade taxes. This unreported income is considered ‘Black Money.’ To use these funds without raising suspicion, the individual might launder this money through various channels, such as purchasing assets or making investments, thereby integrating the illicit money back into the legitimate economy.

Statistics and Relevant Numbers:

While it’s challenging to accurately measure the extent of Black Money due to its clandestine nature, estimates suggest it represents a significant portion of the world’s economy. According to the International Monetary Fund (IMF), shadow or underground economies (which produce Black Money) accounted for about 15% to 24% of global GDP in 2015.

Conclusion

Tackling the issue of Black Money is integral to achieving financial integrity, economic stability, and social justice. This requires concerted effort from governments, financial institutions, businesses, and individuals.

In this endeavor, an essential ally can be the Kyros AML Data Suite. This Anti-Money Laundering (AML) compliance software-as-a-service (SaaS) provides robust tools such as real-time transaction monitoring, risk scoring, and regulatory reporting.

Kyros AML Data Suite can help identify suspicious financial patterns that might indicate the laundering of Black Money. Its advanced risk scoring feature can help prioritize high-risk transactions, enabling timely and focused investigations.

By leveraging advanced technology like Kyros AML Data Suite, financial institutions can play a vital role in identifying, reporting, and ultimately reducing the flow of Black Money. This not only helps maintain regulatory compliance but also contributes to the broader societal effort to combat financial crime and foster economic fairness.