Prevention of Money Laundering Act, 2002 was enacted to prevent money-laundering and to provide for confiscation of property derived from money-laundering. 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).
The PMLA seeks to combat money laundering in India and has broadly three following 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
The act was amended subsequently in the year 2005, 2009 and 2012.
- Money-laundering is defined as 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.
- Attachment means Prohibition of transfer, conversion, disposition or movement of property by an appropriate legal order.
- Proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence.
- Payment System means 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.
PUNISHMENT FOR MONEY LAUNDERING
Punishment: Whosoever commits the offence of money laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but may extend to seven years and also be liable to a fine which may extend to five lakh rupees. If the offence relates to offences under the Narcotic Drugs and Psychotropic Substances Act, 1985, the maximum punishment could extend to imprisonment for ten years.
Attach of the tainted property: Appropriate authorities, appointed by the Govt, 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, on the basis of material in his possession, that:
- any person is in possession of any proceeds of crime;
- such person has been charged of having committed a scheduled offence; and
- such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime
Case Laws: 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 was observed that the provision violates Articles 14 and 21 of the Indian Constitution)
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.
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.
Financial Intelligence Unit (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.
These are excerpts of the few pages of ebook - Legal & Regulatory Aspects Of Banking by N K Gupta.
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