Commentary on The Prevention of Money Laundering Act, 2002

Book Details

1. HISTORICAL BACKGROUND

Introduction	1
Statement of Objects and Reasons	1
United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988	6
The Financial Action Task Force (FATF), 1989	7
Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime, 1990(Strasbourg Convention)	9
FATF Styled Regional Bodies (FSRBs)	10
Asia-Pacific Group on Money-laundering (APG), 1997	11
United Nations Political Declaration and Action Plan against Money-laundering, 1998	12
United Nations office on Drugs and Crime (UNODC), 1997	12
Role of WTO	13
Sound management of risks related to money- laundering and financing of terrorism	14
Prevention of Money Laundering Bill, 1998	15
Amendment to the Act of 2002	16
Financial Intelligence Unit (FIU-IND)	17
Egmont Group	20

2. BASICS OF MONEY LAUNDERING

Introduction	22
Other Definitions	24
Proceeds of Crime	27
Methods	29
1. Placement Techniques	35
2. Layering Techniques	39
3. Integration Techniques	42
Hawala	46
Hawala: Origin & History	46
Concept of Hawla	47
Hawala: Modus Operandi	47
Why Hawala?	48
Hawala in India	50
Relationship of Hawala with Money-Laundering	52
Is Hawala Punishable?	53

3. AUTHORITIES, THEIR POWERS AND FUNCTIONS

Introduction	55
Enforcement of twin legislations	57
Authorities under the Act	57
(a) Director	57
(b) Additional Director	59
(c) Joint Director	59
(d) Deputy Director	59
(e) Assistant Director	59
(f) Enforcement officer	60
(g) Assistant Enforcement officer	60
Powers and Functions of Authorities	60
Jurisdiction of Authorities	78
Central Government’s Role	79
Assistance in Inquiry	82
Punishment for vexatious search	85

4. TOOLS OF INVESTIGATION

Introduction	88
Investigation	88
Tools of Investigation	88
Power of Survey	89
When survey becomes search	94
Freezing of property or records	94
Pre-requisite for search and seizure	102
The Prevention of Money Laundering (Forms, Search and
Seizure or Freezing and the manner of forwarding the Reasons and Material to Adjudicating Authority, Impounding and custody of records and period of Retention) Rules, 2005	104
Rule 4. Procedure for seizure or freezing	104
Rule 6. Impounding of records	105
Rule 7. Custody of records	106
Rule 8. Forwarding of a copy of the reasons and the material to the Adjudicating Authority	106
Rule 9. Acknowledgement of receipt by the Adjudicating Authority	107
Rule 10. Period of retention by the Adjudicating Authority	107
Search of persons	107
What is personal search?	109
Pre-requisite for search of person	110
officers authorised for search of persons	111
Search of females	111
Power to arrest	113
Why arrest?	120
Guidelines for arrest	120
Retention of property	122
Retention of Records	124
Recording of statements	125
Agreement with Foreign Countries	131
Letter of Request	132
Conclusion	133

5. ATTACHMENT, CONFIRMATION AND CONFISCATION

Introduction	134
Object of attachment	136
Reason to believe	137
Scheme for attachment	147
Equivalent Value	148
Statutory period of Provisional Attachment Order passed under sub-section (1) of section 5 of the Act:	151
Attachment of property in absence of scheduled offence	154
Procedural safeguards	158
Taking Possession of Attached or Frozen Properties	160
The Prevention of Money-Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013	162
Rule 3. Procedure relating to possession	162
Rule 4. Manner of taking possession of movable property	162
Rule 5. Manner of taking possession of immovable property	164
Rule 6. Mode of serving of notice	164
Rule 7. Confirmed attached property in the custody of Court	164
Rule 8. Confirmed attached property hypothecated or mortgaged or pledged to bank, financial institutions	164
Three Important Stages	164
1. Issuance of Notice	164
2. Hearing	165
3. Confirmation or Quashing of Attachment	166
Application of mind by the Adjudicating Authority	168
Nexus/link of the attached property	169
Undisclosed/unaccounted money	170
Confiscation or release of property by the Special Court	171
Conclusion	174

6. RELEASE AND RESTORATION OF PROPERTIES/RECORDS

Introduction	175
1.Release	176
I.1 Release of attached properties	177
I.2 Release of properties outside the ambit of the proceeds of crime	181
I.3 Release of property for third party interest	182
I.4 Release of seized/frozen properties	185
I.5 Release of seized records	187
Restoration	188
2.1 Protection of the rightful claimant	189
2.2 Retention of Property/Records	191
Conflict between sub-sections (5) & (6) and sub-section (7) of section 8 of the Act	191
Attachment in case of plea bargaining	192
Conclusion	192

7. PROSECUTION

Introduction	195
Offence of money-laundering	197
Money-laundering and its relation with Proceeds of Crime	197
Money-laundering prior to Vijay Madanlal	205
Money-laundering not a standalone offence	207
Punishment for money-laundering	211
Rigorous Imprisonment	214
Designation of Special Court	214
Procedure for filing Prosecution Complaint	217
Cognizance of offence of money-laundering	217
Procedure for filing Supplementary Complaint	222
Trial before the Special Court	224
Compensation to victims	229
The Schedule	232

