Prevention of Money Laundering Act 2002

Prevention of money laundering act 2002
Definitions, Obligation for Banks, Financial Institutions, Intermediaries, Attachment, Adjudication and confiscation of property, Appellate Tribunal, Special Court, Penalty and fine.

1. Prevention of M oney Laundering Act, 2002 Dr Ramandeep Assistant Professor Deptt. of Commerce GCW, Sirsa (Haryana)

2. Smuggling Abducting /kidnapping Gambling Fraud Prostitution Drug trafficking Committing any other crime How can One E arn B ad M oney

3. How to Convert bad Money into Good Money The person purchases insurance policies and within a short time period surrenders the policy and get the money in cash

4. How to Convert bad Money into Good Money Launderer deposits bad money into the bank and bank in turn provides the same money as loan. LOAN BACK Scheme - A Money Laundering T echnique

5. Meaning of Money Laundering It is the process by which illegal funds and assets are converted into legitimate funds and assets . In other words it is basically the process of converting illegal/ black money of a person in a legal or white money. It is the process used by criminals’ to wash their “tainted” money to make it “clean.”

6. Meaning of Money Laundering Conversion Ille g a l / Dirty M o n e y Le g i t i m a t e / White Money

7. Stages in Money Laundering The cycle of money laundering can be broken down into 3 stages- 1 . Placement: It is the first and the initial stage when the crime money is injected into the formal financial System. 2. Layering: The injected money is layered and moved or spread over various transactions in different accounts and different countries. 3 . Integration: The money enters the financial system in such a way that the money can then be used by the offender or person receiving as clean money.

8. The PMLA, 2002: Introduction Came into force w.e.f. 1 st July 2005 . It extends to whole of I ndia . Intends to fight against all sorts of economic crimes / white collar offences . It aims at combating canalization of money into illegal activities, provides for attachment and seizure of property and records .

9. Objective of the Act The objective of the Act is to - prevent money-laundering and to - provide for confiscation of property derived from, or involved in, money-laundering and - for matters connected.

10. Definitions

11. “ Money Laundering” Whosoever directly or indirectly - attempts to - indulge or - knowingly assists or - knowingly is a party or is actually involved in any process or activity connected with the 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.

12. “Proceeds of crime" proceeds of crime property derived or obtained as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is held outside country , then the property equivalent in value held within the country

13. “Property” means any property or assets of every description, whether - corporeal or incorporeal , movable or immovable , tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located.

14. “Scheduled Offence " ( a) the offences specified under Part A of the Schedule ; or (b) the offences specified under Part B of the Schedule if the total value involved in such offences is 1 crore rupees or more ; or (c) The offences specified under Part C of the Schedule .

15. “Transfer” includes sale , purchase , mortgage , pledge , gift , loan or any other form of transfer of right, title, possession or lien.

16. “Banking company” means a banking company or a co-operative bank to which the Banking Regulation Act, 1949 applies.

17. “Financial Institution ” means a financial institution and includes a chit fund company , a housing finance institution , an authorised person , a payment system operator , a non banking financial company and Department of Posts .

18. “Intermediary” i ) a stock-broker , sub-broker , share transfer agent , banker to an issue , trustee to a trust deed , registrar to an issue , merchant banker , underwriter , portfolio manager , investment adviser or any other intermediary (ii) an association registered under the Forward Contracts (Regulation) Act, 1952; or (iii) intermediary registered by the Pension Fund Regulatory and Development Authority ; or (iv) a recognised stock exchange .

19. “Reporting entity” means a banking company , financial institution , intermediary or a person carrying on a designated business or profession.

20. Punishment for the Offence of Money L aundering ( section 4)

21. Punishment Fine up to Rs.5 lakh Fine up to Rs.5 lakh In addition , the property shall be confiscated by the C entral Government . AND AND

22. Obligation of Banking C ompanies, Financial I nstitutions and Intermediaries

23. Obligation of Banking Companies, Financial Institutions and Intermediaries. all are required to maintain such record of all transactions, for a period of 5 years , and furnish to the concerned Authorities under the Act, all information relating to such transactions, the nature and value of such transactions; verify the identity of its clients and the beneficial owner , if any; and maintain record of documents evidencing identity of its clients and beneficial owners .

24. Power of Director to Impose Fine (Sec 13)

25. Attachment, Adjudication and Confiscation

26. “Attachment” means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III of the Act.

27. Attachment of property involved in money-laundering If the Director , or Deputy Director has reason to believe ( in writing ) that- Any Proceeds of crime are likely to be Concealed , Transferred , or dealt with in any manner which may result in frustrating any proceedings relating to confiscation, may, by order in writing, provisionally attach such property for a period not exceeding 180 days . The Director or any other officer shall , within a period of 30 days from such attachment, file a complaint before the Adjudicating Authority .

