Money Laundering Act

The Prevention of Money Laundering Act, 2002 is a law made by the Indian government under the NDA to stop money laundering and seize properties gained from it. It became active on July 1, 2005. This law makes banks, financial firms, and middlemen responsible for confirming who their clients are, keeping records, and giving information to the Financial Intelligence Unit – India (FIU-IND).

The Prevention of Money Laundering Act was changed in 2005, 2009, and 2012. But in a decision on November 24, 2017, the Supreme Court removed a part of the law that made it really hard for someone sentenced to more than three years in jail to get bail if the government’s lawyer disagreed. This part of the law said that no one could get bail for a crime under the Act unless the government’s lawyer had a chance to oppose it. And if the lawyer did oppose bail, the court had to be convinced that the person was innocent and wouldn’t commit any more crimes while out on bail. The Supreme Court said this part of the law goes against certain rights in the Indian Constitution.

Objectives

The main goals of the Prevention of Money Laundering Act (PMLA) in India are:

1. Stop and manage money laundering.

2. Take away and hold onto the assets acquired from money laundering.

3. Handle any other related problems regarding money laundering in India.

Salient features

Punishment for money-laundering

According to the law, anyone caught doing money laundering can be put in jail for a tough time, ranging from three to seven years. If the money involved comes from certain serious crimes like those listed in the Narcotic Drugs and Psychotropic Substance Act, 1985, the punishment can be even longer, up to 10 years instead of 7.

Powers of attachment of tainted property

The Director or a higher-ranking officer with the Director’s approval can temporarily seize property suspected to be gained from criminal activities for 180 days. This decision needs to be confirmed by a separate Adjudicating Authority.

Adjudicating Authority

The Adjudicating Authority, appointed by the central government, decides if any seized property is linked to money laundering under the PMLA. It isn’t bound by the usual legal procedures but follows principles of fairness. It can set its own rules for how it operates.

Presumption in inter-connected transactions

If there are multiple transactions connected to each other, and at least one of them is proven to be involved in money laundering, then the other transactions in the group are also considered part of the money laundering process for legal decisions like adjudication or confiscation.

Burden of proof

If someone is accused of money laundering, they have to show that the money they’re accused of laundering is actually legal and earned through legitimate means.

Appellate Tribunal

The Appellate Tribunal, appointed by the Government of India, can hear appeals against decisions made by the Adjudicating Authority and other bodies under the Act. If someone disagrees with the tribunal’s decision, they can appeal to the High Court for that area and ultimately to the Supreme Court.

Special Court

Section 43 of the Prevention of Money Laundering Act, 2002 states that the Central Government, after consulting with the Chief Justice of the High Court, can designate one or more Courts of Session as Special Courts to try offences punishable under Section 4 of the Act through a notification.

FIU-IND

The Financial Intelligence Unit – India (FIU-IND) was established by the Government of India on November 18, 2004, as the primary agency tasked with receiving, analyzing, and sharing information about suspicious financial transactions. FIU-IND also collaborates with national and international intelligence, investigation, and enforcement agencies to combat money laundering and related crimes. It operates independently and reports directly to the Economic Intelligence Council, chaired by the Finance Minister.

Criticism

As of July 2022, out of 5,422 cases filed under the Prevention of Money Laundering Act (PMLA) since its enactment 17 years ago, only 23 individuals have been convicted, resulting in a conviction rate of less than 0.5%. Lawyers argue that the low conviction rate and the targeting of certain individuals in recent years suggest that the PMLA is often used against political opponents or dissenters. They claim that the legal process itself becomes a form of punishment, as accused individuals may not even be aware of the specific allegations against them.

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