8. BAIL

Introduction	235
Types of Bail	238
1.Anticipatory Bail	238
2.Regular Bail	242
Amended position after Nikesh Tarachand	251
Judgments supporting Nikesh Tarachand	253
Judgments supporting revival of section 45	256
Twin conditions settled in Vijay Madanlal	258
Grounds for bail	260
Exceptions to twin conditions	266
(i) where accused is under 16 years	267
(ii) where accused is a woman	268
(iii) where accused is sick or infirm	269
(iv) where allegation is less than one crore rupees	271
3.Bail where accused not arrested during Investigation	272
4.Default bail	280
Conclusion	285

9. DISCHARGE, ACQUITTAL OR CONVICTION

Introduction	287
1.Discharge	289
Grounds for Discharge	290
Discharge in absence of the scheduled offence	294
Consideration for framing of charge	295
Implication of Discharge 299	299
2. Acquittal	303
Implication of Acquittal	303
Remedies after Discharge or Acquittal	311
3. Conviction	311
ED v. Harinarayana Rai	312
Plea Bargaining	313
Is criminal conspiracy an independent scheduled offence?	315
Conclusion	317

10. LIMITATION

Introduction	318
1. Limitation under the Act	319
2. Applicability of the Limitation Act	322
3. Whether delay can be condoned under sections 26 and 42 of the Act?	324
4. Pari materia provisions of the allied legislations	332
5. Limitation prescribed under the Act	341
Conclusion	343

11. REPORTING ENTITIES

Introduction	344
CTR and STR	349
Know Your Customer (KYC) Policy	350
1. Confidentiality of Customer information	351
2. Avoiding hardship to customers	351
3. Sensitizing customers	351
4. Hiring of Employees	351
5. Employee training	352
6. Provisions of FCRA	352
7. Technology requirements	352
8. Designated Director	353
9. Principal officer	354
10. Regulator	354
(i) Customer Acceptance Policy (CAP)	354
(ii) Customer Identification Procedure (CIP)	355
Officially Valid Document	355
Proof of identity	356
Proof of address	356
(iii) Monitoring of Transactions	357
(iv) Risk management	357
Access to information	359
Powers of Director to impose fine	359
Director FIU-IND	362
Suspicious Transaction Reports	363
Egmont Group	363
Financial Action Task Force (FATF)	364
Recommendation 9	365
Recommendation 10	365
Recommendation 11	366
Recommendation 12	367
Recommendation 13	368
Recommendation 14	368
Recommendation 15	369
Recommendation 16	369
Recommendation 17	370
Recommendation 18	371
Recommendation 19	371
Recommendation 20	372
Recommendation 21	372
Benefits of FATF Recommendations	373
1. Transparent and stable financial system	373
2. Reduces the risk and abuses of financial institution by the organized crime groups	373
3. Fight terrorism and trace terrorist money	373
4. Binding of international obligations	373
5. Avoid becoming a haven for criminals	373
No civil or criminal proceedings against Reporting entity, its Directors and employees	374
Conclusion	375
Conclusion	343

12. APPELLATE REMEDIES

Introduction	376
Appellate Tribunal	377
Appeal to Appellate Tribunal	378
Form of Appeal	380
Amount of fee	381
Limitation for filing Appeal	381
Procedure and Powers of Appellate Tribunal	383
Power of Appellate Tribunal to grant interim protection	385
Prosecution for intentionally giving or fabricating false evidence	385
Distribution of Business	386
Powers of Chairman to transfer cases	386
Decision to be by majority	386
Role of Authorised Representative/Presenting officers	387
Members to be public servant	388
Civil Court not to have jurisdiction	390
Appeal to High Court	391
Act to have overriding effect	394
Proceedings in the event of death or insolvency	396
Special Leave to the Supreme Court	398
Revisional jurisdiction	399
Conclusion	401
Conclusion	343

13. RETENTION OF DOCUMENTS, RECORDS OR PROPERTIES

Introduction	402
1. Retention of documents	403
2. Retention of records	409
Impounding of records	414
Procedure relating to Seizure/Freezing	416
3. Retention of property	426
Issuance of notice by the Adjudicating Authority	426
Reason to believe	428
Mandatory compliance of statutory provisions	433
Non-communication of reason to believe	434
Conclusion	436

14.RECIPROCAL ARRANGEMENT WITH FOREIGN COUNTRIES

Introduction	437
Definitions	438
Provisions of the Code of Criminal Procedure, 1973	439
International Co-operation	444
(a) Convention on drug related matters	444
(b) MoUs relating to anti-money laundering	445
Agreements with foreign countries	449
Letter of request to a contracting State	450
Assistance to a contracting State	452
Special Court to release the property	452
Letter of request of a contracting State	452
Reciprocal arrangements for transfer of accused persons	453
Attachment, seizure and confiscation of property in a contracting State or India	459
Procedure in respect of letter of request	462
Conclusion	465

