Prevention Of Money Laundering Act, 2002 is a criminal law enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto.
Prevention Of Money Laundering Act, 2002 also known as PMLA was enacted to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto.
The Political Declaration and Global Programme of Action, was adopted by the General Assembly of the United Nations at its seventeenth special session on the twenty-third day of February, 1990.
The Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8th to 10th June, 1998 calls upon the Member States to adopt national money-laundering legislation and programmes.
Table of Contents
Applicability of Prevention of Money Laundering Act, 2002
Prevention Of Money Laundering Act, 2002 extends to the whole of India. It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
Objectives of Prevention Of Money Laundering Act 2002
- Preventing money laundering
The PMLA aims to stop money laundering and the channeling of money into illegal activities.
- Confiscating property
The PMLA allows for the seizure of property that is involved in or derived from money laundering.
- Penalizing offenders
The PMLA imposes penalties on those who commit money laundering offenses.
- Establishing authorities
- The PMLA establishes appellate tribunals and adjudicating authorities to handle money laundering matters.
- Empowering authorities
The PMLA gives authorities the power to request data from reporting businesses and take action to prevent money laundering.
- 6. Defining reporting entities
The PMLA defines reporting entities and requires them to keep records, authenticate the identities of their clients, and provide information to the Financial Intelligence Unit- India (FIU-IND).
Offence of money-laundering : Section 3 of PMLA
Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.
A person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely:—
- (a) concealment; or
- (b) possession; or
- (c) acquisition; or
- (d) use; or
- (e) projecting as untainted property; or
- (f) claiming as untainted property, in any manner whatsoever;
The process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever.
Punishment for Money-Laundering : Section 4
Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine
Where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words “which may extend to seven years”, the words “which may extend to ten years” had been substituted.
Paragraph 2 of Part A of the Schedule is in respect of offences under the Narcotic Drugs And Psychotropic Substances Act, 1985.
PMLA Accused Guilty Until Proven Innocent: Section 24
Generally, Indian laws follow the concept of Innocent until proven guilty, but it is the exact opposite in case of PMLA.
In any proceeding relating to proceeds of crime under PMLA in the case of a person charged with the offence of money-laundering under section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering; and in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering.
PMLA Adjudicating Authority : Section 6
The Central Government shall, by notification, appoint [an Adjudicating Authority] to exercise jurisdiction, powers and authority conferred by or under this Act.
An Adjudicating Authority shall consist of a Chairperson and two other Members:
Provided that one Member each shall be a person having experience in the field of law, administration, finance or accountancy.
A person shall, however, not be qualified for appointment as Member of an Adjudicating Authority, in the field of law, unless he is qualified for appointment as District Judge; or has been a member of the Indian Legal Service and has held a post in Grade I of that service; in the field of finance, accountancy or administration unless he possesses such qualifications, as may be prescribed.
The Central Government shall appoint a Member to be the Chairperson of the Adjudicating Authority.
The jurisdiction of the Adjudicating Authority may be exercised by Benches. A Bench may be constituted by the Chairperson of the Adjudicating Authority with one or two Members as the Chairperson of the Adjudicating Authority may deem fit. The Benches of the Adjudicating Authority shall ordinarily sit at New Delhi and at such other places as the Central Government may, in consultation with the Chairperson, by notification, specify;
The Central Government shall, by notification, specify the areas in relation to which each Bench of the Adjudicating Authority may exercise jurisdiction.
Notwithstanding anything contained in sub-section (5), the Chairperson may transfer a Member from one Bench to another Bench.
If at any stage of the hearing of any case or matter it appears to the Chairperson or a Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer, to such Bench as the Chairperson may deem fit.
The Chairperson and every Member shall hold office as such for a term of five years from the date on which he enters upon his office:
Provided that no Chairperson or other Member shall hold office as such after he has attained the age of sixty-five years.
The salary and allowances payable to and the other terms and conditions of service of the Member shall be such as may be prescribed:
Provided that neither the salary and allowances nor the other terms and conditions of service of the Member shall be varied to his disadvantage after appointment.
