All You Need To Know About The Anti Money-Laundering Act

With the intention to prevent money-laundering related offences within its boundaries and abroad, the government has taken several steps in the past to plug loopholes in the legal framework. To discourage people from taking part in such acts, the government has also made the penalties much more severe as compared to the past. The Prevention of Money Laundering Act (PMLA) is one such step in this direction which has been amended time and again to keep up with these types of crimes.

What is money laundering?

Money laundering accounts for all those processes which include disguising the proceeds of crime and integrating it into the legitimate financial system. There are three stages of money laundering – placement, layering and integration.

While placement refers to the movement of cash from its source of origination and getting in circulation, layering happens when the offenders tries to cover the tracks making it difficult for authorities to track the transaction down. When the laundered money becomes part of the formal economy, mainly through the banking system, the process is known as integration.

What is Money Laundering Act (PMLA)?

India’s money laundering Act, also known as the Prevention of Money Laundering Act (PMLA), was framed and enacted in January 2003.

“The offence of money laundering as 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,” Section 3 of the Act reads.

Several amendments have been made in the original Act since 2003 to make it more stringent. Recently, the government widened the definition of ‘proceeds of crime’ stating that a property will be considered as tainted if it relates to any offence on the basis of which a PMLA case has been slapped.

The proposed amendment said that the ‘proceeds of crime’ under the PMLA would not only include property obtained from the PMLA offence but also any property which may ‘directly or indirectly’ be obtained as a result of any criminal activity related to the scheduled offence on the basis of which a money laundering case is filed.

Further, entities would be accused of money laundering when they conceal, possess, acquire, use and project or claim a property as untainted.

Who conducts the investigation under the PMLA?

The Directorate of Enforcement (ED) is the agency which is responsible for carrying out probe in cases involving offence of money laundering. The Adjudicating Authority and the Appellate Tribunal set under the Act are also an integral part of the investigation process. While the Adjudicating Authority decides whether a property is involved in money-laundering and confirms its attachment, the Appellate Tribunal is constituted to hear appeals against the orders of the Adjudicating Authority and the authorities that function under this Act.

Punishment under PMLA

Here are the few actions that can be initiated against the person found to be guilty:

• Attachment of property under Section 5, freezing of property and records under Section 17 or Section 18.

• Imprisonment of up to 7-10 years (depending on circumstances) along with a fine (no upper limits).