Prevention of Money Laundering Act, 2002

1. Introduction

Money generated from criminal activities in trade like narcotics, terrorism, smuggling, corruption, counterfeit currency, gambling, and other illicit activities is covered by this Act.

The Prevention of Money Laundering Act, 2002 (‘PMLA’) was passed on January 1, 2003 and was notified & made effective from July 1, 2005. A part of this legislation i.e. PMLA with respect to collecting and processing financial intelligence is administered by the Directorate of Financial Intelligence Unit, India (FIU-IND) under the Ministry of Finance.

2. Applicability: Section 3

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.

Section 2(1) (u) : proceeds of crime

means 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 or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad.

Section 2(1)(y) : scheduled offence means the offences specified under Part A, Part B and Part C of the Schedule;

Part A enlists offences under various acts such as:

Indian Penal Code, Narcotics Drugs and Psychotropic Substances Act, Prevention of Corruption Act, Antiquities and Art Treasures Act, Copyright Act, Trademark Act, Wildlife Protection Act, and Information Technology Act.

Part B specifies offences that are Part A offences, but the value involved in such offences is ₹ 1 crore or more.

Part C deals with trans-border crimes and reflects the dedication to tackle money laundering across global boundaries.

3. Punishment for Offense of Money Laundering

Seizure/freezing of property and records and attachment of property obtained with the proceeds of crime.

Any person who commits the offence of money laundering shall be punishable with –

• Rigorous imprisonment for a minimum term of three years and this may extend up to seven years.
• Fine (without any limit).

If the proceeds of crime involved in money laundering related to Part A (offence specified under the Narcotic Drugs and Psychotropic Substances Act, 1985, then the punishment shall be –

• Rigorous imprisonment for a term which shall not be less than three years but which may extend up to 10 years.
• Fine (without any limit).

4. Adjudication under PMLA

A pictorial representation of the adjudication process is as under:

As per Sections 48 & 49 of the PMLA, the officers of the Directorate of Enforcement have been given powers to investigate cases of Money Laundering. The officers have also been authorised to initiate proceedings for attachment of property and to launch prosecution in the designated Special Court for the offence of money laundering.

The property / record may, if seized be retained or if frozen, may continue to remain frozen for a period not exceeding 180 days from the day on which such property or record were seized or frozen, unless the Adjudicating Authority under PMLA permits retention of such record or property beyond the period of 180 days [Sections 20 & 21].

Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of money-laundering shall stand confiscated to the Central Government. Where on conclusion of a trial under this Act, the Special Court finds that the offence of money-laundering has not taken place or the properties not involved in money-laundering, it may order release of such property to the person entitled to receive it. Where the trial under this Act cannot be conducted, by reason of the death of the accused or the accused having been declared a proclaimed offender or for any other reason or having commenced but could not be concluded, the Special Court, on an application moved by the Director or a person claiming to be entitled to possession of a property in respect of which an order has been issued by the Adjudicating Authority confirming the provisional attachment of the property, pass appropriate orders regarding confiscation or release of the property, as the case may be, after having regard to the material before it [Sub-sections (5) (6) & (7) of Section 8]. After an order of confiscation, all the rights and title in such property shall vest absolutely in the Central Government free from all encumbrances [Section 9].

The Director or any person aggrieved by an order made by the Adjudicating Authority under this Act, may prefer an appeal to the Appellate Tribunal. Appeal has to be filed within a period of forty-five days from the date of receipt of a copy of the order made by the Adjudicating Authority. Appellate Tribunal may entertain an appeal after the expiry of the period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period [Section 26].

Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law or fact arising out of such order. Thus appeal can be filed before High Court on any question of law or fact. High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days [Section 42].