15. TRADE BASED MONEY LAUNDERING

Introduction	466
Relevant provisions under Indian Legislations	467
A. Indian Contract Act, 1872	467
B. Constitution of India, 1950	468
Article 19 and reasonable restrictions	469
Article 301. Freedom of trade, commerce and intercourse	470
International Agreements in trade based money laundering	473
The Vienna Convention, 1988	474
The Council of Europe Convention, 1990	474
Basel Committee’s Statement of principles, 1988	474
The Financial Action Task Force, 1989	474
United Nations Global Programme against Money Laundering, 1997	475
Techniques of trade based money laundering	475
1. Over-Invoicing	475
2. Under-Invoicing	477
3. Multiple Invoices	480
4. Multiple Invoices of the same type	480
WTO Guidelines 480

16. AMENDMENTS

Introduction	483
1. The Prevention of Money-laundering(Amendment) Act, 2005 (20 of 2005)	483
2. The Prevention of Money-laundering(Amendment) Act, 2009 (21 of 2009)	484
3. The Prevention of Money-laundering(Amendment) Act, 2012 (2 of 2013)	495
4. The Finance Act, 2015 (20 of 2015)	518
5. The Finance Act, 2016 (28 of 2016)	520
6. The Finance Act, 2018 (13 of 2018)	521
7. (a) The Finance (No. 2) Act, 2019 (23 of 2019)	522
(b) The Finance Act, 2019 (7 of 2019)	526
8. The Aadhaar and Other Laws (Amendment) Act, 2019(14 of 2019)	526
9. The Prevention of Money-laundering(Maintenance of Records) Amendment Rules, 2023	528
10. Amendment in Section 2(1)(sa)(vi) of the Act by Notification dated 3rd May, 2023	530
11. The Jan Vishwas (Amendment of Provisions) Act, 2023(18 of 2023)	531
12. The Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2023	531
13. The Prevention of Money-laundering (Maintenance of Records) Third Amendment Rules, 2023	532
14. Amendment in Section 2(1)(sa)(vi) of the Act by Notification dated 9th November, 2023	535
Constitutional validity of Amendments	535
Conclusion	537

17. MISCELLANEOUS

Introduction	483
Vexatious Search	538
Punishment for vexatious search	538
Illegal detention and compensatory measures	540
False Information	543
Cognizance of offences	544
Application of Code of Criminal Procedure, 1973	545
Disclosure of information	546
Bar of suits in civil courts	548
Good faith	551
Notice not to be invalid on certain grounds	554
Recovery of fine or penalty	555
Offences by companies	556
Act to have overriding effect	559
Proceedings in the event of death or insolvency	561
Power to make rules	562
Rules to be laid before Parliament	563
Error apparent on face of record	563
Doctrine of Double Jeopardy	567
Is money laundering a continuing offence?	568
Look-out Circular (LoC)	569
Conclusion	576

18. CONCLUDING REMARKS AND SUGGESTIONS

Introduction	483
1. Offence of money-laundering	580
2. Compensation to victim	588
3. The Adjudicating Authority (Procedure) Regulations, 2013	591
Form 3: Notice to Show Cause	591
Form 4: Notice to Show Cause	592
Form 5: Notice to Show Cause	593
4. Show Cause Notice under section 8(1) of the Act	596
5. Enforcement Case Information Report (ECIR)	598
6. Bail	601
7. Statement under section 50	605
8. Freezing Order	607
9. Interest of secured creditors	612
10. Possession of properties	616
11. Investigation under the Act	620
12. Money laundering and scheduled offence triable by the Special Court	621
13. Non-conclusion of trial of money laundering	623
14. Freezing of a Locker	624
15. Confiscation under the Act	628

19. APPENDICES

APPENDIX-I

THE PREVENTION OF MONEY-LAUNDERING ACT, 2002 (AS AMENDED)

CHAPTER-I

PRELIMINARY

1. Short title, extent and commencement	633
2. Definitions	633

CHAPTER-II

OFFENCE OF MONEY-LAUNDERING

3. Offence of money-laundering	640
4. Punishment for money-laundering	640

CHAPTER-III

ATTACHMENT, ADJUDICATION AND CONFISCATION

5. Attachment of property involved in money-laundering	641
6. Adjudicating Authorities, composition, powers, etc.	643
7. Staff of Adjudication Authorities	645
8. Adjudication	645
9. Vesting of property in Central Government	648
10. Management of properties confiscated under this Chapter	648
11. Power regarding summons, production of documents and evidence, etc.	648
11A. Verification of identity by reporting entity	649

CHAPTER-IV

OBLIGATIONS OF BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES

12. Reporting entity to maintain records.	650
12A. Access to information.	651
12AA. Enhance due diligence	652
13. Powerfs of Director to impose fine.	653
14. No civil or criminal proceedings against reporting entity,its directors and employees in certain cases.	654
15. Procedure and manner of furnishing information by reporting entities.	654

CHAPTER-V

SUMMONS, SEARCHES AND SEIZURES, ETC.

