An act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money laundering.
The statutes prevailing before the Prevention of Money Laundering Act, 2002 are:
The present act implements the Political Declaration adopted by the Special Session of the United Nation General Assembly which called upon the Member-States to adopt money-laundering legislation and programme.
In India, the Anti Money Laundering (AML) measures are controlled through the Prevention of Money Laundering Act, 2002 which was brought in force with effect from 1st July 2005. RBI, SEBI and IRDA have been brought under the PML Act, and thereafter it was 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.
- Criminal Law Amendment Ordinance (XXXVIII of 1944)
- The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
- Narcotic Drugs and Psychotropic Substances Act, 1985.
The Act extends to the whole of India including the state of Jammu & Kashmir.
The Directorate of Enforcement of the Department of Revenue, Ministry of Finance is responsible for administering the Prevention of Money Laundering Act.
‘Money Laundering’ – Meaning:
Money laundering is the process of moving illegally acquired cash through financial systems so that it appears to be legally acquired.
The process of money laundering is well depicted in movie of Rajnikanth – Shivaji (the Boss).
Obligations of Banking Companies, Financial Institution and Intermediaries :
The Act provides that every banking company, financial institution and intermediaries should:
Statutory Frame Work
Special Courts have been set-up in a number of States / UTs by the Central Government to conduct the trial of the offences of money laundering and also try an offence, other than an offence of money laundering, with which the accused may, under the Code of Criminal Procedure, 1973, be charged at the same trial. Accordingly appeals and revisions can be made to the Higher Courts.
The authorities under the Act like the Director, Adjudicating Authority and the Appellate Tribunal have been constituted to carry out the proceedings related to attachment and confiscation of any property derived from money laundering.
Summons, Searches and Seizures, etc.:
The Act also laid provisions for issue of Summons, Search and Seizure, power of arrest or retention of property or records. The burden of proof shall lie on the accused to show that the property is untainted.
Attachment, Adjudication and Confiscation:
The attachments of property either movable or immovable are done by the Director or any person not below the Deputy Director, authorized by him to do so. On filing a complaint by the Director before the Adjudicating Authority who shall serve a notice on such person to indicate his source of income, earnings or assets out of which he has acquired the property attached and thereafter record a finding whether all or any of the properties referred to under the case are involved in money laundering or not.
Where the Adjudicating Authority comes to a conclusion that any of the property under review is involved in money laundering, he shall order in writing, confirm the attachment of the property or retention of property or record seized to that effect. If not, the person concerned is acquitted on conclusion of a trial for any scheduled offence then the attachment of the property or retention of the seized property or record, if any, shall seize to have effect.
No Prosecution, suit or other proceedings shall lie against the Government or any officer of the government for anything done or intended to be done in good faith under this act.
The Adjudicating Authority shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure.
Appeal against the order of Adjudicating Authority:
The Director or any person aggrieved by an order made by the Adjudicating Authority under this Act may prefer an appeal to the Appellate Tribunal within a period of forty-five days from the date of receipt of a copy of the order.
Appeal against the order of Appellate Tribunal:
An appeal can be filed before the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law or fact arising out of such order.
Hierarchical structure of courts for Money Laundering
Punishment for 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 shall be liable to fine up to Rs. 5, 00,000. But if the crime involved in Money Laundering deals with any of the offences specified under Para 2 of part A of the Schedule then the maximum punishment awarded shall extend to 10 years.
a. maintain a record of transaction
b. also required to verify and maintain the records of the identity of all its clients (KYC norms)
c. 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.
Agreements with Foreign Countries:
The Act has provided powers to Central Government to enter into agreement with Foreign Governments with respect to exchange of information and to enforce the provisions of the Act.
Process of money laundering:
Usually, the process of Money laundering goes through the following three stages i.e.Placement Layering Integration