MONEY-LAUNDERING

& ITS PREVENTION

1
MONEY-LAUNDERING
● It is defined as the act of concealing or disguising the identity of illegally obtained
proceeds so that they appear to have originated from a legitimate source.
● Some of the common methods of money laundering are Bulk Cash Smuggling, Shell
companies and trusts, Round-tripping, False invoicing etc.

2
Stages of Money Laundering
● Placement stages
At this stage vast amount of money generated from illegal sources like drug
dealing, terror activity are placed into the financial system or retail economy or
smuggle out of the country.
● Layering stages
It is a complex layer of financial transactions designed to disguise audit-trail and
provide anonymity.
● Integration stages
At this stage money re-enters the mainstream economy in legitimate looking form.

3
Framework for prevention of money laundering in India
● Statutory framework: It includes enactment of the Prevention of Money
Laundering Act (PMLA) 2002
● Institutional framework: It involves mainly two bodies:
○ Enforcement Directorate for investigation and prosecution of cases under the
PML.
○ Financial Intelligence Unit – India (FIU-IND) for receiving, processing,
analysing and disseminating information relating to suspect financial
transactions as well as for coordinating and strengthening efforts of national
and international intelligence, investigation and enforcement agencies against
money laundering.

4
● International cooperation
○ The Financial Action Task Force (FATF): is an inter-governmental body which
sets standards and develops and promotes policies to combat money
laundering and terrorist financing. A new standard has been added concerning
the implementation of targeted financial sanctions related to the proliferation
of weapons of mass destruction.
○ Asia/Pacific Group on Money Laundering (APG) membership to facilitate the
adoption, implementation and enforcement of internationally accepted anti-
money laundering and antiterrorist financing standards set out by FATF.

5
Prevention of Money Laundering Act, 2002
● Defines Money laundering offence and provides for freezing, seizure, confiscation
of the proceeds of the crime.
● The act is applicable to all financial institutions - banks, mutual funds, insurance
companies and their financial intermediaries.
● Punishment for the offence of money-laundering is up to 3-7 years with fine up to
₹5 lakh.
● There is an obligation of banking companies, financial institutions & intermediaries
to follow the procedure of KYC norms and maintain the record of last 10 years
transaction between client and banking institution.

6
PML (Amendment) Act, 2012
● It enlarges the definition of money laundering by including activities such as
concealment, acquisition, possession and use of proceeds of crime as criminal
activities.
● Upper limit of fine is removed.
● The act has provided for provisional attachment & confiscation of property of any
person for a period not exceeding 180 days, if authority has the reason to believe
that the money laundering has taken place.

7
New Amendment through Finance Act, 2019
● The definition of “proceeds of crime” has been widened which now includes
properties and assets created through any criminal activity even if it is not under
the Prevention of Money Laundering Act (PMLA) and it will now be considered as
“relatable offence”.
● Other amendments have also been brought in to remove the grey areas and
ambiguity in PMLA Act.

8
What are the Recent Amendments in PMLA?
● Clarification about the Position of Proceeds of Crime: Proceeds of the Crime not
only includes the property derived from scheduled offence but would also include
any other property derived or obtained indulging into any criminal activity relate-
able or similar to the scheduled offence.
● Money Laundering Redefined: Money Laundering was not an independent crime
rather depended on another crime, known as the predicate offence or scheduled
offence.

9
The amendment seeks to treat money laundering as a stand-alone crime.
Under Section 3 of PMLA, the person shall be accused of money laundering if in any
manner that person is directly or indirectly involved in the proceeds of the crime.
Concealment Possession Acquisition
Use or projecting as untainted property Claiming as untainted property.
● Continuing Nature of Offence: This amendment further mentioned that the person
will be considered to be involved in the offence of money laundering till the time
that person is getting the fruits of activities related to money laundering as this
offence is of a continuing nature.

10
What are the Concerns Raised About the Amendments in
PMLA?
Possible Misuse of Powers: There is a strong possibility that PMLA can be invoked
against a political rival or a dissenter, because the “process is itself the punishment”.
Issues with ECIR: ECIR (Enforcement Case Information Report), an equivalent of the FIR,
is considered an “internal document” and not given to the accused.
Throughout the procedure, the accused does not even know facts of the allegation
against him, as the only document which contains the allegation is the ECIR, which is
not supplied to the accused persons.
Contrast to General Criminal Law: PMLA is different from the General Criminal Law.
In General Criminal Law, every accused is innocent until proven guilty.
However, in PMLA, this burden has been shifted to the accused persons; they will have
to prove their innocence.

11
Accused-Bound to be a Witness: Section 63 of PMLA states that information must be
given by the accused, false information or no information will constitute another
offence.
Compelling the accused to be a witness against themselves is violative of the right
against self-incrimination.
Inefficiency of ED: The conviction rate of the Enforcement Directorate under this law is
very low, despite thousands of cases registered, people arrested, and lives turned
upside down.
According to the data quoted by the government in Parliament of India, there were
zero convictions between 2005 and 2013-14. By 2014-15 to 2021-22, out of 888 cases
under ED, only 23 cases were under conviction. Raids carried out by the Enforcement
Directorate in the last six years have jumped nearly 27 times to 3,010 in 2022 as
compared to just 112 in 2004

12
THE END
13