16. Power of survey.	655
17. Search and seizure.	656
18. Search of persons.	657
19. Power to arrest.	659
20. Retention of property.	659
21. Retention of records.	660
22. Presumption as to records or property in certain cases.	661
23. Presumption in inter-connected transactions.	662
24. Burden of proof.	662

CHAPTER-VI

APPELLATE TRIBUNAL

25. Appellate Tribunal.	663
26. Appeals to Apppellate Tribunal.	663
27. Composition, etc., of Appellate Tribunal. [Repealed]	664
28. Qualifications for appointment. [Repealed]	664
29. term of office. [Repealed]	664
30. Conditions of service. [Repealed]	664
31. Vacacies. [Repealed]	664
32. Resignation and removal. [Repealed]	664
33. Member to act as Chairperson in certain circustances. [Repealed]	664
34. Staff of Appellate Tribunal. [Repealed]	664
35. Procedure and powers of Appellate Tribunal.	664
36. Distribution of business amongst Benches	665
37. Power of Chairman to transfer cases	665
38. Decision to be by majority	665
39. Right of appellant to take assistance of authorised representative and of Government to appoint presenting officers	665
40. Members, etc., to be public servants	666
41. Civil court not to have jurisdiction	666
42. Appeal to High Court	666

CHAPTER-VII

SPECIAL COURTS

43. Special Courts.	667
44. Offences triable by Special Courts.	667
45. Offences to be cognizable and non-bailable.	668
46. Application of Code of Criminal Procedure, 1973 to proceddings before Special Court.	669
47. Appeal and revision.	670

CHAPTER-VIII

AUTHORITIES

48. Authorities under the Act.	670
49. Appointment and powers of authorities and other officers.	670
50. Powers of authorities regarding summons, production of documents and to give evidence, etc.	671
51. Jurisdiction of authorities.	671
52. Power of Central Government to issue directions, etc.	672
53. Empowerment of certain officers.	672
54. Certain officers to assist in inquiry, etc.	672

CHAPTER-IX

RECIPROCAL ARRANGEMENT FOR ASSISTANCE IN CERTAIN MATTERS AND PROCEDURE FOR ATTACHMENT AND CONFISCATION OF PROPERTY

55. Definitions.	674
56. Agreements with foreign countries.	674
57. Letter of request to a contracting State in certain cases.	674
58. Assistance to a contracting State in certain cases.	675
58A. Special Court to release the property.	675
58B. Letter of request of a contracting State or authority for confiscation or release the property.	675
59. Reciprocal arrangements for processes and assistance for transfer of accused persons.	676
60. Attachment, seizure and confiscation, etc., of property in a contracting State or India.	677
61. Procedure in respect of letter of request.	678

CHAPTER-X

MISCELLANEOUS

62. Punishment for vexations search.	678
63. Punishment for false information or failure to give information, etc.	679
64. Cognizance of offences.	679
65. Code of Criminal Procedure, 1973 to apply.	680
66. Disclosure of information.	680
67. Bar of suits in civil courts.	680
68. Notice, etc., not to be invalid on certain grounds.	680
69. Recovery of fine or penalty.	681
70. Offences by companies.	681
71. Act to have overriding effect.	682
72. Continuation of proceedings in the event of death or insolvency.	682
72A. Inter-ministerial Co-ordinate Committee	683
73. Power to make rules.	683
74. Rules to be laid before Parliament.	685
75. Power to remove difficulties.	686
THE SCHEDULE	686

