B.

Voc Sem II Paper Code: BVB 204 Paper

Name: Banking & Allied Services – Law &
Regulations Topic: PMLA

By Dr. Jivan Kumar Chowdhury

• PMLA refers to the Prevention of Money Laundering Act,
2002.
• The Prevention of Money Laundering Act, 2002 came
into force with effect from 1st July, 2005. The Act was
amended by the Prevention of Money Laundering
(Amendment) Act 2009 w.e.f. 01.06.2009. The Act was
further amended by the Prevention of Money-
Laundering (Amendment) Act, 2012 w.e.f. 15-02-2013
and Prevention of Money Laundering (Amendment) Act,
2019.
• It extends to the whole of India including the state of
Jammu & Kashmir.
• Object of Prevention of Money Laundering Act, 2002
• As stated in the Preamble to the Act, it is an Act to
• prevent money-laundering and to provide for
• confiscation of property derived from, or involved in,
• money-laundering and to punish those who commit the
• offence of money laundering.
• Sec 3 of Prevention of Money Laundering Act, 2002 defines “
money laundering “ as whosoever attempts to indulge in any
process or activity connected 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.
• Thus the proceeds from criminal activities further propel
crimes and create a parallel economy and all of these
transactions operate being unnoticed.
• The PMLA also enumerates a list of offences which are
classified as ‘scheduled offences’ constitute as ‘crime’.
• The growing number of financial crimes and high profile
embezzlement have become a matter of severe concern.
• As a result of which the Finance Act 2019, has introduced an
amendment to the PMLA to curb the same. The amendment
provides stringent rules for investment and gives the required
classifications on ambiguities that existed earlier. It is
significant to note that the amendments have been made by
inserting an ‘explanation’.
• The amendment made in the PMLA in the Finance Act, 2019
can be accessed here.
• Amendment:
• 1. Explanation to Sec. 2(U) inserted:
• The explanation clarifies the position of ‘proceeds of crime’.
• Now ‘proceeds of crime’ will be understood to relate to any
property that directly or indirectly derived or obtained
through an activity relatable to scheduled offences.
• 2. Explanation to Sec. 3.
• Sec. 3 of PMLA relates to “ offences of money laundry”. The
explanation under Sec. 3 mentions, a person shall be guilty of
money laundry if the person is directly involved or is
knowingly a party to one or more of the following processes
connected with the “proceeds of crime”.
• a) concealment b) Possession c) Acquisition d) Use e)
projecting as untainted property f) claiming it as untainted
property, in any manner whatsoever.
• Accordingly, the entire process/activity connected to the
proceeds of crime is a continuing offence.
• The above explanation was inserted basis an observation
made by Financial Task Action Force (FATF), that concealment,
possession, acquisition and use of the proceeds of crime were
not criminalized earlier under Sec. 3 of the PMLA.
• 3. Provision to Sec. 17(1) and 18(1) omitted:
• Omitting the above provision now gives the authorized officer
under PMLA the authority to enter any property for purpose
of conducting search and seizure and the search of any
person, even in the absence of the reporting of a scheduled
offence to a Magistrate or any other competent authority in
this regard.
• 4. Amendment of Sec 44 of the PMLA: Sec. 44 of the PMLA
encompasses the provisions for offences which can be tried
by Special Courts. A Provision has been inserted to Sec. 44(1)
(b) of the PMLA which talks about submitting of a ‘Closure
Report” upon conclusion of investigation. It states that if no
offence of money laundering can be determined after
investigation, the authority shall submit a “closure report”
before the special Court. It assists in closing of cases where
investigation was completed and no offence was found.
• The trial conducted by the special court for scheduled
offences shall be distinct from any other trial being conducted
for the same scheduled offence. It shall not be considered as
a joint trial.
• 5. Explanation to Sec 45(2) of PMLA:
• This explanation clarifies that the offence of money
laundering is a cognizable and non – bailable offence.
Accordingly, an authorized officer can arrest the accused
without a warrant.
• The name of Agency administers the Prevention of Money
• Laundering Act, 2002:
• The Directorate of Enforcement in the Department of
• Revenue, Ministry of Finance is responsible for
• investigating the cases of offence of money laundering
• under Prevention of Money Laundering Act, 2002.
• Financial Intelligence Unit - India (FIU-IND) under the
• Department of Revenue, Ministry of Finance is the
• central national agency responsible for receiving, processing,
analyzing and disseminating information relating to suspect
financial transactions to enforcement agencies and foreign
FIUs.
• The steps have been taken by the Government of India to
tackle the menace of Money Laundering
• Government of India is committed to tackle the menace of
Money Laundering and has always been part of the global
efforts in this direction.
• India is signatory to the following UN Conventions, which deal
with Anti - Money Laundering / Countering the Financing of
Terrorism :
• 1. International Convention for the Suppression of the
Financing of Terrorism (1999);
•
• 2. UN Convention against Transnational Organized Crime
(2000); and
• 3. UN Convention against Corruption (2003).
• In pursuance to the political Declaration adopted by the
special session of the United Nations General Assembly
• (UNGASS) held on 8th to 10th June 1998 (of which India is one
of the signatories) calling upon member States to adopt Anti
Money Laundering Legislation &Programme, the Parliament
has enacted a special law called the ‘Prevention of Money
Laundering Act, 2002’ (PMLA 2002).
• This Act has been substantially amended, by way of enlarging
its scope, in 2009 (w.e.f. 01.06.2009), by enactment of
Prevention of Money Laundering (Amendment) Act, 2009.
The Act was further amended by Prevention of Money-
Laundering (Amendment) Act, 2012 w.e.f. 15-02-2013.
• The major Acts covered in the Schedule:
• (a) Indian Penal Code, 1860;
• (b) NDPS Act, 1985;
• (c) Unlawful Activities (Prevention ) Act, 1967;
• (d) Prevention of Corruption Act, 1988;
