Money laundering is beomcing a pervasive cocept may it be Developed country or Developing country. to curb this more and more countries now bringing suspicious transations unders the leagal scanner. Moeny is Behind all ill acts and wishes. The purpose behind most of the criminal acts is to generate a profit for the individual or group that carries out the act mostly offenders.
Now question is what is Money laundering? In a very simple word It is the processing of criminal proceeds to disguise illegal origin of money. This process is of critical importance; as it enables the criminal to enjoy these profits without jeopardize their source.
These offences or illiegal acts (like- illegal arms sales, smuggling, and the activities of organized crime, including drug trafficking and prostitution rings) can generate huge sum of Money. Insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to legitimize the ill-gotten gains through money laundering.
The Act implements the Political Declaration adopted by the Special Session of the UN General Assembly, 1999 which called upon the Member-States to adopt money-laundering legislation and programmes. Accordingly, in India the Act was enacted after incorporating the recommendations of the Standing Committee on finance presented to the Lok Sabha on 4th March, 1999. The Act thereafter was incorporated and enacted on 17th January, 2003.
Anti Money Laundering in India
In India, the Anti Money Laundering (AML) measures are controlled through the Prevention of Money Laundering Act, 2002 (PML Act) which was brought in force with effect from 1st July 2005. RBI, SEBI and IRDA have been brought under the PML Act, and therefore it will be applicable to all financial institutions, banks, mutual funds, insurance companies, and their financial intermediaries. The agency monitoring the AML activities in India is called Financial Intelligence Unit (FIU IND) and compliance is required by all financial intermediaries.
Anatomy of PML Act 2002: Prevention of Money Laundering Act, 2002 has been logically drafted into 75 sections in 10 Chapters with a Schedule which has two parts. Part A further has 2 paragraphs & Part B with 5 paragraphs.
Chapter I Preliminary
Chapter II Offence of Money-Laundering
Chapter III Attachment, Adjudication and Confiscation
Chapter IV Obligations of Banking Companies, Financial Institutions and Intermediaries
Chapter V Summons, Searches and Seizures, Etc
Chapter VI Appellate Tribunal
Chapter VII Special Courts
Chapter VIII Authorities
Chapter IX Reciprocal Arrangement for Assistance in Certain Matters and Procedure For
Attachment and Confiscation of Property
Chapter X Miscellaneous
Paragraph 1 Offence under the Indian Penal Code 1860 (IPC)
Paragraph 2 Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act)
Paragraph 1 Offence under the Indian Penal Code 1860
Paragraph 2 Offences under the Arms Act, 1959
Paragraph 3 Offences under the Wild Life (Protection) Act, 1972
Paragraph 4 Offences under the Immoral Traffic (Prevention) Act, 1956
Paragraph 5 Offences under the Prevention of Corruption Act, 1988
Meaning: Money Laundering
Money laundering is the process of moving illegally acquired cash through financial systems so that it appears to be legally acquired
Money laundering is the processing of dirty money in order to disguise their illegal origin. Dirty money is proceeds derived from criminal conduct, and criminals want the money to look like it came from a legitimate source.
Punishment of Money Laundering:
The punishment for the offence of Money Laundering is:
· Rigorous imprisonment for a term not less than 3 years extending to 7 years ,and
· Liable to fine up to Rs. 5,00,000
· If the crime involved in Money Laundering deals with any of the offences specified under Para 2 of part A of the Schedule: the maximum punishment awarded shall extend to 10 years.
Offences referred to in the Para 2 of part A deals with Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985.
Attachment, Adjudication and Confiscation:
The act deals with the confiscation of the property in accordance with the chapter III of the said Act. The attachments are done by the Director or any person below the Deputy Director authorized to do so by him.
The property here in question relates to both movable and immovable property. In case of immovable property, the term shall include all persons claiming/entitled to claim any interest in the property.
The Adjudicating Authority shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure and that the proceedings shall be deemed to be taken as judicial proceeding coming within the ambit of the meaning of 193 and Section 228 of the Indian Penal Code.
