Prevention of Money Laundering Act, 2002

The Prevention of Money Laundering Act, 2002
An Act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto.
Citation	Act No.15 of 2003
Enacted by	Parliament of India
Date enacted	17 January 2003
Date assented to	17 January 2003
Date commenced	1 July 2005
Amendments
The Prevention of Money Laundering (Amendment) Act, 2005, The Prevention of Money Laundering (Amendment) Act, 2009
Status: In force

Prevention of Money Laundering Act, 2002 is an Act of the Parliament of India enacted 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 act was amended in the year 2005, 2009 and 2012.^[4]

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

Appropriate authorities, appointed by the Govt of India, can provisionally attach property believed to be "proceeds of crime" for 180days. 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

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

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

PATRIOT Act

This is an Act of the United States Congress. The act, as a response to the terrorist attacks of 11 September, significantly reduced restrictions in law enforcement agencies' gathering of intelligence within the United States; expanded the Secretary of the Treasury’s authority to regulate financial transactions, particularly those involving foreign individuals and entities; and broadened the discretion of law enforcement and immigration authorities in detaining and deporting immigrants suspected of terrorism-related acts. The act also expanded the definition of terrorism to include domestic terrorism, thus enlarging the number of activities to which the USA PATRIOT Act’s expanded law enforcement powers can be applied.^[21]

References

1. http://economictimes.indiatimes.com/articleshow/1156901.cms
2. http://fiuindia.gov.in/pmla2002.htm
3. "Section 12 of PMLA, 2002".
4. http://indiacode.nic.in/acts-in-pdf/022013.pdf
5. "Department of Revenue |". dor.gov.in. Retrieved 2015-10-29.
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 2015-10-29.
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. Retrieved 2015-10-30.
19. Cassella, Stephan (September 2007). "Money Laundering Laws" (PDF). Retrieved 2 March 2011.
20. "Money Laundering control Act 1986".
21. Public Law Pub.L. 107–56