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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