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Introduction
Money laundering has become a world-wide menace. The goal of a
large number of criminal acts is to generate a profit for the
individual or group that carries out the act. Money laundering is
the processing of these criminal proceeds to disguise their
illegal origin. This process is of critical importance, as it
enables the criminal to enjoy these profits without jeopardizing
their source.
Some of the offences of like- illegal arms sales, smuggling, and
the activities of organised crime, including for example drug
trafficking and prostitution rings, can generate huge sums.
Insider trading, bribery and computer fraud schemes can also
produce large profits and create the incentive to
legitimise
the ill-gotten gains through money laundering.
What is meant by Money Laundering?
Money laundering is the process of moving illegally acquired cash
through financial systems so that it appears to be legally
acquired
Money laundering is the processing of dirty money in order to
disguise their illegal origin. Dirty money is proceeds derived
from criminal conduct and criminals want the money to look like it
came from a legitimate source.
Anti Money Laundering Act
In India, the Anti Money Laundering (AML) measures are controlled
through the Prevention of Money Laundering Act, 2002 which was
brought in force with effect from 1st July 2005. RBI, SEBI and
IRDA have been brought under the PML Act, and therefore it will be
applicable to all financial institutions, banks, mutual funds,
insurance companies, and their financial intermediaries. The
agency monitoring the AML activities in India is called Financial
Intelligence Unit (FIU IND) and compliance is required by all
financial intermediaries.
Background
The Act implements the Political Declaration adopted by the
Special
Session of the UN General Assembly, 1999 which called upon the
Member-States to adopt money-laundering legislation and programme.
Accordingly, in India the Act was enacted after incorporating the
recommendations of the Standing Committee on finance presented to
the Lok Sabha on 4th March, 1999. The Act thereafter was
incorporated and enacted on 17th January, 2003
Punishment of Money Laundering:
The punishment for the offence of Money Laundering is rigorous
imprisonment for a term not less than 3 years extending to 7 years
and shall be liable to fine upto Rs. 5,00,000. But if the crime
involved in Money Laundering deals with any of the offences
specified under para 2 of part A of the Schedule then the maximum
punishment awarded shall extend to 10 years. The offences referred
to in the para 2 of part A deals with ?Offences under the Narcotic
Drugs And Psychotropic Substances Act, 1985?.
Attachment, Adjudication and Confiscation:
The act deals with the confiscation of the property in accordance
with the chapter III of the said Act. The attachments are done by
the Director or any person below the Deputy Director authorised to
do so by him.
The property here in question relates to both movable and
immovable property. In case of immovable property, the term shall
include all persons claiming/entitled to claim any interest in the
property.
The Adjudicating Authority shall have the same powers as are
vested in a Civil Court under the Code of Civil Procedure and that
the proceedings shall be deemed to be taken as judicial proceeding
coming within the ambit of the meaning of 193 and Section 228 of
the Indian Penal Code.
Obligations of Banking Companies, Financial Institution and
Intermediaries:
The Act provides that every banking company, financial institution
and intermediaries should maintain a record of transaction and
provide this information to the Director when required to do so.
They are also required to verify and maintain the records of the
identity of all its clients. Such records shall be maintained for
a period of 10 years from the date of cessation of the transaction
between the clients and the banking companies.
As the passing of the information is part of the statute hence no
proceedings can be taken on account of the same. The procedure for
procuring the information shall be drawn by the Central Government
in consultation with the RBI.
This particular chapter has been included keeping in mind the
usage of cash for the purposes of illegal transactions
particularly advanced for sale/purchase of property. The check
over the Bank creates a stricter balance because the influx and
out flux of money can easily be kept in account.
Summons, Searches and Seizures, etc.:
The chapter deals with the technicalities involved in survey,
search and seizure, power of arrest or retention of property or
records as well as presumptions as to records/property, or even
inter-connected transaction. The burden of proof however shall lie
on the accused to show that his property is untainted.
Appellate Tribunal:
The Appellate Tribunal was established by Central Government to
hear
appeals against the dealers of Adjudicating Authority and
authorities
under this Act.
Appeals to the Appellate Tribunal can be made by the Director, or
any
person aggrieved by an order made by the Adjudicating Authority,
or any
banking institution or allied institution within 45 days from the
date
on which a copy of the order is received accompanied by the
prescribed
fees.
The Appellate Tribunal shall comprise of a Chairperson and 2 other
Members.
The chapter further provides that the Civil Court shall have no
jurisdiction over the suit/proceeding empowered to be determined
by the
Director, Adjudicating Authority or Appellate Tribunal. However
appeal
may be furthered to the High Court within 60 days from the date of
communication of the decision/order of Appellate Tribunal to him.
Special Courts:
The Central Government shall constitute the Special Courts in
consultation of the Chief Justice of India to try the offence of
Money
Laundering.
The offences triable by Special Court are the scheduled offences.
However due respect shall be paid to the Code of Criminal
Procedure. In
fact, the Code shall also apply to the Special Courts. Accordingly
appeals and revisions can be made to the Higher Courts.
Authorities:
Like any other Act, even PMLA provides for certain Authorities.
They
are:
1 Director/ Additional Director/ Joint Director.
2 Deputy Director
3 Assistant Director, and
4 Other officers appointed by the Act.
All the aforesaid appointments shall be made by the central
government.
However, the powers granted are in accordance with the grade of
the
authority and accordingly powers of the superior authority can be
given
over to the lesser authority to reduce the burden of the same.
To assist the officers, certain other officers may be appointed
like
1 Officers of customs of Central Excise Department
2 Officers under the NDPs Act
3 Officers of the Stock Exchange
4 Officers of the RBI
5 Officers of the police
6 Officers of the Securities Exchange Board
7 Officers of Central Government, State Government, local
authorities/
banking companies.
Reciprocal Arrangement for Assistance in certain matters and
Procedure
for Attachment and Confiscation of Property:
This chapter states that the Central Government may enter into
agreement
with the Foreign Government in respect of this Act for enforcing
the
provisions of the Act or exchanging information.
In order to examine the facts/circumstances, enforce steps as per
the
specification of the Special Courts or to forward the evidences to
the
Special Courts etc.
Similarly, the Central Government shall also assist the
contracting
state.
The basic idea is that of international co-operation and the
members
stat of UN particularly have an obligation to co-operate on
accepted
principles.
Amendment
There were certain important amendments that were brought in 2005.
1 Amendment of section 2- In the definition the definition of
investigation was also added.
2 Amendment of section 28- Changes were brought in to the
appointment of Chairperson or a Member of the Appellate Tribunal.3 Amendment of section 73- The insertion of the clause stating
that the
police officer shall also have the investigating power.
Prevailing laws in India on anti-money launderingIn India Prevention of Money laundering in the sense of seizure
and
confiscation of proceeds of crime is age old. The statutes
prevailing
before the Prevention of Money Laundering Act, 2002(Money
Laundering Act
of 2002) are: (a) Criminal Law Amendment Ordinance (XXXVIII of
1944)(b)
The Smugglers and Foreign Exchange Manipulators (Forfeiture of
Property)
Act, 1976(c)Narcotic Drugs and Psychotropic Substances Act, 1985.
Conclusion
It is to be noted that even after so many efforts and prevailing
laws,
India is among six countries being actively monitored by Interpol
and
International banking watchdogs after the detection of massive
money-laundering because of inadequate internal compliance
procedures.
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The
author can be reached at: sanjay_ils@legalserviceindia.com /
