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Prevention of Money Laundering Act, 2002 was enacted to fight against the criminal offence of legalizing the income/profits from an illegal source. The Prevention of Money Laundering Act, 2002 enables the Government or the public authority to confiscate the property earned from the illegally gained proceeds.
Any person who directly or indirectly:
As the supply of illegal arms, drug trafficking, and prostitution, which can generate huge amounts of money and projecting or claiming it as untainted property; shall be guilty of the offence of Money Laundering. The Act was formulated for the following objectives:
Money laundering vis-à-vis syphoning of funds
Mere earning of money or obtaining any property by committing a crime does not amount to money laundering, though it may amount to syphoning of funds.
Obtaining or deriving any property by committing a crime which amounts to a Scheduled offence, and then projecting or claiming such money or property as untainted property amounts to money laundering.
Hawala, bulk cash smuggling, fictional loans, cash-intensive businesses, round-tripping, trade-based laundering, Shell companies and trusts, real estate, gambling, and fake invoicing are some of the common methods of money laundering.
‘Proceeds of Crime’, means and includes, any property obtained or is derived directly or indirectly as a result of criminal activity relating to a Scheduled Offence.
Under PMLA, the commission of any offence, as mentioned in Part A and Part C of the Schedule of PMLA will attract the provisions of PMLA. Some of the Acts and offences, which may attract PMLA, are enumerated below:
The Enforcement Directorate in the Department of Revenue, Ministry of Finance, the Government of India is responsible for investigating the offences of money laundering under the PMLA. Financial Intelligence Unit – India (FIU-IND) under the Department of Revenue, Ministry of Finance is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister. FIU-IND is the central national agency responsible for receiving, processing, analysing, and disseminating the information relating to suspect financial transactions. It is also responsible for:
The scheduled offences are separately investigated by agencies mentioned under respective acts, for example, the local police, CBI, customs departments, SEBI, or any other investigative agency, as the case may be.
Over the past decades, several anti-money laundering policies have been adopted to overcome laundering. Financial institutions and governments are constantly looking for new approaches to fight against the money launderers.
The banks and financial institutions play a pivotal role in the world of financial crime. It is important that they are properly trained on how to identify and handle money laundering. Almost every bank employee receives training in anti-money laundering, and all financial institution and banks are legally required to report any suspicious activity.
With the help of technology such as special compliance platforms, companies are now able to easily research their customers and ensure that they are not doing business with criminals.