Prevention of Money Laundering Act, 2002: Obligations, Punishments, and Trials
22
Prevention of MoneyLaundering
Act,2002
Question 1
What is Money – Laundering?
Answer
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 andprojectingitasuntaintedpropertyshallbeguiltyofoffenceofmoneylaundering.
Question 2
What are Proceeds of crime?
Answer
Section 2(1)(u) defines “proceeds of crime” as 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.
Question 3
What Is Payment System?
Answer
In terms of clause (rb)
Of section
2 “payment
System” means a system that
Enables payment to be effected between a payer and a
Beneficiary, involving clearing, payment or settlement
Service or all of them. It includes
The systems enabling credit card operations, debit card operations,smartcardoperations,moneytransferoperationsorsimilaroperations.
Question 4
What is the punishment for the offence of money laundering?
Answer
Chapter II comprises of Sections 3 and 4. Section 3 deals
With the offence
Of money laundering.
Section 4
Provides for the punishment
For Money-Laundering. Whoever commits
Theoffenceofmoney-launderingshallbepunishablewithrigorousimprisonmentforaterm
which shall not be less than three years but which may extend to seven years And shall also be liable To fine. But where the proceeds of crime involved in money-laundering relate to any offence specified under paragraph 2 of Part A of the Schedule, the maximum punishment may extend to ten years instead of sevenyears.
Question 5
Enumerate The obligations of banking companies under the Prevention of Money Laundering Act,2002.
Answer
Section 12 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries or a person carrying on a designated Business or profession. According to sub- section (1), every banking company, financial institution and intermediary or a person carryingon a designated Business or profession shall–
(a)maintain a record of all Transactions, including information relating to Transactions covered under clause (b), In such manner as to enable it to reconstruct Individual transactions;
(b)furnish to the Director Within such time as may be prescribed, Information relating to such transactions, whether attempted or executed, The nature and value of which may be Prescribed;
(c)verify the identity of its clients in such manner and subject to such conditions, As may be prescribed;
(d)identifythebeneficialowner,ifany,ofsuchofitsclients,asmaybeprescribed;
(e)maintain record of Documents evidencing identity of its clients and Beneficial owners as wellasaccountfilesandbusinesscorrespondencerelatingtoitsclients.
Every information maintained, Furnished or verified, save as otherwise Provided under any law for the time being in force shall be kept confidential.
The records referred to in clause (a) of sub-section (I) shall be maintained For a period of five years from the date of transaction between a client and The reporting entity.
The records referred to in clause (e) Of sub-section (I) shall be maintained for a period of Five years after the business relationship between a client and the Reporting entity has ended or the Account has been closed, whichever islater.
The Central Government may, by notification, exempt any reporting entity or Class Of reporting entities from any obligation under thischapter.
Question 6
How the trials under PMLA are conducted in
special courts?
Answer
Sections 43 – 47 deals with provision relating to Special Courts. Section 43 empowers the Central Government (in consultation With the Chief Justice of the High Court) For trial of Offence of money laundering, to notify one or more Courts of Sessions as Special Court or Special Courts for such area or areas or for Such cases or class or group of cases As may be specified in the notification To this effect. Section 44 clearly provides For the offences triable by Special Courts. It overrides the provisions of The Code of Criminal Procedure, 1973 and provides That–
(i)the scheduled offence And the offence punishable under section 4 shall be triable only by theSpecialCourtconstitutedfortheareainwhichtheoffencehasbeencommitted;
(ii)a Special Court may, Upon a complaint made by an authority Authorised in this behalf under this Act take cognizance Of the offence for which the accused is Committed to it for trial. The requirement of police report of the facts which constitute an Offence under this Act Is no moreapplicable.
Question 7
Explain the term “Offence Of Money Laundering” within the Meaning of the Prevention of MoneyLaunderingAct,2002.Statethepunishmentfortheoffenceofmoneylaundering.