APPENDIX-II

RULES AND REGULATIONS UNDER THE PREVENTION OF MONEY LAUNDERING ACT, 2002

1 The Prevention of Money-Laundering (Appeal) Rules, 2005	697
1. Short title and commencement	697
2. Definitions	697
3. Form of Appeal	698
4. Order of the Appellate Tribunal	699
5. Service of notice, requisitions or orders	699
6. Interpretation	699
Form	699
2. The Prevention of Money-Laundering (Manner of Receiving the Records Authenticated Outside India) Rules, 2005	700
1. Short title and commencement	700
2. Definitions	701
3. Manner of authentication of records received from outside India	701
4. Interpretation	701
3. The Prevention of Money-Laundering (The Manner of Forwarding a Copy of the Order of Provisional Attachment of Property along with the Material, and Copy of the Reasons along with the Material in respect of Survey, to the Adjudicating Authority and its Period of Retention) Rules, 2005	702
1. Short title and commencement	702
2. Definitions	702
3. Manner of forwarding a copy of the order of provisional attachment of property along with the material under sub-section (2) of section 5 of the Act, to the Adjudicating Authority	703
4. Manner of forwarding a copy of the reasons along with the material in respect of survey under sub-section (2) of section 16 of the Act, to the Adjudicating Authority	704
5. Acknowledgement of receipt of a copy of the order of provisional attachment of property and the material and a copy of the reasons and the material in respect of survey by the Adjudicating Authority	705
6. Period of retention of a copy of the order of provisional attachment of property and the material and a copy of the reasons and the material in respect of survey by the Adjudicating Authority	705
7. Interpretation	706
Form-I	706
Form-II	706
Form-III	707
4. The Prevention of Money-Laundering (Receipt and Management of Confiscated Properties) Rules, 2005	708
1. Short title and commencement	708
2. Definitions	708
3. Receipt of confiscated property	708
4. Management of confiscated property	709
5. Assistance to the Administrator	709
6. Interpretation 709
Form I	709
Form II	710
5. The Prevention of Money-Laundering (Maintenance of Records) Rules, 2005	711
1. Short title and commencement	711
2. Definitions	711
3. Maintenance of records of transactions (nature and value)	719
3A. Implementation of policies by groups	721
4. Records containing information	721
5. Procedure and manner of maintaining information	721
6. [Omitted]	722
7. Procedure and manner of furnishing information	722
8. Furnishing of information to the Director	722
9. Client Due Diligence	723
9A. Functions and obligations of the Central KYC Records Registry	735
9B. Inspection by Reserve Bank of India	736
10. Maintenance of the records of the identity of clients	736
10A. Furnishing of Report to Director	737
10B. Expenses for audit	737
11. Interpretation	737
6. The Prevention of Money-Laundering (Forms, Search and Seizure or Freezing and the Manner of Forwarding the Reasons and Material to the Adjudicating Authority, Impounding and Custody of Records and the Period of Retention) Rules, 2005	740
1. Short title and commencement	740
2. Definitions	740
3. Procedure relating to search	742
4. Procedure relating to seizure or freezing	744
5. Applicability of the provisions of the Code of Criminal Procedure, 1973 7	745
6. Impounding of records	745
7. Custody of records	745
8. Manner of forwarding of a copy of the reasons and the material relating to search, seizure and freezing under sub-section (2) of section 17 and sub-section (1A) of section 17 of the Act and search of persons under sub-section (2) of section 18 and sub-section (2) of section 20 of the Act to the Adjudicating Authority	746
9. Acknowledgement of receipt of a copy of the reasons and the material relating to search, seizure or freezing] and search of person by the Adjudicating Authority	746
10. Period of retention of copy of the reasons and the material relating to search, seizure or freezing and search of persons by the Adjudicating Authority	746
11. Forms of records	746
12. Interpretation	746
Form I	748
Form II	749
Form III	750
Form IV	7511
Form V	751
7. The Prevention of Money-Laundering (the Forms and the Manner of Forwarding a Copy of Order of Arrest of a Person along with the Material to the Adjudicating Authority and its Period of Retention) Rules, 2005	753
1. Short title and commencement	753
2. Definitions	753
3. Manner of forwarding a copy of the order of arrest and the material to the Adjudicating Authority	754
4. Acknowledgement of receipt of the copy of the order of arrest and the material by the Adjudicating Authority	754
5. Period of retention of a copy of the order of arrest and the material by the Adjudicating Authority	755
6. Forms of records	755
7. Interpretation	755
Form I	756
Form II	756
Form III	757
8. The Prevention of Money-Laundering (the Manner of Forwarding a Copy of the Order of Retention of Seized Property along with the Material to the Adjudicating Authority and the Period of its Retention) Rules, 2005	758
1. Short title and commencement	758
2. Definitions	758
3. Manner of forwarding the copy of the order of retention of seized property along with the material to the Adjudicating Authority	759
4. Acknowledgement of receipt of the copy of the order of retention of seized property and the material by the Adjudicating Authority	760
5. Period of keeping the copy of the order of retention and the material by the Adjudicating Authority	760
6. Interpretation	760
Form I	761
Form II	761
9. The Prevention of Money-Laundering (Issuance of Provisional Attachment Order) Rules, 2013	762
1. Short title and commencement	762
2. Definitions	762
3. Manner of issuance of provisional attachment order	762
4. Service of provisional attachment order on corporate bodies,societies and trusts etc.	763
5. Interpretation	764
10.The Prevention of Money-Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority)Rules, 2013	765
1. Short title and commencement	765
2. Definitions	765
3. Procedure relating to possession	765
4. Manner of taking possession of movable property	766
5. Manner of taking possession of immovable property	767
6. Mode of serving of notice	768
7. Confirmed attached property in the custody of Court	768
8. Confirmed attached property hypothecated or mortgaged or pledged to bank, financial institutions, etc.	768
9. Maintenance of registers for confirmed attached property	768
10. Interpretation	768
Form I	769
Form II	769
Form III	770
Form IV	771
11.The Prevention of Money-Laundering (Restoration of Confiscated Property) Rules, 2016	772
1. Short title and commencement	772
2. Definitions	772
3. Manner for restoration of confiscated property	772
3A. Manner of restoration of property during trial	773
4. Interpretation	773
12. The Adjudicating Authority (Procedure) Regulations, 2013	774

CHAPTER-I

PRELIMINARY

1. Short title and commencement	774
2. Definitions	774

CHAPTER-II

APPLICATIONS AND COMPLAINTS

3. Filing of applications and complaints	774
4. Date and signature	775
5. Attestation	775
6. Receipt of papers	775
7. Date of stamping of papers and maintenance of Inward Register in the following manner	775

CHAPTER-III

PRESENTATION, REGISTRATION NUMBER AND POSTING FOR ORDERS

8. Duty of official authorised to receive application	775
9. Registration and numbering	776
10. Cause list	776
11. Procedures to be followed by Registrar	776
12. Court Master to assist Bench	777

CHAPTER-IV

SERVICE OF SUMMONS AND NOTICES

13. Time and place of dispatch and receipt of electronic record	779
14. Bringing legal representatives on record	780
15. Filing of reply to notice	781
16. Inspection of records	781
17. Fees for inspection of records	781
18. Fees for copying	781
19. Maintenance of applications for inspection	782

CHAPTER V

20. Dress for Chairperson, Members of Adjudicating Authority and representatives of parties	782
21. Examination of witness and the issue of commissions	782
22. Recording of deposition	783
23. Numbering of witness	783
24. Witness expenses payable	783
25. Marking of documents	783