If, for reasons other than temporary absence, any vacancy occurs in the office of the Chairperson or any other Member, then, the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Adjudicating Authority from the stage at which the vacancy is filled.
The Chairperson or any other Member may, by notice in writing under his hand addressed to the Central Government, resign his office.
Co-Accused Statement Under S. 50 Of PMLA Not Substantive Piece Of Evidence
The Calcutta High Court in the case of Sujay Krishna Bhadra v/s. Enforcement Directorate Kolkata Zonal Office-II has held that the co-accused statement under Section 50 of Prevention of Money Laundering Act (PMLA) is not a substantive piece of evidence.
The bench of Justice Suvra Ghosh while granting bail to Sujay Krishna Bhadra Accused in Recruitment Scam the person accused in has observed that since the case primarily depends on documentary evidence which is in custody of the E.D, there is no scope for the petitioner to tamper with the same. With regard to the apprehension that the petitioner shall influence witnesses or may abscond if released on bail, stringent conditions may be imposed upon him to address the concern.
Twin Bail Condition for Accused Under PMLA : Section 45
Section 45 of the PMLA, which contains certain restrictions on the Courts’ power to grant bail, does not contain any provision saving the special powers to grant bail conferred upon the High Courts by Section 439 Cr.P.C., whereas Section 44 of the PMLA, which confers jurisdiction for trial of offences under the Act upon Special Courts and which does not contain any provision which may affect the powers of any Court regarding grant of bail, provides that nothing contained in Section 44 shall affect the High Court’s special powers regarding bail under Section 439 Cr.P.C.
The provision contained in Section 44 (2) of PMLA saving special powers of the High Courts regarding grant of bail was meant to be incorporated in Section 45 of the Act, but it has erroneously been placed just above Section 45.
A plain reading of Section 45 of the PMLA shows that the public prosecutor must be given an opportunity to oppose the application and the Court should have reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail. The twin conditions though restricts the right of accused to be released on bail but do not impose absolute restraint and the discretion vests in the Court.
PMLA | Trial Is Not Likely To Conclude In Reasonable Time, Section 45 Can’t Become Shackle Leading To Unreasonably Long Detention Of Accused
The Delhi High Court has held that where it is evident that the trial is not likely to conclude in a reasonable time, Section 45 of the Prevention of Money Laundering Act (PMLA) cannot be allowed to become a shackle which leads to unreasonably long detention of accused persons.
Investigation Agency Of Money-Laundering
The Enforcement Directorate (ED) has been given the responsibility to enforce the provisions of the PMLA by conducting investigation to trace the assets derived from proceeds of crime, to provisionally attach the property and to ensure prosecution of the offenders and confiscation of the property by the Special court.
Latest Amendments Under Prevention of Money Laundering Act/Rules
In March 2023, the Ministry of Finance’s Department of Revenue notified the Prevention of Money Laundering (Maintenance of Records) Amendment Rules, 2023.
Prevention of Money Laundering (Maintenance of Records) Amendment Rules, 2023 expanded the scope of reporting entities under money laundering provisions to include non-governmental organizations (NGOs).
They established a defined definition for politically exposed persons (PEPs) in alignment with the Financial Action Task Force (FATF) recommendations.
Under the new rules, reporting entities such as financial institutions, banking companies, and intermediaries must disclose beneficial owners and the existing know-your-customer (KYC) requirements.
The Prevention Money Laundering rules were amended to Include company representatives (directors, etc.), banking intermediaries, financial companies, as well as accountancy professionals, such as Chartered Accountants and Company Secretaries.
PMLA On Chinese app scam
The Chinese applications fraud, in which certain accounting experts helped create shell corporations for these apps, prompted the most current amendments to the PMLA, 2002. These experts registered these shell corporations using their office address, and some of them even rose to the position of director and had access to the bank accounts.
Many people found the fast loans offered by some of these Chinese apps to be alluring. Regretfully, the loan borrowers’ personal information was stolen and distributed to other apps, including gaming apps.
Accountants must now conduct due diligence on their clients’ ownership, financial situation, and funding source in order to stop these scams. They must also record the transaction’s purpose.
