Money Laundering Explodes to Turn India's Black Money White

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Agents offering to launder money are using creative means, including flying banned cash by the planeload to northeastern states exempt from restrictions as well as connecting people to high-turnover businesses that can deem old cash as revenue, keep a portion of it, and return the rest, according to people involved in the networks. Premiums range from 10 percent to 50 percent, depending on the difficulty, they say. At least one property brokerage is offering to arrange the sale of apartments using banned money in an upscale suburb of Mumbai that's popular with Bollywood movie stars.

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"The whales and sharks will break out of this net easily and find a way to pump their money back into system through organized networks," said C.H. Venkatachalam, general secretary of the All India Bank Employees Association, a union representing 500,000 bank personnel. "It is not easy to cull out the black money from India's economy, and the real big players are tough to touch. "

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There's big risk in transporting currency notes. Apart from theft, income tax authorities or police officers could intercept mass cash transports and impound them. Yet the hawala system, at least, uses trust as a bedrock, and those involved honor their commitments or face repercussions, the lawyer said. The hawala network, a centuries-old system of moving cash around the Muslim world outside formal banking channels, has become active in India only in the past few decades.

People are also taking things into their own hands. They use household staff or people with little money to move their currency notes into bank accounts of multiple people below the 250,000 rupees limit that triggers inquiries from the tax department.