CHAPTER VI

ORDERS

26. Issue of Order	783
27. Copy of order to be delivered on date of its pronouncement	783
28. Indexing of case files	783

CHAPTER VII

GRANT OF CERTIFIED COPIES

29. Application for certified copy	784
30. Endorsement of a copy	784
FORM 1– RECEIPT SLIP	784
FORM 2–DAILY CAUSE LIST	785
FORM 3–NOTICE TO SHOW CAUSE	785
FORM 4–NOTICE TO SHOW CAUSE	786
FORM 5–NOTICE TO SHOW CAUSE	787
FORM 6–SUMMONS TO WITNESS	788
FORM 7–APPLICATION FOR INSPECTION OF RECORDS	789
FORM 8–STATEMENT OF WITNESS	789
FORM 9–CERTIFICATE OF ATTENDANCE	790
FORM 10–GENERAL -INDEX	790
FORM 11–LIST OF RECORDS TRANSMITTED TO THE RECORD ROOM	790
FORM 12–APPLICATION FOR COPY OF RECORD	791

APPENDIX-III

United Nations Convention Against Illicit Traffic In Narcotic Drugs And Psychotropic Substances, 1988	792
Article 1. Definitions	793
Article 2. Scope of The Convention	795
Article 3. Offences and Sanctions	795
Article 4. Jurisdiction	798
Article 5. Confiscation	799
Article 6. Extradition	802
Article 7. Mutual Legal Assistance	804
Article 8. Transfer of Proceedings	807
Article 9. Other Forms of Co-operation and Training	807
Article 10. International Co-operation and Assistance For Transit States	808
Article 11. Controlled Delivery	809
Article 12. Substances Frequently Used in the Illicit Manufacture of Narcotic Drugs or Psychotropic Substances	809
Article 13. Materials and Equipment	813
Article 14. Measures to Eradicate Illicit Cultivation of Narcotic Plants and to Eliminate Illicit Demand for Narcotic Drugs and Psychotropic Substances	813
Article 15. Commercial Carriers	814
Article 16. Commercial Documents And Labelling of Exports	815
Article 17. Illicit Traffic by Sea	815
Article 18. Free Trade Zones and Free Ports	816
Article 19. The Use of the Mails	817
Article 20. Information to be Furnished by the Parties	817
Article 21. Functions of the Commission	817
Article 22. Functions of the Board	818
Article 23. Reports of the Board	819
Article 24. Application of Stricter Measures than those required by this Convention	819
Article 25. Non-Derogation From Earlier Treaty Rights and Obligations	819
Article 26. Signature	820
Article 27. Ratification, Acceptance, Approval or Act of Formal Confirmation	820
Article 28. Accession	820
Article 29. Entry Into Force	821
Article 30. Denunciation	821
Article 31. Amendments	821
Article 32. Settlement of Disputes	822
Article 33. Authentic Texts	822
Article 34. Depositary	822

APPENDIX-IV

Prevention of Criminal Use of the Banking System for the purpose of Money Laundering, 1988	824

