Context: The Central Government has issued a notification on certain changes in the Prevention of Money-Laundering Act (PMLA) some of which tend to treat money laundering as a stand-alone crime and also expand the ambit of “proceeds of crime” to assets that may have been derived from any other criminal activity related to scheduled offenses.
Ministry concerned: Department of Revenue, Ministry of Finance.
What is money-laundering?
Money laundering is the process by which large amounts of illegally obtained is given the appearance of having originated from a legitimate source. in Money laundering, the black money must involve a predicate crime such as the violation of Indian Penal Code, IPC, Narcotics, Prevention of corruption and Human Trafficking. This is because in India, stashing black money is simply a civil crime involving tax evasion, while money laundering has criminal dimensions related to black money.
Steps in Money Laundering
There are three different steps in money laundering described by three terms as follows:
- Placement: Black Money, generally in the form of cash is inserted into a legitimate financial institution.
- Layering: In this stage, the money launderer typically engages in a series of continuous conversions or movements of funds, within the financial or banking system by way of numerous accounts, so as to hide their true origin and to distance them from their criminal source. The money launderer may use various channels for the movement of funds, as a series of bank accounts sometimes spread across the globe, especially in those jurisdictions which do not co-operate in anti-money laundering investigations.
- Integration: At the integration stage, the money re-enters the mainstream economy in legitimate-looking form. This may involve a final bank transfer into the account of a local business in which the launderer is “investing” in exchange for a cut of the profits. At this point, the money can be used by the criminal without getting caught.
Prevention of Money-laundering Act,2002:
- Prevention of Money Laundering Act, 2002 is an Act of the Parliament of India enacted by the government to prevent money-laundering and to provide for confiscation of property derived from money-laundering.
- PMLA defines money laundering offense and provides for the freezing, seizure and confiscation of the proceeds of crime.
- The act was amended in the year 2005, 2009, 2012 and 2019. PMLA (Amendment) Act, 2012 has enlarged the definition of money laundering by including activities such as concealment, acquisition, possession, and use of proceeds of crime as criminal activities.
- RBI, SEBI, and IRDA have been brought under the PMLA, and therefore the provisions of this act are applicable to all financial institutions, banks, mutual funds, insurance companies, and their financial intermediaries.
- Punishment under the Act: 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 offense 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.
- Powers of attachment of tainted property: Appropriate authorities, appointed by the Govt of India, 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 ( the authority appointed by the central government through a 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.
- 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 be presumed that the remaining transactions form part of such inter-connected transactions
- A person, who is accused of having committed the offense of money laundering, has to prove that alleged proceeds of crime are in fact lawful property.
- 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. Orders of the tribunal can be appealed inappropriate High Court (for that jurisdiction) and finally to the Supreme 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.
PMLA Amendment 2019:
- The most crucial amendments are the deletion of provisos in sub-sections (1) of Section 17 (Search and Seizure) and Section 18 (Search of Persons), doing away with the pre-requisite of an FIR or charge sheet by other agencies that are authorized to probe the offenses listed in the PMLA schedule.
- Another important change is the insertion of an explanation in Section 44. “The jurisdiction of the Special Court, while dealing with the offense under this Act, during investigation, inquiry or trial under this Act, shall not be dependent upon any orders passed in respect of the scheduled offense, and the trial of both sets of offenses by the same court shall not be construed as joint trial,” it says.
- The scope of “proceeds of crime”, under Section 2, has been expanded to empower the agency to act against even those properties which “may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offense”.
- An explanation added to Section 45 clarifies that all PMLA offenses will be cognizable and non-bailable. Therefore, ED officers are empowered to arrest an accused without a warrant, subject to certain conditions.
What is 'proceeds of crime'?
“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 offense or the value of any such property.
What is a 'scheduled offense'?
- Scheduled offense means an offense specified under Part A or Part C of the Schedule of the Prevention of Money Laundering Act, 2002.
- In part A, offenses to the Schedule comprise of offenses under Indian Penal Code, Narcotic Drugs and Psychotropic Substances, Explosive Substances Act, Unlawful Activities (Prevention) Act, offenses under Arms Act, Wild Life (Protection) Act, Immoral Traffic (Prevention) Act, Prevention of Corruption Act, Explosives Act, Antiquities & Arts Treasures Act etc.
- Part ‘C’ deals with trans-border crimes and is a vital step in tackling Money Laundering across International Boundaries.
Which agency administers the Prevention of Money Laundering Act, 2002?
- The Directorate of Enforcement in the Department of Revenue, Ministry of Finance is responsible for investigating the cases of the offense of money laundering under the Prevention of Money Laundering Act, 2002.
- Financial Intelligence Unit – India (FIU-IND) under the Department of Revenue, Ministry of Finance is the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions to enforcement agencies and foreign FIUs.
- 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.