Prevention Of Money Laundering Act Notes PDF Free Download

Prevention Of Money Laundering Act Notes PDF Download Info

Prevention Of Money Laundering Act Notes PDF Free Download, Prevention of Money Laundering Act (PMLA), 2002.

Prevention Of Money Laundering Act Notes PDF

This Article Is Written By Nishka Kamath, A Graduate Of Nalanda Law College, University Of Mumbai. It Is An Attempt To Describe The Prevention Of Money Laundering Act, 2002, Commonly Referred To As The Pmla, In Great Detail. It Also Has An Overview Of What Is Meant By Money Laundering, The Common Forms, The Impact Caused On Nations, And So On. Further, An Attempt Is Made To Enlighten The Readers On The Important Terms And Provisions Of The Prevention Of Money Laundering Act, 2002, Along With The Way Forward And The Faqs.

It Is Not A Fact Unknown That Money And Crimes Are Interrelated. People Commit Crimes When Money Is Involved; Simply Put, Such Crimes Are Committed For Economic Gains. One Of These Offences Is That Of Money Laundering.

The Individuals Committing The Offence Of Money Laundering Want Their Money To Move Freely In Society Without Any Threat That Such Money Will Eventually Lead To The Discovery Of Their Illegitimate Activities. Not Only This, But The Money Thus Laundered Helps Them Escape The Clutches Of The Police, As Such Funds Are Difficult To Be Confiscated By The Authorities. With All Such Aforementioned Issues Of Illegal Laundering Of Money, There Was A Dire Need Of Enacting A Legislation To Prevent Such Activities, And The Prevention Of Money Laundering Act, 2002, Was Enacted.

To Understand The Act Better, Let’s First Take A Look At What Is Meant By Money Laundering.

The Individuals Committing The Offence Of Money Laundering Want Their Money To Move Freely In Society Without Any Threat That Such Money Will Eventually Lead To The Discovery Of Their Illegitimate Activities. Not Only This, But The Money Thus Laundered Helps Them Escape The Clutches Of The Police, As Such Funds Are Difficult To Be Confiscated By The Authorities. With All Such Aforementioned Issues Of Illegal Laundering Of Money, There Was A Dire Need Of Enacting A Legislation To Prevent Such Activities, And The Prevention Of Money Laundering Act, 2002, Was Enacted.

When Economic Offences Like Money Laundering Attain Success, Criminal Activities Gain Profit, Thus Causing An Increase In Crime And Corruption Rates. Moreover, The Use Of Illegitimate Means To Gain Profit, Like That Of Bribery Also Rises.

A Country Might Have To Face Serious Repercussions When Its Reputation Gets Tarnished Or When It Becomes Known As A Money Laundering Or Terrorist Financing Haven. Further, Even Legal Businesses And Companies May Have To Face The Repercussions Of Such Illegitimate Activities; For Instance, Their Access To The World Market May Get Narrower Due To Overly Cautious Inspections And System Controls.

Illegal Activities Like Money Laundering And Terrorist Financing Possess The Ability To Harm The Peace And Harmony Of A Country’s Economic Sector; Further, They Can Also Disrupt The Stability Of Individual Financial Institutions In Several Ways.

It Is Common For Money Launderers To Use ‘front Companies’ To Launder Money. Front Companies Can Be Defined As Those Companies That Appear To Be Legitimate, Thus Engaging In A Legitimate Business, But In Actuality Are Controlled By Criminal Minds. Such Companies ‘co-mingle’ With The Illegitimate Funds Thus Obtained With Legitimate Funds To Conceal The Source From Which The Illegitimate Money Was Obtained.