Obligations of Banking Companies, Financial Institution and Intermediaries:
Chapter IV of the Act provides that every banking company, financial institution and intermediaries should maintain a record of transaction and provide this information to the Director when required to do so. They are also required to verify and maintain the records of the identity of all its clients. Such records shall be maintained for a period of 10 years from the date of cessation of the transaction between the clients and the banking companies.
As the passing of the information is part of the statute hence no proceedings can be taken on account of the same. The procedure for procuring the information shall be drawn by the Central Government in consultation with the RBI.
This particular chapter has been included keeping in mind the usage of cash for the purposes of illegal transactions particularly advanced for sale/purchase of property. The check over the Bank creates a stricter balance because the influx and out flux of money can easily be kept in account.
Summons, Searches and Seizures, etc.:
The chapter deals with the technicalities involved in survey, search and seizure, power of arrest or retention of property or records as well as presumptions as to records/property, or even inter-connected transaction. The burden of proof however shall lie on the accused to show that his property is untainted.
The Appellate Tribunal was established by Central Government to hear appeals against the dealers of Adjudicating Authority and authorities under this Act.
Appeals to the Appellate Tribunal can be made by the Director, or any person aggrieved by an order made by the Adjudicating Authority, or any banking institution or allied institution within 45 days from the date on which a copy of the order is received accompanied by the prescribed fees. The Appellate Tribunal shall comprise of a Chairperson and 2 other Members.
The chapter further provides that the Civil Court shall have no jurisdiction over the suit/proceeding empowered to be determined by the Director, Adjudicating Authority or Appellate Tribunal. However appeal may be furthered to the High Court within 60 days from the date of communication of the decision/order of Appellate Tribunal to him.
The Central Government shall constitute the Special Courts in consultation of the Chief Justice of India to try the offence of Money Laundering.
The offences triable by Special Court are the scheduled offences. However due respect shall be paid to the Code of Criminal Procedure. In fact, the Code shall also apply to the Special Courts. Accordingly appeals and revisions can be made to the Higher Courts.
Like any other Act, even PMLA provides for certain Authorities. They are:
1. Director/ Additional Director/ Joint Director.
2. Deputy Director
3. Assistant Director, and
4. Other officers appointed by the Act.
All the aforesaid appointments shall be made by the Central Government. However, the powers granted are in accordance with the grade of the authority and accordingly powers of the superior authority can be given over to the lesser authority to reduce the burden of the same.
To assist the officers, certain other officers may be appointed like
1. Officers of customs of Central Excise Department
2. Officers under the NDPs Act
3. Officers of the Stock Exchange
4. Officers of the RBI
5. Officers of the police
6. Officers of the Securities Exchange Board
7. Officers of Central Government, State Government, local authorities/ banking companies.
Reciprocal Arrangement for Assistance in certain matters and Procedure for Attachment and Confiscation of Property:
This chapter states that the Central Government may enter into agreement with the Foreign Government in respect of this Act for enforcing the provisions of the Act or exchanging information. In order to examine the facts/circumstances, enforce steps as per the specification of the Special Courts or to forward the evidences to the Special Courts etc. Similarly, the Central Government shall also assist the contracting state. The basic idea is that of international co-operation and the member’s state of UN particularly has an obligation to co-operate on accepted principles.
There were certain important amendments that were brought in 2005.
1. Amendment of section 2- In the definition the definition of investigation was also added.
2. Amendment of section 28- Changes were brought in to the appointment of Chairperson or a Member of the Appellate Tribunal
3. Amendment of section 73- The insertion of the clause stating that the police officer shall also have the investigating power. Prevailing laws in India on anti-money laundering In India Prevention of Money laundering in the sense of seizure and confiscation of proceeds of crime is age old. The statutes prevailing before the Prevention of Money Laundering Act, 2002(Money Laundering Act of 2002) are: (a) Criminal Law Amendment Ordinance (XXXVIII of 1944)(b) The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976(c)Narcotic Drugs and Psychotropic Substances Act, 1985.
It is to be noted that even after so many efforts and prevailing laws, India is among six countries being actively monitored by Interpol and International banking watchdogs after the detection of massive money-laundering because of inadequate internal compliance procedures.
Compiled by CA.Vikash Dwivedi