Prevention of Money Laundering Act, 2002 (PMLA)

(இதன் தமிழ் வடிவத்திற்கு இங்கே சொடுக்கவும்)

Prevention of Money Laundering Act, 2002 (PMLA)

• Enacted in 2002 to combat the illegal transformation of income from unlawful sources into legitimate profits.
• Empowers governmental bodies to seize assets acquired through illegitimate means.

Money Laundering

• Involves converting illegal funds (black money) into legal tender (white money).
• Requires a series of transactions and transfers to obscure the illicit origin of funds.
• Integrates laundered funds into legally acceptable financial institutions.

Objectives of the PMLA

• Prevent money laundering.
• Deter financial flows into illegal activities.
• Confiscate property derived from money laundering.
• Impose penalties on offenders.
• Establish adjudicating authorities and appellate tribunals.
• Handle related matters.

Common Forms of Money Laundering

• Hawala

• Bulk cash smuggling
• Fictional loans

• Cash-intensive businesses
• Round-tripping

• Trade-based laundering
• Shell companies and trusts

• Real estate transactions

• Gambling
• Fake invoicing

Money Laundering Offence

• Involves activities like concealment, possession, acquisition, use, projection, and claiming of proceeds of crime as untainted property.
• Individuals directly or indirectly involved in these processes are guilty of money laundering under the PMLA.

Understanding Proceeds of Criminal Activity

• Definition: Refers to any assets acquired directly or indirectly from engaging in criminal acts associated with a Scheduled Offence.

Catalogue of Criminal Acts

• Part A encompasses violations under various statutes such as the Indian Penal Code, Narcotics Drugs and Psychotropic Substances Act, and others.
• Part B identifies offenses similar to Part A but with a value exceeding Rs 1 crore.
• Part C focuses on cross-border criminal activities, demonstrating a commitment to combating global money laundering.

Operational Procedure in Money Laundering

• Placement Phase: Initial incorporation of illicitly gained funds into the legitimate financial framework.
• Layering Phase: Dispersal and manipulation of funds across multiple transactions to obscure their illicit origins.
• Integration Phase: Reintroduction of laundered funds into the financial system, making them appear legitimate for subsequent use.

Money Laundering vs. Syphoning of Funds

Distinguishing Factors:

• Mere commission of a crime and obtaining property does not constitute money laundering but may constitute syphoning of funds.
• Money laundering involves projecting or claiming illegally obtained property as untainted.

Authorities Entrusted for Investigation

Enforcement Directorate (ED):

• Responsible for investigating money laundering offenses under the PMLA.

Financial Intelligence Unit – India (FIU-IND):

• Reports directly to the Economic Intelligence Council (EIC) chaired by the finance minister.
• Central agency for receiving, processing, analysing, and disseminating information on suspect financial transactions.
• Coordinates national and international intelligence efforts against money laundering and related crimes.

Investigation of Scheduled Offences

Respective Investigative Agencies:

• Offenses under specific laws are investigated by designated agencies.
• These agencies include local police, CBI, customs departments, SEBI, and other relevant bodies.

Actions Against Individuals Involved in Money Laundering

Seizure and Attachment of Property:

• Property obtained with proceeds of crime can be seized, frozen, or attached.

Penalties for Offenders:

• Punishable by rigorous imprisonment for a minimum of three years, extendable up to seven years.
• Fine imposed without any limit.

Rationale for the Prevention of Money Laundering Act (PMLA)

Global Imperative:

• Enacted to counteract proceeds laundering from drug-related offenses, aligning with international conventions.
• This reflects a global effort to stem illicit funds and uphold financial system integrity.

Formation of FATF:

• Following FATF's 1989 establishment, measures like PMLA were adopted, addressing global money laundering to safeguard financial stability and integrity.

UNGA Resolution:

• A 1990 UN General Assembly resolution emphasized legislation to combat drug money laundering, driving India's PMLA enactment.
• This highlighted international consensus on addressing illicit financial flows and criminal activities.

Recommendations of the Narasimham Committee:

• Narasimham Committee insights urged action on money laundering, shaping PMLA.
• These recommendations stressed the need for robust measures to combat financial crime and safeguard financial integrity.

Adherence to Global Standards:

• PMLA aligns with international standards, ensuring India's compliance with global anti-money laundering efforts.
• This commitment strengthens India's standing in combating financial crime and upholding international norms.