28. High Court Special Court Appellate Tribunal Adjudicating Authority

29. Composition of Adjudicating Authority The CG shall , by notification, appoint an Adjudicating Authority to exercise jurisdiction, powers conferred by or under this Act. It shall consist of a Chairperson and 2 other Members . One Member each shall be a person having experience in the field of law, administration, finance or accountancy .

30. Adjudication Process On receipt of complaint, if the Adjudicating Authority has reason to believe that any person has committed an offence, it may serve a notice of not less than 30 days on such person calling upon him to indicate the sources of his income, earnings or assets.

31. The Adjudicating Authority shall, after- Considering the reply of the notice issued; H e arin g t h e a gg ri eve d p e r so n a n d t h e d ir ecto r o r an y o t h e r ; and Taking into account all the relevant materials placed on record before him, by an order, record a finding whether all or any of the properties are involved in money-laundering. Adjudication Process

32. If any property is involved in money- laundering than he shall by an order in writing, confirm the attachment of the property and record a finding of that effect. T he Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached or frozen. If Special Court finds that the offence of money-laundering has been committed , it shall order that such property shall stand confiscated to the Central Government . If Special Court finds that the offence of money-laundering has not been committed, it shall order release of such property to the person entitled to receive it Adjudication Process

33. Vesting of property in Central Government (Section 9) Where an order of confiscation has been made in respect of any property of a person, all the rights and title in such property shall vest absolutely in the CG free from all encumbrances . If any encumbrance on the property or lease-hold interest has been created , then it may, by order declare such encumbrance or lease-hold interest to be void and thereupon the aforesaid property shall vest in the CG free from such encumbrance or lease-hold interest.

34. Establishment of Appellate Tribunal [Section 25] The Appellate Tribunal constituted under section 12 (1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 shall be the Appellate Tribunal for hearing appeals against the orders of the Adjudicating Authority and the other authorities under this Act.

35. Appeals to Appellate Tribunal The director or any person aggrieved by an order made by the Adjudicating Authority may prefer an appeal to the Appellate Tribunal. Any reporting entity aggrieved by any order of the Director may also prefer an appeal to the Appellate Tribunal. Every appeal shall be filed within a period of 45 days from the date of order is received. Appellate Tribunal may entertain an appeal after the expiry of the said period.

36. Appeals to Appellate Tribunal On receipt of an appeal, the Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard , pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against . The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Adjudicating Authority or Director, as the case may be. The Appellate Tribunal shall dispose of the appeal within 6 months from the date of filing of the appeal.

37. Power of Appellate Tribunal According to section 35 (2), the Appellate Tribunal shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit

38. Appeal to High Court High Court Special Court Appellate Tribunal Adjudicating Authority

39. Appeal to High Court Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within 60 days from the date of communication of the decision or order of the Appellate Tribunal

40. Special Court High Court Special Court Appellate Tribunal Adjudicating Authority

41. Special Court Special Court” means a Court of Session designated as Special Court under sub-section (1) of section 43. Section 43 empowers the CG in consultation with the Chief Justice of the High Court for trial of offence of money laundering to designate one or more Courts of Sessions as Special Court or Special Courts for such area or areas or for such cases as may be prescribed in the notification to this effect.

42. Special Court Section 45 provides that the offences under the Act shall be cognizable and non- bailable . No person accused of an offence punishable for a term of imprisonment of more than 3 years under Part A of the Schedule shall be released on bail unless- ( i ) The Public Prosecutor has been given an opportunity to oppose the application for such release and (ii) Where the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail.

43. Special Court The Special Court cannot take cognizance of any offence under the Act, unless a complaint in writing is made by:- (a) The Director or (b) Any officer of the Central Government or a State Government authorised in writing by a general or special order made in this behalf by that Government.

44. No Police officer to investigate the matter Notwithstanding anything contained in the Code of Criminal Procedure, 1973, or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised , by the CG by a general or special order , and, subject to such conditions as may be prescribed.

45. Fine or Penalty

46. Punishment for vexatious search Any authority or officer who , without reasons recorded in writing,- (a) searches or causes to be searched any building or place ; or (b) detains or searches or arrests any person, shall for every such offence be liable on conviction for imprisonment for a term which may extend to 2 years or fine which may extend to 50,000 rupees or both .

47. Punishment for false information or failure to give information Any person willfully and maliciously giving false information and so causing an arrest or a search to be made under this act, then he shall be liable for punishment , i.e.:- Imprisonment for a term up to 2 years, or Fine up to Rs. 50,000, or Both.

48. Punishment for failure to give information If any person, - Being legally bound to state the truth , refuses to answer any question, or Refuses to sign any statement made by him , which an authority may legally require to sign, or Omits to attend or produce books of account or documents at the place or time. Then, he shall be liable for penalty, a sum which shall not be less than Rs 500 but which may extend to Rs 10,000 for each such default or failure .

49. Thank You