Prevention of Money Laundering Act PMLA

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    In Context

    • Recently, the Supreme Court upheld the core amendments made to the Prevention of Money Laundering Act (PMLA).

    More about the news

    • About:
      • Over 240 petitions were filed against the amendments in which the challengers claimed to violate personal liberty, procedures of law and the constitutional mandate.
      • The verdict came on an extensive challenge raised against the amendments introduced to the 2002 Act by way of Finance Acts.
    • Issues cited by the court:
      • The Act gives the government and the Enforcement Directorate (ED) virtually unbridled powers of summons, arrest, and raids.
      • It makes bail nearly impossible while shifting the burden of proof of innocence on to the accused rather than the prosecution.
        • Court made it clear that the State has a compelling interest in imposing stringent bail conditions for economic offences.
    • Enforcement Case Information Report (ECIR):
      • The Court also said an Enforcement Case Information Report (ECIR) cannot be equated with an FIR, and that supplying an ECIR in every case to the person concerned is not mandatory. 
      • It is enough if ED, at the time of arrest, discloses the grounds of such arrest.

     

    Dirty Money & Money Laundering

    • Dirty Money:
      • Criminal activities like illegal arms sales, smuggling, drug trafficking and prostitution rings, insider trading, bribery and computer fraud schemes produce large profits.
      • The money generated is called ‘dirty money’.
    • Money laundering:
      • Money laundering is the process of conversion of ‘dirty money’, to make it appear as ‘legitimate’ money.
      • The money from the criminal activity is considered dirty, and the process “launders” it to make it look clean.
      • Money laundering is a serious financial crime that is employed by white-collar and street-level criminals alike.

    • Steps of Money laundering:
      • Placement surreptitiously injects the “dirty money” into the legitimate financial system.
      • Layering conceals the source of the money through a series of transactions and bookkeeping tricks.
      • In the final step, integration, the now-laundered money is withdrawn from the legitimate account to be used for whatever purposes the criminals have in mind for it.

    About Prevention of Money Laundering Act (PMLA) 2002 

    • About:
      • It was enacted in January 2003 and the Act along with the Rules framed thereunder has come into force with effect from 1st July 2005. 
      • The Parliament enacted the PMLA as a result of international commitment to sternly deal with the menace of money laundering of proceeds of a crime having transnational consequences and on the financial systems of the countries.
    • Objectives:
      • The PML Act seeks to combat money laundering in India and has three main objectives:
        • To prevent and control money laundering
        • To confiscate and seize the property obtained from the laundered money; and
        • To deal with any other issue connected with money laundering in India.
      • The Act also proposes punishment under section 4.
    • Provisions:
      • Definition of money laundering:
        • Sec. 3 of PMLA defines offence of money laundering as 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 and projecting it as untainted property shall be guilty of offence of money-laundering. 
      • Prescribes obligation: 
        • PMLA prescribes the obligation of banking companies, financial institutions and intermediaries for verification and maintenance of records of the identity of all its clients and also of all transactions and for furnishing information of such transactions in a prescribed form to the Financial Intelligence Unit-India (FIU-IND). 
      • Empowerment of officers: 
        • PMLA empowers certain officers of the Directorate of Enforcement to carry out investigations in cases involving offence of money laundering and also to attach the property involved in money laundering. 
        • It empowers the Director of FIU-IND to impose fines on banking companies, financial institutions or intermediaries if they or any of its officers fails to comply with the provisions of the Act as indicated above.
      • Setting up of Authority: 
        • PMLA envisages the setting up of an Adjudicating Authority to exercise jurisdiction, power and authority conferred by it essentially to confirm attachment or order confiscation of attached properties. 
        • It also envisages the setting up of an Appellate Tribunal to hear appeals against the order of the Adjudicating Authority and the authorities like Director FIU-IND.
      • Special Courts:
        • It envisages the designation of one or more courts of sessions as Special Court or Special Courts to try the offences punishable under PMLA and offences with which the accused may, under the Code of Criminal Procedure 1973, be charged at the same trial. 
      • Agreement for Central Government: 
        • It allows the Central Government to enter into an agreement with the Government of any country outside India for enforcing the provisions of the PMLA, exchange of information for the prevention of any offence under PMLA or under the corresponding law in force in that country or investigation of cases relating to any offence under PMLA.

    Enforcement Directorate

    • The Directorate of Enforcement (ED) is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India.
    • It is part of the Department of Revenue, Ministry of Finance.
    • The origin of this Directorate goes back to 1 May 1956, when an ‘Enforcement Unit’ was formed, in the Department of Economic Affairs, for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947.
    • The prime objective of the Enforcement Directorate is the enforcement of two key Acts of the Government of India namely, the Foreign Exchange Management Act 1999 (FEMA) and the Prevention of Money Laundering Act 2002 (PMLA).

     

    Source: TH

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