Legislative Mandate and Extent:

• Enacted under Article 253, PMLA empowers India to implement international conventions, ensuring alignment with global norms on Money Laundering.
• This underscores India's dedication to international cooperation in combating financial crime and maintaining financial system integrity.

Adjudicating Authority under PMLA

Appointment by Central Government:

• The Central Government holds the authority to appoint an adjudicating authority empowered to execute functions under the Prevention of Money Laundering Act (PMLA).

Composition of the Authority:

• Consists of a bench comprising:
• A Chairperson.
• Two additional members, one of whom must possess expertise in law, administration, finance, or accountancy.

Qualifications for Membership:

• Individuals with legal expertise may serve as members if they meet one of the following criteria:
• Qualifications suitable for appointment as a district judge.
• Former member of the Indian Legal Service who held a Grade I position.

Jurisdiction:

• The adjudicating authority's bench operates in New Delhi and other locations designated by the Central Government and the chairperson.

Responsibilities of the Adjudicating Authority:

• Confirming provisional attachment orders issued by the Enforcement Directorate (ED) within 180 days in cases of suspected money laundering.
• Ensuring proper handling of assets suspected to be acquired through proceeds of crime in accordance with the law.

Confirmation Process:

• Once confirmed, the attachment order allows the ED to take possession of the assets.
• The accused can continue to use the property until the adjudicating authority approves the seizure.

Actions Available to the Accused:

• Right to Appeal: Challenging the confirmation order at the PMLA's Appellate Tribunal within 45 days.
• Appellate Tribunal Appeal: If the Appellate Tribunal confirms the order, the accused can appeal to the High Court.

Property Status:

• The owner cannot access the property until the trial is completed unless it is released.
• For residential property, the ED takes possession after the owner vacates once confirmed.

Outcome of Conviction:

• If convicted, the trial court may order confiscation and transfer ownership to the central government.
• Recent Revisions to PMLA: Enhancing Regulatory Framework

Overview of Amendments

Inclusion of Professional Entities:

• The recent amendments to the Prevention of Money Laundering Act (PMLA) broaden its scope.
• They include practising chartered accountants, company secretaries, and cost and works accountants.
• This expansion aims to strengthen disclosure mechanisms, especially for non-governmental organizations.
• Financial institutions, banking companies, or intermediaries oversee these entities.

Politically Exposed Persons (PEPs):

• Notably, the revisions entail a clear definition of Politically Exposed Persons, encompassing individuals entrusted with significant public roles by foreign nations.
• This definition includes heads of states or governments, senior politicians, government, judicial, or military officials, senior executives of state-owned enterprises, and influential members of political parties.

Expansion of Reporting Entities:

• The Finance Ministry's initiative to widen the spectrum of non-banking reporting entities is a crucial step.
• It empowers 22 financial entities to verify customer identities using Aadhaar authentication under the ambit of the money laundering law, thereby strengthening the surveillance framework.

Proposed Aadhaar Authentication Extension:

• Additionally, the Ministry of Electronics and IT has proposed extending Aadhaar authentication to various services.
• This proposal suggests granting a broader range of private entities the authority to conduct Aadhaar authentication, thus broadening the utility of digital identity verification.

Objectives of Changes

Alignment with RBI Directives:

• Alignment with 2008 RBI circular on KYC norms/anti-money laundering standards.
• Aim to ensure consistency and coherence in regulatory frameworks.
• Includes defining Politically Exposed Persons (PEPs) in line with FATF norms.
• Enhances international compliance.

Adherence to FATF Guidelines:

• Adhering to FATF assessments on anti-money laundering and counter-terrorist financing standards is imperative.
• Compliance with international benchmarks is crucial.
• Revisions underscore India's commitment to meeting FATF standards.
• This effort bolsters the country's standing in the global financial ecosystem.

Enhanced Vigilance and Reporting:

• Amendments enhance vigilance and reporting mechanisms.
• Expected to strengthen the overall efficacy of anti-money laundering efforts.

Elevation of Corporate Governance Standards:

• Recent revisions to the PMLA signify a concerted effort by the Centre.
• Aim to elevate corporate governance standards and reinforce financial integrity.
• Enhance reporting protocols for accountants and disclosure regulations for companies.
• Amendments aim to curb undisclosed wealth generation, prevent fund diversion, deter fictitious transactions, and mitigate laundering risks.
• These efforts foster transparency, accountability, and trust in the financial sector.
• Contribute to broader goals of economic stability and integrity.

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