PREVENTION OF MONEY LAUNDERING ACT, 2002

PRESENTED BY : HETAL BHADRA

INTRODUCTION

The Prevention of Money Laundering Act came into force w.e.f. 1st July,2005.

The Act was amended by the prevention of money laundering (Amendment) act 2009 w.e.f. 1st June,2009.

Further it amended by the prevention of money laundering act (Amendment) act 2012 w.e.f. 15th Feb,2013

This Act extends to whole of India including the state of Jammu & Kashmir.

OBJECT OF THIS ACT

It is an act to prevent Money Laundering and to

provide for confiscation of property derived from, or

involved in, money laundering and to punish those

who commit the offence of money laundering.

WHAT IS MONEY LAUNDERING?

The goal of a large number of criminal activities is to

generate profit for an individual or a group. Money

laundering is the processing of these criminal proceeds

to disguise their illegal origin.

Illegal arms sales, smuggling, other organized crime,

drug trafficking and prostitution rings can generate huge

mounts of money. The money so generated is tainted and is in

the nature of ‘dirty money’. Money Laundering is the process of

conversion of such proceeds of crime, the ‘dirty money’, to

make it appear as ‘legitimate’ money.

MONEY LAUNDERING INCLUDES :Theft Fra

ud

Tax evasion

Human traffickingDrug trafficking Terrorism

Robbery Arms smuggling

Prostitution

Corrupt practices

IMPORTANT DEFINITIONS

1. “Attachment" means prohibition of transfer, conversion,

disposition or movement of property by an order issued

under Chapter III.

2. Person Includes - An Individual, HUF, Company , Firm ,

AOPs , BOIs,

3. "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. [Section 2(1)(u)]

4. "scheduled offence" means –

The offences listed in the Schedule to the Preventionof Money Laundering Act, 2002 are scheduled offences10in terms of Section 2(1)(y) of the Act. The scheduledoffences are divided into two parts - Part A & Part C.

In part A, offences to the Schedule have been listedin 28 paragraphs

Part ‘C’ deals with trans-border crimes, and is a vitalstep in tackling Money Laundering across InternationalBoundaries.

Annexure - A

5. "property" means any property or assets of every

description, whether corporeal or incorporeal, movable

or immovable, tangible or intangible and includes

deeds and instruments evidencing title to, or interest

in, such property or assets, wherever located;

WHAT IS THE OFFENCE OF 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 including its concealment, possession,

acquisition or use and projecting or claiming it as

untainted property shall be guilty of offence of money

laundering (Section 3)

HOW DOES MONEY LAUNDERING TAKE PLACE ?

The process of Money Laundering generally involve thefollowing three stages :

This is the first step of the money-laundering process and the ultimate aim of this phase is to remove the cash from the location of acquisition so as to avoid detection from the authorities.

Ex: Dividing large amount of money into less smaller terms that are deposited directly into different bank account.

1. Placement

Layering involves moving funds around the financial system, often in a complex serious of transactions to create confusion and complicate the paper trail. Ex: Exchanging money in larger or smaller amount, or transferring funds to numerous accounts in one or more financial institutions.

2. Layering

Acct 1, Bank C

Acct 1, Bank A

Acct 1, Bank D

Acct 2, Bank B

Acct X, Bank Y

Acct 2, Bank B

The ultimate goal of money laundering process is integration. Once the funds are in the financial system and insulated through the layering stage, the integration stage is used to create the appearance of legality through additional transactions.Ex: Purchase or resale of real estate, investment in securities etc.Or funnel such money into various dummy firms and get repaid through salaries, rent, leas on non- existing assets.

3. Integration

.

ACTIVITIES RESPONSIBLE FOR MONEY LAUNDERING:

Conversion or transfer of property knowing that the property is the result of a

committed crime in order to conceal the illicit origin of the property;

Assistance to any person involved in committing of such a crime in order to

avoid legal consequences of these activities;

Hiding or concealing the true nature, source, location, availability and

movement of derived ownership rights or property knowing that the property is

the result of a committed crime;

Gaining, possession or use of goods or things or values knowing at the time of

their receipt that they are the result of illicit trafficking of narcotics;

Collusion in order to commit, attempt, assist, instigate, facilitate or advise to

commit crime of trafficking of narcotics including money laundering.

WHO CAN INVESTIGATE A CASE OF MONEY LAUNDERING ?

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.

WHAT ARE THE POSSIBLE ACTIONS WHICH CAN BE TAKENAGAINST PERSONS / PROPERTIES INVOLVED IN MONEYLAUNDERING ?

1. Attachment of property u/s 5.

2. Imprisonment for a term not less than 3 years, it may

extend up to 7 years and shall be liable to fine which

may extend to 5 Lakh rupees. (It may extend up to 10

years and In case offence is punishable under the

Narcotics and Psychotropic substances Act, 1985)

3. The prosecution or conviction of any legal juridical

person is not contingent on the prosecution or

conviction of any individual.

THANK YOU….