APPENDIX-V

FATF Recommendations with Interpretive Notes	828
A. AML/CFT Policies and Co-Ordination	828
1. Assessing risks and applying a risk-based approach	828
2. National co-operation and co-ordination	829
B. Money Laundering and Confiscation	829
3. Money laundering offence	829
4. Confiscation and provisional measures	829
C. Terrorist Financing and Financing of Proliferation	830
5. Terrorist financing offence	830
6. Targeted financial sanctions related to terrorism and terrorist financing	830
7. Targeted financial sanctions related to proliferation	830
8. Non-profit organisations	830
D. Preventive Measures	831
9. Financial institution secrecy laws	831
E. Customer Due Diligence and Record-Keeping	831
10. Customer due diligence	831
11. Record-keeping	832
F. Additional Measures for Specific Customers and Activities	833
12. Politically exposed persons	833
13. Correspondent banking	833
14. Money or value transfer services	834
15. New technologies	834
16. Wire transfers	835
G. Reliance, Controls and Financial Groups	835
17. Reliance on third parties	835
18. Internal controls and foreign branches and subsidiaries	836
19. Higher-risk countries	836
H. Reporting of Suspicious Transactions	836
20. Reporting of suspicious transactions	836
21. Tipping-off and confidentiality	836
I. Designated Non-Financial Businesses and Professions	837
22. DNFBPs: Customer due diligence	837
23. DNFBPs: Other measures	838
J. Transparency and Beneficial Ownership of Legal Persons And Arrangements	838
24. Transparency and beneficial ownership of legal persons	838
25. Transparency and beneficial ownership of legal arrangements	839
K. Powers and Responsibilities of Competent Authorities, and Other Institutional Measures	839
Regulation and Supervision	839
26. Regulation and supervision of financial institutions	839
27. Powers of supervisors	840
28. Regulation and supervision of DNFBPs	840
L. Operational and Law Enforcement	841
29. Financial intelligence units	841
30. Responsibilities of law enforcement and investigative authorities	841
31. Powers of law enforcement and investigative authorities	841
32. Cash couriers	842
M. General Requirements	842
33. Statistics	842
34. Guidance and feedback	842
N. Sanctions	842
35. Sanctions	842
O. International Co-Operation	843
36. International instruments	843
37. Mutual legal assistance	843
38. Mutual legal assistance — freezing and confiscation	845
39. Extradition	845
40. Other forms of international co-operation	846
Interpretive note to Recommendation 1	846
Assessing Proliferation Financing Risks and Applying Risk-Based Measures	847
A. Obligation and Decisions for Countries	848
B. Obligations and decisions for financial institutions and DNFBPs	850
Interpretive note to Recommendation 2	852
Interpretive note to Recommendation 3	853
Interpretative note to Recommendations 4 and 38	854
Interpretative note to Recommendation 5	855
A. Objectives	855
B. Characteristics of the terrorist financing offence	855
Interpretative note to Recommendation 6	856
A. Objective	856
B. Identifying and Designating Persons and Entities Financing or Supporting Terrorist Activities	857
C. Freezing And Prohibiting Dealing In Funds Or Other Assets Of Designated Persons And Entities	861
D. De-Listing, Unfreezing And Providing Access To Frozen Funds Or Other Assets	862
E. United Nations Designation Criteria	864
Interpretive note to Recommendation 7	865
A. Objective	865
B. Designations	866
C. Freezing And Prohibiting Dealing In Funds Or Other Assets Of Designated Persons And Entities	868
D. De-Listing, Unfreezing And Providing Access To Frozen Funds Or Other Assets	870
E. United Nations Designation Criteria	871
Interpretive note to Recommendation 8	873
A. Introduction	873
B. Objectives and General Principles	874
C. Measures	875
D. Resources For Supervision, Monitoring, And Investigation	879
Interpretive note to Recommendation 10	880
A. Customer due Diligence and Tipping-off	880
B. CDD-Persons Acting on Behalf of a Customer	880
C. CDD for Legal Persons and Arrangements	881
D. CDD for Beneficiaries of Life Insurance Policies	883
E. Reliance on Identification and Verification already Performed	884
F. Timing of Verification	884
G. Existing Customers	884
H. Risk Based Approach	885
Interpretative note to Recommendation 12	889
Interpretative note to Recommendation 13	889
Interpretive note to Recommendation 14	890
Interpretive note to Recommendation 15	890
Interpretive note to Recommendation 16	892
A. Objective	892
B. Scope	893
C. Cross-Border Qualifying Wire Transfers	894
D. Domestic Wire Transfers	894
E. Responsibilities Of Ordering, Intermediary And Beneficiary Financial Institutions	895
F. Money Or Value Transfer Service Operators	896
Interpretative note to Recommendation 17	898
Interpretative note to Recommendation 18	899
Interpretative note to Recommendation 19	900
Interpretative note to Recommendation 20	901
Interpretative note to Recommendations 22 and 23	901
Interpretative note to Recommendation 22	902
Interpretative note to Recommendation 23	902
Interpretative note to Recommendation 24	903
A. Basic Information	904
B. Beneficial Ownership Information	905
C. Timely Access to Current and Accurate Information	906
D. Obstacles to Transparency	907
E. Other Legal Persons	908
F. Liability and Sanctions	909
G. International Co-operation	909
Interpretative note to Recommendation 25	909
International Co-operation	913
Liability and Sanctions	914
Interpretative note to Recommendation 26	914
Risk-based approach to Supervision	914
Resources of supervisors	915
Interpretative note to Recommendation 28	915
Interpretative note to Recommendation 29	916
A. General	916
B. Functions	916
(a) Receipt	916
(b) Analysis	916
(c) Dissemination	916
C. Access to Information	918
(a) Obtaining Additional Information from Reporting Entities	918
(b) Access to Information from other sources	918
D. Information Security and Confidentiality	918
E. Operational Independence	918
F. Undue Influence or Interference	919
G. Egmont Group	819
H. Large Cash Transaction Reporting	919
Interpretive note to Recommendation 30	919
Interpretative note to Recommendation 32	921
A. Objectives	821
B. The Types of Systems that may be Implemented to Address the Issue of Cash Couriers	821
C. Additional Elements Applicable to Both Systems	922
D. Sanctions	923
E. Gold, Precious Metals And Precious Stones	924
Interpretative note to Recommendation 38	925
Interpretative note to Recommendation 40	925
A. Principles Applicable to All Forms of International Co-operation	925
Obligations on requesting authorities	925
Unduly restrictive measures	925
Safeguards on information exchanged	926
Power to search for information	926
B. Principles Applicable to Specific Forms of International Co-operation	926
Exchange of information between FIUs	926
Exchange of information between financial supervisors	927
Exchange of information between law enforcement authorities	928
Exchange of information between non-counter-parts	929

APPENDIX-VI

FATF Special Recommendations on Terrorist Financing with Interpretive Notes

Interpretative Note to Special Recommendation II	932
Objective	932
Definitions	932
Interpretative Note to Special Recommendation III	935
Objectives	935
Definitions	937
Interpretative Note to Special Recommendation VI	942
General	942
Scope and Application	943
Interpretative Note to Special Recommendation VII	945
Objective	945
Definitions	945
Interpretative Note to Special Recommendation VIII	948
Introduction	948
Objectives and General Principles	949
Definitions	950
Interpretative Note to Special Recommendation IX	953
Objectives	953
Definitions	954

