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Hawala in India is prohibited under the provision of which of the following Acts

  • A.Financial Action Task Force Act
  • B.Fiscal Responsibility and Budget Management Act
  • C.Foreign Exchange Management Act
  • D.Banking Regulation Act

Answer: C

Correct answer: Foreign Exchange Management Act

Hawala transfers money across borders outside the banking system and without any foreign exchange actually crossing it, which makes it a contravention of the Foreign Exchange Management Act, 1999 (and before that of FERA). Because it leaves no audit trail it is also a route for money laundering, so the Prevention of Money Laundering Act bears on it too.

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