PREVENTION OF MONEY LAUNDERING ACT (PMLA), 2002
WHY IN NEWS?
- Recently, Former Jammu and Kashmir minister Lal Singh was arrested by the Enforcement Directorate (ED).
MORE ABOUT THE NEWS:
- Ex-minister was under investigation by the federal agency as part of the case lodged under the Prevention of Money Laundering Act (PMLA) against an educational trust run by his wife and former legislator Kanta Andotra
- The official also said that the former minister tried his best to “dodge” the agency and “evade arrest”.
WHAT IS PMLA ACT,2002?
- Prevention of Money Laundering Act, 2002 (PMLA) was enacted to fight against the criminal offence of legalizing the income/profits from an illegal source.
- The Prevention of Money Laundering Act, 2002 enables the Government or the public authority to confiscate the property earned from the illegally gained proceeds.
- The PMLA and rules notified thereunder impose obligation on banking companies, financial institutions, and intermediaries and persons carrying on a designated business or profession, to verify identity of clients, maintain records and furnish information to FIU-IND.
WHAT IS MONEY LAUNDERING?
- Money laundering is defined as the process through which an illegal fund, such as black money, is obtained from illegal activities and disguised as legal money, eventually portrayed as white money.
- The money laundered is passed on through various channels or phases of conversions and transfers to make it legal and eventually reach a legally acceptable institution, like a bank.
- The Prevention of Money Laundering Act (PMLA) 2002 defines money laundering as an act of directly or indirectly attempting to indulge or knowingly assisting or knowingly being a party or actually involved in concealing, possessing, acquiring, using, projecting as untainted property, or claiming as untainted property, in any manner whatsoever, the proceeds of crime.
TYPES OF MONEY LAUNDERING:
Below mentioned are some types of money laundering:
- Bulk cash smuggling
- Fictional loans
- Cash-intensive businesses
- Trade-based laundering
- Shell companies and trusts
- Real estate
- Fake invoicing
KEY PROVISIONS OF PMLA ACT,2002:
The Prevention of Money Laundering Act (PMLA) 2002 has several key provisions aimed at preventing and controlling money laundering. Some of the essential provisions are discussed below:
- Reporting obligations: The PMLA 2002 imposes reporting obligations on various entities, including banks, financial institutions, and intermediaries.
- Attachment and confiscation of property: The PMLA 2002 allows for attachment and confiscation of property involved in money laundering.
- Punishment for money laundering: The PMLA 2002 provides for rigorous imprisonment for a term ranging from three years to seven years and a fine for committing the offence of money laundering.
- International cooperation: The PMLA 2002 provides for international cooperation in the investigation and prosecution of money laundering offences. T
CHALLENGES IN PMLA ACT:
- The enforcement agencies lack the necessary resources to effectively investigate and prosecute money laundering offences.
- The legal framework for investigating and prosecuting money laundering offences is complex, and the authorities must navigate multiple laws and regulations.
- The conviction rate for money laundering offences in India is low.
- The burden of proof in money laundering cases lies with the prosecution, which can be challenging to prove beyond reasonable doubt.
- In some cases, political interference has hindered the investigation and prosecution of money laundering offences.
- This interference can come in the form of pressure on investigators or prosecutors to drop cases or delay the legal process.
ADDRESSING MONEY LAUNDERING vis-a-vis PMLA ACT:
The financial institutions, banks and intermediaries have the following obligations under the PMLA:
- To maintain records of every transaction and amount, irrespective of whether such transactions were carried on in one go or there were series of transactions having an internal connection with each other when such series occurred within thirty days.
- To inform the Director appointed under the PMLA about such transactions within the allotted time.
- To verify the identity of the clients.
- To keep a record of all the documents relating to the identity of the clients and the beneficial owners, account files and business transactions relating to the clients.
- PMLA ACT despite its challenges, has been instrumental in detecting and prosecuting money laundering offences in the country.
- It is important for all entities covered under the act to comply with the reporting obligations and cooperate with the enforcement agencies to effectively combat money laundering.
SYLLABUS: MAINS, GS-2, GOVERNANCE
SOURCE: THE HINDU, Fiuindia.gov.in