India has taken steps to update its money laundering law, the Prevention of Money-Laundering Act (PMLA), in order to address potential gaps ahead of its upcoming assessment by the Financial Action Task Force (FATF).
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Dimensions of the Article:
- Changes Made Under the PMLA
- Concerns Regarding Changes Made Under the PMLA
- Prevention of Money Laundering Act (PMLA), 2002
Changes Made Under the PMLA
The Indian government has made several changes to the Prevention of Money-Laundering Act (PMLA) to plug loopholes and comply with Financial Action Task Force (FATF) regulations. Some of the key changes are:
- More disclosures for non-governmental organizations by reporting entities like financial institutions, banking companies, or intermediaries.
- Definition of “politically exposed persons” (PEPs) as individuals who have been entrusted with prominent public functions by a foreign country, which brings uniformity with a 2008 Reserve Bank of India (RBI) circular for Know Your Customer (KYC) norms and anti-money laundering standards for banks and financial institutions.
- Inclusion of practicing chartered accountants, company secretaries, and cost and works accountants carrying out financial transactions on behalf of their clients under the ambit of the money laundering law.
- Widening the list of non-banking reporting entities to allow 22 financial entities like Amazon Pay (India) Pvt. Ltd, Aditya Birla Housing Finance Ltd, and IIFL Finance Ltd. to verify the identity of their customers via Aadhaar under the ambit of the money laundering law.
The financial transactions covered under the money laundering law include buying and selling of any immovable property, managing client money, securities, or other assets, management of bank, savings, or securities accounts, organization of contributions for the creation, operation, or management of companies, creation, operation, or management of companies, limited liability partnerships, or trusts, and buying and selling of business entities.
Concerns Regarding Changes Made Under the PMLA
- Reporting entities required to maintain records of all transactions and conduct KYC before each specified transaction; failure to comply could result in penalties and action from investigative agencies.
- Low conviction rate under the PMLA, making it a difficult process to go through.
- Exclusion of lawyers and legal professionals in the new definition of entities covered under the PMLA criticized by some professionals.
- Some argue that these newly incorporated professionals are already regulated by professional bodies set up under various acts of Parliament, making these measures unnecessary.
Prevention of Money Laundering Act (PMLA), 2002
- According to the Prevention of Money Laundering Act (PMLA) 2002, Money laundering is concealing or disguising the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources.
- It is frequently a component of other, much more serious, crimes such as drug trafficking, robbery or extortion.
- Money laundering is punishable with rigorous imprisonment for a minimum of 3 years and a maximum of 7 years and Fine under the PMLA.
- The Enforcement Directorate (ED) is responsible for investigating offences under the PMLA.
- The Financial Intelligence Unit – India (FIU-IND) is the national agency that receives, processes, analyses and disseminates information related to suspect financial transactions.
- After hearing the application, a special court (designated under the Prevention of Money Laundering Act PMLA, 2002) may declare an individual as a fugitive economic offender and also confiscate properties which are proceeds of crime, Benami properties and any other property, in India or abroad.
- The authorities under the PMLA, 2002 will exercise powers given to them under the Fugitive Economic Offenders Act.
- These powers will be similar to those of a civil court, including the search of persons in possession of records or proceeds of crime, the search of premises on the belief that a person is an FEO and seizure of documents.
-Source: The Hindu