Answer
Offence of Money Laundering:
Section 2 of the Prevention of Money
Laundering Act, 2002 defines the term
“scheduled offence”, which accordingly means–
(i)the offences Specified under Part A of the Schedule;or
(ii)the offences Specified under Part B of the Schedule If the total value involved in Such offences is thirty lakh rupees ormore.
(iii)The offences Specified under Part C of the Schedule.
These Schedule to the Act gives a List of all the above offences.
Punishment for the Offence of Money Laundering
Section 4 of the said act provides for the punishment for Money-Laundering. Whoever Commits the offence of money-laundering shall be punishablewith:
(i)Rigorous imprisonment For a term which shall not be less than three Years, but may be extended to seven years,and
(ii)Shall also be liable tofine.
But, where the proceeds of crime involved in money-laundering relates to any offence Specified under paragraph 2 of Part A of the Schedule, the Maximum punishment may extend to ten Years instead of sevenyears.
Question 8
Explain The meaning of the term “Money Laundering”. Z, a known smuggler was caught in transfer of funds illegally Exporting narcotic drugs from India to Some countries in Africa. State the maximum Punishment that can be awarded to Him under Prevention of Money Laundering Act,2002.
Answer
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 and
Projecting it as untainted property
Shall be guilty of offence of money
Laundering.[Section3ofthePreventionofMoneyLaunderingAct,2002]
Paragraph 2 of Part A of the Schedule to the Prevention of Money Laundering Act, 2002, covers Offences under the Narcotic Drugs And Psychotropic Substances Act, 1985. Whereby, illegal Import into India, export from India or Transshipment of narcotic drugs and psychotropic substances (section 23) is covered under paragraph 2 of PartA.
Punishment
Section 4 of the said Act provides for the
Punishment for Money-Laundering. Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 7 years
And shall also be liable to fine. But where the proceeds of crime involved in money-laundering relate to any offence specified under paragraph 2 of Part A of the Schedule, the maximum punishment may extend to
10 years instead of 7years.
Question 9
Mr. Fraudulent has been arrested for a cognizable and non-bailable offence punishable for a term of Imprisonment for more than three years under the Prevention of Money Laundering Act,2002.Advise,astohowcanhebereleasedonbailinthiscase?
Answer
Section 45 of the Prevention of Money Laundering Act, 2002, Provides that the offences under the Act shall be cognizable and non-bailable. Notwithstanding anything contained in The Code of Criminal Procedure, 1973, no person accused of An offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bondunless-
(i)The Public Prosecutor Has been given an opportunity to oppose the application for such releaseand
(ii)Where the Public Prosecutor opposes the application, 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 onbail.
In case of any person who is under the age of 16 years or In case of a woman or In case of a sickorinfirmperson,theSpecialCourtcandirectthereleaseofsuchpersononbail.
Question 10
“Money Laundering” does not mean just siphoning of Fund.”
Comment on this statement Explaining the significance and aim of the Prevention of Money Laundering Act, 2002.
Answer
“Money Laundering” does not mean just Siphoning of fund:
Money Laundering is a moving of
Illegally acquired cash through financial
Systems so that it appears to
Be legally acquired. Thus, money laundering is not just the
Siphoning of fund but it is the conversion of money which is illegallyobtained.
Prevention of Money Laundering Act, 2002 has been enacted with aim for Combating channellising of money into illegal activities.
Significance And Aim of Prevention of Money Laundering Act, 2002:
The
Preamble to the Act provides
That it aims to prevent money–laundering
And to provide for confiscation of property derived from, or involved
In, money–laundering and for
Matters connected therewith or incidentalthereto.
In order to further strengthen the existing legal Framework and to effectively combat money Laundering, terror financing and Cross-border economic offences, an Amendment Act, 2009 was passed. The new law seeks to check use of black money for financing terror activities. Financial intermediaries like full-fledged money changers, money transfer service Providers and credit card operators Have also been brought under the ambit of The Prevention of Money-Laundering Act. Consequently, these intermediaries, as also casinos, have been Brought under the reporting regime Of the enforcement authorities. It Also checks the misuse of promissory Notes by FIIs, who would now be required To furnish all details of their Source. The new law would check misuse Of “proceeds of crime” be it from sale of banned narcotic Substances or breach of the Unlawful Activities (Prevention) Act. The passage of the Prevention of Money Laundering (Amendment), 2009 have enabled India’s entry into Financial Action Task Force (FATF), an inter-governmental body that has the mandate to combat money Laundering and terroristfinancing.