The Prevention Of Money Laundering Bill Was Put Forward In Parliament In 1998. Further, The Pmla Bill Was Referred To The Standing Committee On Finance. The Standing Committee Then Handed Out Its Report To The Lok Sabha In 1999. Later, In 1999, The Government Introduced The Prevention Of Money Laundering Bill, 1999, In The Parliament After Including All The Suggestions Laid Down By The Standing Committee. Further, The Bill Received The Assent Of The President And Came To Be Known As The Prevention Of Money Laundering Act, 2002. The Act Became Enforceable On July 1, 2005.

It Is Noteworthy That The Pmla Was Sanctioned As A Response To India’s Global Commitment (Vienna Convention) To Combat The Issue Of Economic Crimes Like Money Laundering. The Other Conventions Include:

The Main Motive For Enacting Such A Legislation Was To Combat The Crime Of Legalising The Economic Gains Obtained From Illegal Sources. This Act Authorises The Indian Government And The Police Officials To Seize Any Property That They Have Investigated To Have Been Earned From Illegal Sources Or By Conducting Any Illegal Activities.

As The Name Suggests, The Pml Act Was Enacted To Intercept Or Obstruct The Issue Of Money Laundering. Further, The Motive Was To Seize Any Property Bought Or Obtained By Carrying Out The Crime Of Money Laundering And For Matters Related To Such An Act.

The Term ‘attachment’ Under The Pmla Is Defined As The Interdiction Of Transfer, Conversion, Disposition, Or Movement Of Property, As Stated Under Chapter Iii Of The Act.

The Term ‘beneficial Owner’ Under Section 2(Fa) Of The Pmla Means A Person Who Either Possesses Or Has Command Over A Client Of A Reporting Entity Or An Individual In Place Of Whom A Transaction Is Being Directed, And Includes An Individual Who Exercises Optimum Effective Power Over A Juridical Person.

Under Section 2 (H) Of The Pmla, A ‘chit Fund Company’ Is Defined As A Company Controlling, Conducting Or Managing, As Foreman, Representative, Or In Any Other Capacity, Chits As Defined In Section 2 Of The Chit Funds Act, 1982.

Under Section 2 (Ha), The Term ‘client’ Means An Individual Involved In An Economic Transaction Or Activity With A Reporting Entity. This Also Includes Any Individual On Whose Behalf The Individual Involved In The Financial Transaction Or Activity Is Acting.

Under Section 2(Ia) Of The Pmla, The Term ‘corresponding Law’ Is Defined As Any Law Of Another Country Equivalent To Any Of The Clauses Of The Act Or Those That Manage The Offences In That Country, Similar To Any Of The Scheduled Offences.

Under Section 2(Rb) Of The Pmla, The Term ‘payment System’ Means A System That Authorises Payment To Be Affected Between A Payer And A Beneficiary, Pertaining To Clearing, Payment, Or Settlement Services, Or All Of Them.

There Is A Further Explanation Given To This Term, Which Says That, For The Purpose Of This Clause, The Term ‘payment System’ Will Include Those Systems That Permit The Following Operations, Amongst Others:

Credit Card Operations,
Debit Card Operations,
Smart Card Operations,
Money Transfer Operations,
Other Similar Operations.

Under Section 2(Rc) Of The Pmla, The Term Payment System Operator Is Defined As An Individual Who Performs A Payment System, And Such An Individual Will Include His Overseas Principles.

Under Section 2(U) Of The Pmla, The Term ‘proceeds Of Crime’ Is Defined As Any Property Acquired Or Attained, Directly Or Indirectly, By Some Individual By Performing Any Crime Or Wrongdoing Pertaining To A Scheduled Offence, Or The Value Of Any Such Property (Or, Where Such Property Is Taken Or Held Outside The Country, Then The Property Equivalent In Value Held Within The Country). Later, Modifications Were Made To The Section, And The Term ‘or Abroad’ Was Added To The Definition Of ‘proceeds Of Crime’.

Further, An Explanation Is Added To Avoid Any Sort Of Discrepancies, It States That ‘proceeds Of Crime’ Include Property That Is Derived Or Obtained From The Scheduled Offence But Also Includes Any Property That May Directly Or Indirectly Be Acquired As A Result Of Any Criminal Activity Having Its Relation To The Scheduled Offence.