• (e) Customs Act, 1962;
• (f) SEBI Act, 1992;
• (g) Copyright Act, 1957;
• (h) Trade Marks Act, 1999;
• (i) Information Technology Act, 2000 and 2008
• (j) Explosive Substances Act, 1908;
• (k) Wild Life (Protection) Act, 1972;
• (l) Passport Act, 1967;
• (m) Environment Protection Act, 1986; (n) Arms Act, 1959.
• Persons who investigates Predicate/Scheduled Offences:
• Predicate Offences are investigated by agencies such
• as Police, Customs, SEBI, NCB and CBI, etc. under their
respective Acts.
• Persons can investigate a case of Money Laundering
• As per Sections 48 & 49 of the PMLA, the officers of the
Directorate of Enforcement have been given powers to
investigate cases of Money Laundering. The officers have
also been authorised to initiate proceedings for attachment
of property and to launch prosecution in the designated
Special Court for the offence of money laundering.
• The possible actions which can be taken against persons /
properties involved in Money Laundering
• (a) Attachment of property under Section 5, seizure/ freezing
of property and records under Section 17 or Section 18.
Property also includes property of any kind used in the
commission of an offence under PMLA, 2002 or any of the
scheduled offences.
• (b) Persons found guilty of an offence of Money Laundering
are punishable with imprisonment for a term which shall not
be less than three years but may extend up to seven years and
shall also be liable to fine [Section 4].
• (c)When the scheduled offence committed is under the
Narcotics and Psychotropic substances Act, 1985 the
punishment shall be imprisonment for a term which shall not
• be less than three years but which may extend up to ten years
and shall also be liable to fine.
• (d) The prosecution or conviction of any legal juridical person
is not contingent on the prosecution or conviction of any
individual.
• The powers of authority during survey
• An authority during the survey may—
• (i) place marks of identification on the records inspected by
him and make or cause to be made extracts or copies
therefrom;
• (ii) make an inventory of any property checked or
• verified by him; and (iii) record the statement of any person
present in the place which may be useful for, or relevant to,
any proceeding under this Act.
• The powers available to the Investigating Officers under the
Act
• The Investigating Officers have the powers:-
• (a) to provisionally attach any property derived or obtained,
directly or indirectly, by any person as a result of criminal
activity relating to a scheduled offence or the value of any
such property [Section 5];
• (b) to conduct survey of a place;
• (c) to conduct search of building, place, vessel, vehicle or
aircraft & seize/freeze records & property ;
• (d) to conduct personal search ;
• (e) to arrest persons accused of committing the offence of
Money Laundering ;
• (f) to summon and record the statements of persons
concerned
• The powers of officers / authority during search and seizure
• Authorised officer may —
• (a) enter and search any building, place, vessel, vehicle or
aircraft where he has reason to suspect that such records or
proceeds of crime are kept;
• (b) break open the lock of any door, box, locker, safe, almirah
or other receptacle where the keys thereof are not available;
• (c) seize any record or property found as a result of such
search;
• (d) place marks of identification on such record or properties
if required or make or cause to be made extracts or copies
therefrom;
• (e)make a note or an inventory of such record or property;
• (f) examine on oath any person, who is found to be in
possession or control of any record or property, in respect of
all matters relevant for the purposes of any investigation
under this Act; and
• (g) where it is not practicable to seize such record or property,
the officer authorized may make an order to freeze such
property, whereupon the property shall not be transferred or
otherwise dealt with, except with the prior permission of the
officer making such order.
• The time limit for retention of records or property seized
during search, seizure and the time limit for continuation
of the order of freezing of property/records frozen during
search and seizure
• The property / record may, if seized be retained or if
frozen may continue to remain frozen for a period not
exceeding 180 days from the day on which such
• property or record were seized or frozen, unless the
• Adjudicating Authority under PMLA permits retention of
such record or property beyond the period of 180 days.
• According to Sec. 5(4) the persons claiming or entitled to
claim any interest in the enjoyment of immovable property
can enjoy the property during the period of provisional
attachment.
• Where the Adjudicating Authority decides that any property is
involved in money-laundering, he shall, by an order in writing,
confirm the attachment of the property. Such attachment
shall—
• (a) continue during the pendency of the proceedings relating
to any offences under this Act before a court or under the
corresponding law of any other country, before the
competent court of criminal jurisdiction outside India, as the
case may be; and (b) becomes final after an order of
confiscation is passed.
• When all or any of the attached/seized/ frozen properties are
not involved in money laundering, the Adjudicating
Authority shall direct the release of all properties other than
the properties involved in money-laundering to the person
from whom such properties were seized or the person
entitled to receive it.
• However, the Director or any other officer authorised by him
in this behalf, may withhold the release of any such property
for a period of ninety days if he (Director of Enforcement) is of
the opinion that such property is relevant for the appeal
proceedings under this Act.
• The Director or any person aggrieved by an order made by the
Adjudicating Authority under this Act, may prefer an appeal to
the Appellate Tribunal. Appeal has to be filed within a period
of forty-five days from the date of receipt of a copy of the
order made by the Adjudicating Authority.
• Appellate Tribunal may entertain an appeal after the expiry of
the period of forty-five days if it is satisfied that there was
sufficient cause for not filing it within that period.