Question 11
How A trial under the Prevention of Money Laundering Act, 2002 is Conducted in Special Courts?
Answer
Sections 43 to 47 deal with provisions relating to Special Courts. Section 43 empowers the Central Government (in consultation with The Chief Justice of the High Court) for trial of offence Of money laundering, to notify one or more Courts of Sessions as Special Court or Special Courts for such area or areas Or for such cases or class or group Of cases as may be specifiedinthenotificationtothiseffect.Section44clearlyprovidesfortheoffencestriableby
Special Courts. It overrides the provisions of the Code Of Criminal Procedure, 1973 and providesthat–
(1)the scheduled offence And the offence punishable under section 4 shall be triable only by theSpecialCourtconstitutedfortheareainwhichtheoffencehasbeencommitted;
(2)a Special Court may, Upon a complaint made by an authority Authorized in this behalf under this Act take cognizance Of the offence for which the accused is Committed to it for trial. The requirement of police report of the facts which constitute an Offence under this Act Is no moreapplicable.
Question 12
The Adjudicating Authority appointed
Under the Prevention of Money Laundering Act, 2002 issued an order attaching certain properties of XYZ Limited alleged to be involved in money
Laundering for a specified period. The
Company aggrieved by the order of
The Adjudicating
Authority seeks your advice about the
Remedy that is available under
The Act. Advise explaining the relevant
Provisions of the Prevention of Money Laundering Act,2002.
Answer
Section 25 of Prevention of Money Laundering Act, 2002 empowers the
Central Government to establish an
Appellate Tribunal to hear appeal against order of the Adjudicating Authority
And other authorities under the Act.
Section 26 deals with the right and time frame to make an appeal
To the
Appellate Tribunal. Any person
Aggrieved by an order made by the Adjudicating Authority may prefer an appeal
To the Appellate Tribunal within a
Period of 45 days from the date on which a copy of the order is received by him. The appeal
Shall be in such form and be accompanied by such fee as may be prescribed. The Appellate Tribunal may extend the period if it
Is satisfied that there was sufficient cause for not filing it within
The period of 45days.
The Appellate Tribunal may after
Giving the parties to the appeal
An opportunity of being
Heard, pass such order as it thinks fit, confirming, modifying or setting
Aside the order appealedagainst.
The Act also provides further appeal. According to Section 42 any
Person aggrieved by any decision or
Order of the Appellate Tribunal may file an appeal to the High Court within60daysfromthedateofcommunicationoftheorderoftheAppellateTribunal.
In the light of the provisions
Of the Act explained above the company is advised to
Prefer an appeal to Appellate
Tribunal inthe first instance.
Question 13
Mr. Gambler has been arrested for a cognizable and non-bailable offence punishable for atermofimprisonmentformorethanthreeyearsunderthePreventionofMoney
Laundering Act, 2002. He seeks your advise as to how can he be released on bail. Advisehim
Answer
In accordance with the provisions of
The Money Laundering Act, 2002, as
Contained under Section 45, the
Offences under the Act shall be
Cognizable and non-bailable. Notwithstanding anything contained in the Code of
Criminal Procedure, 1973, no person accused
Of an offence punishable for a term of imprisonment
Of more than 3 years underPartAoftheScheduleshallbereleasedonbailoronhisownbondunless:
The public Prosecutor has been given an opportunity to oppose the Application for such release and
Where the Public Prosecutor opposes
The application, 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 onbail.
In case of any person who is under the age of 16 years or
In case of a woman or in caseof a sick
Or infirm person, the Special Court
Can direct the release of such person on bail.