Under Section 2(V) Of The Pmla, The Term ‘property’ Means Any Property Or Assets Of Every Description, Whether Corporeal Or Incorporeal, Movable Or Immovable, Tangible Or Intangible, And Incorporates Deeds And Instruments Evidencing Title To, Or Interest In, Such Property Or Assets.

Further, An Explanation Is Given Under The Said Section, Stating That, In Order To Remove All Doubts, It Is Stated That The Term ‘property’ Incorporates Any Type Of Property Used In Committing A Wrong Under This Act Or Any Of The Scheduled Offences.

Under Section 2(Wa) Of The Pmla, The Term ‘reporting Entity’ Means A Banking Company, Any Financial Institution, An Intermediary, Or An Individual Conducting A Designated Business Or Profession.

Under Section 2(Zb) Of The Pmla, The Term ‘value’ Is Defined As The Market Value Of A Particular Property On The Date It Was Bought By An Individual, Or If The Date Cannot Be Specified, The Date On Which Such Property Is Owned By The Individual.

Under Section 55(A) Of The Pmla, The Term ‘contracting State’ Is Defined As Any Nation Or Location Outside India With Respect To Which Pacts Have Been Embodied By The Central Government With The Government Of Such A Nation By Means Of A Treaty Or Otherwise.

In Other Words, Any Individual Who Has A Direct Or Indirect Involvement, Or If He Knowingly Assists Or Is A Part Of The Activity That Is Connected To Such A Crime, Including Its Concealment, Possession, Acquisition, Or Use, And Projects Or Declares It As Untainted Property, Will Be Held Guilty Of The Offence Of Money Laundering.

Under Section 4 Of The Pmla, Any Individual Who Commits The Crime Of Money Laundering Will Be Accountable To Receive A Punishment That Involves Rigorous Imprisonment Up To 3 Years, Which May Extend To 7 Years, And Will Also Be Culpable To Pay A Penalty.

A Point Must Be Noted That, In Case If The Crime In Question Is Related To Any Offence Specifically Mentioned Under The Narcotic Drugs And Psychotropic Substances Act, 1985, The Penalty May Be Extended To A Rigorous Imprisonment Of 10 Years Instead Of 7 Years.

Section 2(V) Of The Pmla Defines The Term ‘property’ As “any Property Or Assets Of Every Description, Whether Corporeal Or Incorporeal, Movable Or Immovable, Tangible Or Intangible, And Includes Deeds And Instruments Evidencing Title To, Or Interest In, Such Property Or Assets, Wherever Located”.

Further, Section 2(D) Of The Pmla Defines The Term ‘attachment’ As “means Prohibition Of Transfer, Conversion, Disposition, Or Movement Of Property” By Any Direction Given Under The Provisions Of The Pml Act.”

A Point Must Be Noted That Under Section 5 Of The Pmla, The Power Of Attachment Has Been Conceded To The Director, The Joint Director, Or Any Officer Not Below The Rank Of A Deputy Director. The Person In Authority Can Attach Property For Up To 180 Days, If There Is A Cause To Believe The Property Was Obtained Illegally Or That The Individual Is In Possession Of Proceeds Of Crime And Is Charged With That Crime, And Proceeds Of Money Are Likely To Be Concealed Or Transferred.

Further, Such Attachment Must Be Executed In A Manner Prescribed Under The Second Schedule Of The Income Tax Act, 1961. Moreover, The Person In Authority Must Record In Writing The Reasons They Believe The Property Was Obtained Through Illegal Means. The Reason Must Be Sent In A Sealed Envelope To The Adjudicating Authority Along With A Copy Of The Attachment Order. After Attachment, The Adjudicating Authority Will Receive The Complaint, Which Should Be Filed Within 30 Days.