APPENDIX-VII

United Nations Convention against Transnational Organized Crime, 2000

Article 1. Statement of Purpose	958
Article 2. Use of Term	958
Article 3. Scope of Application	959
Article 4. Protection of Sovereignty	959
Article 5. Criminalization of Participation in an Organized Criminal Group	960
Article 6. Criminalization of the Laundering of Proceeds of Crime	961
Article 7. Measures to Combat Money Laundering	962
Article 8. Criminalization of Corruption	963
Article 9. Measures Against Corruption	963
Article 10. Liability of Legal Persons	963
Article 11. Prosecution, Adjudication and Sanctions	964
Article 12. Confiscation and Seizure	964
Article 13. International Co-operation for Purposes of Confiscation	965
Article 14. Disposal of Confiscated Proceeds of Crime or Property	967
Article 15. Jurisdiction	967
Article 16. Extradition	968
Article 17. Transfer of Sentenced Persons	971
Article 18. Mutual Legal Assistance	971
Article 19. Joint Investigation	976
Article 20. Special Investigative Techniques	977
Article 21. Transfer of Criminal Proceedings	977
Article 22. Establishment of Criminal Record	977
Article 23. Criminalization of Obstruction of Justice	978
Article 24. Protection of Witnesses	978
Article 25. Assistance to and Protection of Victims	979
Article 26. Measures to Ensure to Enhance Co-operation With Law Enforcement Authorities	979
Article 27. Law Enforcement Co-operation	980
Article 28. Collection, Exchange and Analysis of Information on the Nature of Organized Crime	981
Article 29. Training and Technical Assistance	981
Article 30. Other Measures: Implementation of the Convention Through Economic Development and Technical Assistance	982
Article 31. Prevention	983
Article 32. Conference of the Parties to the Convention	985
Article 33. Secretariat	985
Article 34. Implementation of the Convention	986
Article 35. Settlement of Disputes	986
Article 36. Signature, Ratification, Acceptance,Approval and Accession	987
Article 37. Relation with Protocols	987
Article 38. Entry Into Force	988
Article 39. Amendment	988
Article 40. Denunciation	989
Article 41. Depositary and Languages	989

APPENDIX-VIII

Master Direction – Know Your Customer (KYC) Direction, 2016 (Updated as on May 04, 2023)	990

APPENDIX-IX

Report of the Standing Committee on the Prevention of Money Laundering Bill, 1998	1079

APPENDIX-X

Report of the Select Committee on the Prevention of Money Laundering Bill, 1999	1173

About the Author

Dr. Shamsuddin

Conferred LL.B (Hons.), LL.M and Doctorate degrees by Aligarh Muslim University and joined Maharshi Dayanand University on 06.08.1980 as Lecturer in law. He was on foreign deputation to Ahmadu Bello University, Zaria (Nigeria) as Senior Lecturer in Law from 1983 to 1988. On his return from abroad, he rose to the status of Associate Professor of Law and served Maharshi Dayanand University till 1991.

Dr. Shamsuddin joined the Government of India in 1991 and held senior positions for more than two decades as Legal Advisor, Special Public Prosecutor, Additional Director (Prosecution) and Head of Legal Division of the Enforcement Directorate. On recommendation of the Supreme Court of India, he was appointed as Presiding Officer, Debts Recovery Tribunal (DRT), Aurangabad and rendered his services from 2009 to 2013 with additional charge of DRTs at Pune and Nagpur.

Dr. Shamsuddin represented India at international Forum of the Financial Action Task Force (FATF, Paris), Asia Pacific Group (APG, Australia), Strasbourg (France), Cairns (Australia), Singapore and other foreign countries as part of Indian delegation. After superannuating from the Government of India as Additional Director, Enforcement Directorate, he resumed his practice as an Advocate and has been conducting cases before the Supreme Court,High Courts, Tribunals, Special Courts and Adjudicating Authorities all over the country.

Other Books authored by Dr. Shamsuddin are Meos of India: Their Customs & Laws and Women, Law & Social Change besides more than 100 Research Papers (Published & Unpublished).

Dr. Shamsuddin’s journey started from village Dhauj (Faridabad) located in the lap of Aravali Hills. Despite tough life full of hardships and challenges, he achieved a new milestone and created history in the legal field by entering into Limca Book of Records (2001).

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Commentary on The Prevention of Money Laundering Act, 2002

Publisher: Commercial Law Publishers

Pages: 1288

Language: English

ISBN: 9789356034075

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Book Details

Contents

APPENDIX-I

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

APPENDIX-II

CHAPTER-I

PRELIMINARY

CHAPTER-II

APPLICATIONS AND COMPLAINTS

CHAPTER-III

PRESENTATION, REGISTRATION NUMBER AND POSTING FOR ORDERS

CHAPTER-IV

SERVICE OF SUMMONS AND NOTICES

CHAPTER V

CHAPTER VI

ORDERS

CHAPTER VII

GRANT OF CERTIFIED COPIES

APPENDIX-III

APPENDIX-IV

APPENDIX-V

APPENDIX-VI

FATF Special Recommendations on Terrorist Financing with Interpretive Notes

APPENDIX-VII

United Nations Convention against Transnational Organized Crime, 2000

APPENDIX-VIII

APPENDIX-IX

APPENDIX-X

About the Author

Dr. Shamsuddin

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