Money laundering is a deliberate and serious crime of financial nature and refers to the process of making illegally earned money look legitimate. Such illegal activities may include drug trafficking or terrorist funding. The money has its origins from criminal activity and is illegal, however the process of laundering makes it look clean as if earned legally. Developing countries like India have been extremely vulnerable to terrorism and financial scams over the past several decades which are financed by laundered money. Despite the establishment of several regulators at different levels, this problem continues to be a national threat and jeopardize the formal economic system. Therefore, examining indicators of money laundering activities in the Indian economy is necessary. This study aims to propose an index to measure money laundering and assign weights to individual parameters to assess the extent of money laundering prevalent in an economy. The study is based on primary data gathered by seeking experts’ opinions on money laundering and its parameters of measurement. The results show that the most significant indicator for money laundering in a developing economy is terror funding. The study further highlights the need for enhanced vigilance and integrated security measures by enforcement agencies to combat money laundering across the world economies. This study would be helpful for academicians and policymakers to understand the key indicators of money laundering in an economy.