PMLA : Prevention of Money Laundering Act

Prevention of Money Laundering Act is Indian law passed in 2002 to prevent money-laundering and to provide for confiscation of property derived from money-laundering acts by companies or high net individuals.

Money laundering involves disguising financial assets so that they can be used without detection of the illegal activity that let to its production. Through the process of money laundering a person converts illegal money into a legal entity.

This Act is applicable to whole of India, including Jammu & Kashmir, and  came into force on 1st July, 2005.

ENACTMENT OF PMLA –

With the PMLA coming into force, banks, financial institutions and financial intermediaries will have to mandatorily report to Government all suspicious transactions and those over Rs.10 Lakh.

As per the provisions of the Act, every banking company, financial institution and intermediary needs to maintain a record of all transactions, the nature and value of which is being prescribed in the rules.

Financial institutions, including chit funds, cooperative banks and intermediaries like stock brokers, share transfer agents, underwriters and investment advisers were to be registered with SEBI.

PUNISHMENT FOR MONEY LAUNDERING

The punishment for the offence of Money Laundering is rigorous imprisonment for a term not less than 3 years extending to 7 years and shall be liable to fine upto Rs. 5,00,000. But if the crime involved in Money Laundering deals with any of the offences specified under para 2 of part A of the Schedule then the maximum punishment awarded shall extend to 10 years.

PROCESS OF MONEY LAUNDERING –

The process of money laundering involves the following 3 steps,

  1. PLACEMENT :- It involves the introduction of the illegal funds into the financial system.
  2. LAYERING :- It involves a series of continuous conversions or movement of funds within the financial or banking system by way of numerous accounts , so as to hide their true origin.
  3. INTEGRATION :- This step involves investment of funds which have been placed in different accounts into real estate, business ventures or luxury assets etc.

ADJUDICATING AUTHORITY

The Adjudicating Authority is the authority appointed by the central government through notification to exercise jurisdiction, powers and authority conferred under PMLA. It decides whether any of the property attached or seized is involved in money laundering.

It  shall not be bound by the procedure laid down by the Code of Civil Procedure,1908, but shall be guided by the principles of natural justice and subject to the other provisions of PMLA. The Adjudicating Authority shall have powers to regulate its own procedure.

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