Prevention of Money Laundering Act (PMLA), 2002

The Prevention of Money Laundering Act (PMLA), enacted in 2002 by the Parliament of India, is a crucial legislation aimed at combating money laundering and confiscating property obtained through illicit means. The act came into effect on July 1, 2005, and has recently undergone amendments to enhance the authority of the Enforcement Directorate (ED).

Significance of PMLA

The PMLA holds significant importance, particularly from an economic and political perspective, for the Indian economy and is a key topic for examinations such as the UPSC Civil Services. This article delves into recent updates, the background, money laundering, and the objectives of the PMLA.

Understanding Money Laundering

Money laundering refers to the systematic process of transforming illegally obtained funds, commonly known as black money, into legitimate funds, or white money. This intricate process involves moving laundered funds through various channels and stages of conversion and transfer, ultimately depositing them into a legally recognized institution, such as a bank.

Common Types of Money Laundering

Some of the most prevalent forms of money laundering include:

• Hawala
• Shell companies and trusts
• Fake invoicing
• Trade-based laundering
• Real estate
• Gambling
• Cash-intensive businesses
• Fictional loans
• Bulk cash smuggling
• Round-tripping

Objectives of PMLA

The primary objectives of the PMLA are:

• To prevent and combat money laundering activities in India.
• To confiscate property derived from money laundering.
• To cooperate with other countries in the fight against money laundering.

Recent Updates to PMLA

The recent amendments to the PMLA have further strengthened the ED’s powers, including:

• Increased the scope of the definition of “proceeds of crime” to include property derived from any criminal activity, not just scheduled offenses.
• Empowered the ED to attach properties even before the filing of a complaint.
• Allowed the ED to intercept and monitor electronic communication and digital data.
• Provided for the establishment of Special Courts for speedy trial of money laundering cases.

The PMLA is a vital tool in India’s fight against money laundering and plays a crucial role in maintaining the integrity of the financial system and the economy.

The Prevention of Money Laundering Act (PMLA) is a crucial Indian law that criminalizes the act of disguising the origin of illegally obtained money. Its primary objective is to prevent and control money laundering activities, ensuring the legality of financial transactions and preserving the integrity of financial systems.

Background and Legislative History of PMLA

• The PMLA was enacted by the then-NDA government on January 17, 2003, with the primary goal of preventing and controlling money laundering by confiscating proceeds derived from crime.
• The Bill was meticulously reviewed by the Department-related Standing Committee, incorporating their recommendations before being introduced in the Lok Sabha. After a thorough legislative process, the PMLA, 2002, became operational on July 1, 2005.

Objectives of the PMLA

Money laundering poses a significant threat to the integrity and sovereignty of India’s financial system, as well as those of numerous other countries. To combat these threats, the PMLA was enacted with the following objectives:

• To combat money laundering and related activities, including the confiscation of criminal proceeds, the establishment of agencies, and the development of effective strategies to counter such illicit practices.
• To confiscate and seize assets obtained through money laundering, effectively preventing their further laundering.
• To address miscellaneous matters related to money laundering in India and propose stringent punishments for offenders.
• To discover and confiscate property acquired through criminal activity, preventing its further laundering.

Provision of Punishment for Money-Laundering

• If found guilty of money laundering in India, an individual will face rigorous imprisonment ranging from 3 to 7 years.
• If the proceeds of guilt are related to offenses under the Narcotic Drugs and Psychotropic Substance Act, 1985, the sentence increases to 10 years.

Powers of attachment of tainted property

• Appropriate authorities can temporarily seize property suspected of being “proceeds of crime” for 180 days, subject to appointment by the Government of India.
• An independent adjudicating authority must confirm such an order.

Adjudicating Authority

• Appointed by the central government of India, the Adjudicating Authority exercises jurisdiction, powers, and authority as set forth in the PMLA, 2002.
• Determines whether seized or related property is involved in money laundering.
• Not bound by procedures specified in the Code of Civil Procedure, 1908, but guided by natural justice principles and subject to other provisions of the PMLA, 2002.

Burden of proof

• When found guilty of money laundering, an individual must prove that the alleged proceeds of the crime are, in fact, lawful property.

Appellate Tribunal

• Appointed by the Government of India to hear appeals from decisions of the adjudicating authority or any other authority established under the Act.
• Tribunal decisions can be appealed to the High Court (for that jurisdiction) and then to the Supreme Court.

Special Court

• The Central Government assigns one or more Courts of Session as special courts for the trial of offenses punishable under Section 4 of the PMLA, 2002.
• Assignments are made after consulting with the Chief Justice of the relevant High Court.

FIU-IND

• Established by the Government of India on November 18, 2004, as the central national agency responsible for obtaining, processing, analyzing, and disseminating information related to suspect financial transactions.
• Reports directly to the Finance Minister-led Economic Intelligence Council (EIC).