Prevention of Money Laundering Act, 2002

Prevention of Money Laundering Act, 2002 is an Act of the Parliament of India enacted by the NDA government to prevent money-laundering and to provide for confiscation of property derived from money-laundering.[1][2] PMLA and the Rules notified there under came into force with effect from July 1, 2005. The Act and Rules notified there under impose obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information in prescribed form to Financial Intelligence Unit - India (FIU-IND).[3]

The Prevention of Money Laundering Act, 2002
Parliament of India
CitationAct No.15 of 2003
Enacted byParliament of India
Enacted17 January 2003
Assented to17 January 2003
Commenced1 July 2005
Amended by
The Prevention of Money Laundering (Amendment) Act, 2005, The Prevention of Money Laundering (Amendment) Act, 2009
Status: In force

The act was amended in the year 2005, 2009 and 2012.[4]

On 24 Nov 2017, In a ruling in favour of citizens' liberty, the Supreme Court has set aside a clause in the Prevention of Money Laundering Act, which made it virtually impossible for a person convicted to more than three years in jail to get bail if the public prosecutor opposed it. (Section 45 of the PMLA Act, 2002, provides that no person can be granted bail for any offence under the Act unless the public prosecutor, appointed by the government, gets a chance to oppose his bail. And should the public prosecutor choose to oppose bail, the court has to be convinced that the accused was not guilty of the crime and additionally that he/she was not likely to commit any offence while out on bail- a tall order by any count.) (It observed that the provision violates Articles 14 and 21 of the Indian Constitution)

Objectives

The PMLA seeks to combat money laundering in India and has three main objectives:

  • To prevent and control money laundering.
  • To confiscate and seize the property obtained from the laundered money; and
  • To deal with any other issue connected with money laundering in India.[5]

Key definitions
  • Attachment: Prohibition of transfer, conversion, disposition or movement of property by an appropriate legal order.[6]
  • Proceeds of crime: Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence.[7]
  • Money-laundering: Whosoever directly or indirectly attempts to indulge or assist other person or actually involved in any activity connected with the proceeds of crime and projecting it as untainted property.[8]
  • Payment System: A system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them. It includes the systems enabling credit card, debit card, smart card, money transfer or similar operations.[9]

Salient features

Punishment for money-laundering

The Act prescribes that any person found guilty of money-laundering shall be punishable with rigorous imprisonment from three years to seven years and where the proceeds of crime involved relate to any offence under paragraph 2 of Part A of the Schedule (Offences under the Narcotic Drugs and Psychotropic Substance Act, 1985), the maximum punishment may extend to 10 years instead of 7 years.[10]

Powers of attachment of tainted property

The Director or officer above the rank of Deputy Director with the authority of the Director, can provisionally attach property believed to be "proceeds of crime" for 180 days. Such an order is required to be confirmed by an independent Adjudicating Authority.[11]

Adjudicating Authority

The Adjudicating Authority is the authority appointed by the central government through notification to exercise jurisdiction, powers and authority conferred under PMLA. It decides whether any of the property attached or seized is involved in money laundering.[12]

The Adjudicating Authority shall not be bound by the procedure laid down by the Code of Civil Procedure,1908, but shall be guided by the principles of natural justice and subject to the other provisions of PMLA. The Adjudicating Authority shall have powers to regulate its own procedure.[13]

Presumption in inter-connected transactions

Where money laundering involves two or more inter-connected transactions and one or more such transactions is or are proved to be involved in money laundering, then for the purposes of adjudication or confiscation, it shall presumed that the remaining transactions form part of such inter-connected transactions.[14]

Burden of proof

A person, who is accused of having committed the offence of money laundering, has to prove that alleged proceeds of crime are in fact lawful property.[15]

Appellate Tribunal

An Appellate Tribunal is the body appointed by Govt of India. It is given the power to hear appeals against the orders of the Adjudicating Authority and any other authority under the Act.[16] Orders of the tribunal can be appealed in appropriate High Court (for that jurisdiction) and finally to the Supreme Court[17]

Special Court

Section 43 of Prevention of Money Laundering Act, 2002 (PMLA) says that the Central Government, in consultation with the Chief Justice of the High Court, shall, for trial of offence punishable under Section 4, by notification, designate one or more Courts of Session as Special Court or Special Courts for such area or areas or for such case or class or group of cases as may be specified in the notification.

FIU-IND

Financial Intelligence Unit – India (FIU-IND) was set by the Government of India on 18 November 2004 as the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions. FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and related crimes. FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.[18]

Similar laws in other countries

Money Laundering Control Act of 1986
Main article: Money Laundering Control Act of 1986

This is an Act of the United States Congress that made money laundering a Federal crime. It criminalized money laundering for the first time in the United States.[19]

  • Established money laundering as a federal crime
  • Prohibited structuring transactions to evade CTR filings
  • Introduced civil and criminal forfeiture for BSA violations and other violations.
  • Directed banks to establish and maintain procedures to ensure and monitor compliance with the reporting and record keeping requirements of the BSA[20]

See also

References
  1. http://economictimes.indiatimes.com/articleshow/1156901.cms
  2. "Archived copy". Archived from the original on 12 June 2008. Retrieved 25 April 2008.CS1 maint: archived copy as title (link)
  3. "Section 12 of PMLA, 2002".
  4. http://indiacode.nic.in/acts-in-pdf/022013.pdf
  5. "Department of Revenue |". dor.gov.in. Retrieved 29 October 2015.
  6. "Section 2(1)(d) in PMLA, 2002". Indian Kanoon. Retrieved 10 October 2012.
  7. "Section 2(1)(u) in PMLA, 2002". Indian Kanoon. Retrieved 10 October 2012.
  8. "Section 3 in PMLA, 2002". Indian Kanoon. Retrieved 10 October 2012.
  9. "Section 2(1)(rb) of PMLA 2002". Indian kanoon.
  10. "PMLA 2002 - Section 4 - Punishment for Money Laundering". fiuindia.gov.in. Retrieved 29 October 2015.
  11. "Section 5 in PMLA, 2002". Kanoon. Retrieved 10 October 2012.
  12. "Section 6 of PMLA 2002". Indian Kanoon.
  13. "Sub-section 15 of Section 6 of PMLA, 2002". Indian Kanoon.
  14. "Section 23 of PMLA 2002". Indian kanoon.
  15. "Section 24 in PMLA, 2002". Indian Kanoon. Retrieved 10 October 2012.
  16. "Section 25 in PMLA, 2002". Indian Kanoon. Retrieved 10 October 2012.
  17. "Section 42 in PMLA, 2002". Indian Kanoon. Retrieved 10 October 2012.
  18. "About FIU-IND - Overview". fiuindia.gov.in. Archived from the original on 8 February 2014. Retrieved 30 October 2015.
  19. Cassella, Stephan (September 2007). "Money Laundering Laws" (PDF). Retrieved 2 March 2011. Cite journal requires |journal= (help)
  20. "Money Laundering control Act 1986".
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