This Article is written by Sidharth M (The effectiveness of the new Prevention of Money Laundering (Amendment) Act, 2019 in curbing money laundering in India), Govt Law College, Thiruvananthapuram.
ABSTRACT
According to a report by PWC India, 52 per cent of Indian organizations experienced fraud or economic crime within the last 24 months. Another survey conducted by private firm LocalCircles, has shown that 42% of Indians experienced financial fraud in the last 3 years.
A 2009 report of the United Nations Office on Drugs and Crime (UNODC) estimated that, criminal proceeds amounted to 3.6% of global GDP, with 2.7% (or USD 1.6 trillion) being laundered.
International Monetary Fund stated in 1998 that the aggregate size of money laundering in the world could be somewhere between 2% to 5% of the world’s GDP.
So it’s a known fact that Money and Crimes go hand in hand. People commit crimes in order to escape from income taxes or to accumulate more money illegally. One such offences is that of money laundering.
Why it should be Prohibited or What is so serious about money laundering?
1.Money laundering is often associated with criminal activities such as drug trafficking, terrorism, corruption, and fraud, and allowing these activities to continue unchecked can have serious consequences for society as a whole.
2.Money laundering can facilitate the concealment of assets and income from tax authorities, which can lead to revenue losses for governments and distort public policy decision-making.
And there are numerous of dangers of Money Laundering.
INTRODUCTION
The Prevention of Money Laundering Act (PMLA) is an Indian law passed in 2002 with the objective of preventing and combating money laundering activities in the country. The Act criminalizes money laundering and provides for the confiscation of property derived from, or involved in, money laundering activities. The law also imposes various obligations on certain entities, including banks, financial institutions, and intermediaries, to maintain records and report transactions that are suspected of involving proceeds of crime or money laundering. The PMLA has been amended several times since its enactment, with the most recent amendment in 2019.
AMENDMENT OF 2019
The Finance Act, 2019 has brought about certain amendments to the Prevention of Money Laundering Act, 2002 (‘PMLA’). The primary amendment is to the definition of ‘proceeds of crime’ under the PMLA, which now includes properties not only derived or obtained from a scheduled offence, but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to a scheduled offence. Additionally, a person would be guilty of money laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or found to be involved in concealing, possessing, acquiring or using a property connected with proceeds of crime.
WHY WAS IT NECESSARY?
The existing law had many loop holes through which criminals could easily escape from getting punished under the law. Therefore, there was a need for slight changes in this law. The 2019 amendment hence made changes to make it impossible for criminals to escape from the eyes of law. It completely plugged down the loopholes and made the act more efficient.
Changes brought in the Acts are as follows,
1.In the cases of Money Laundering a major issue faced by the Investigating agency was the ambiguity revolved around the clause in PMLA which deals with ‘Proceeds of Crime’.
Proceeds of Crime literally means illegally gained money or property that are then showed as Legally gained by mixing it with the legitimate financial system. The problem that was faced by the investigating agency was the fact that the ambit of Proceeds of Crime was very limited and hence Enforcement Directorate has contented that this issue slowed down their investigative progress.
Through the Amendment of 2019 Government have finally rectified this issue by increasing the ambit of ‘Proceeds of Crime’. The scope now includes properties and assets created, derived, or obtained through any criminal activity related to the scheduled offence, even if it is not under the PMLA. Before the amendment the scope covered was “any direct or indirect attempts to indulge or knowingly assist or knowingly participate or actual involvement 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. A property will be considered as tainted if it relates to any offence on the basis of which a PMLA case has been initiated.”
2.Another loophole that was present in the PMLA was about the Section 3 which states that anyone who is found guilty of concealing, disguising, converting, transferring, or disposing of proceeds of a criminal activity in violation of the Act, shall be liable for punishment. Section 3 also held that for a person to be guilty of offence he should be found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly was a party or was actually involved in any one or more of the processes or activities included in Section 3.
But the amendment of 2019 explained that the earlier version of Section 3 made the offence as a one time offence and the offender will not be held guilty once he make the property untainted. Thus through the amendment of 2019 it was clarified that the person will be held guilty as long as he is enjoying the Proceeds of Crime and made the offence as a Continuing offence.
3.Before the change made in the ‘Proceeds of Crime’ the investigating agency ie the Enforcement Directorate couldn’t proceed it’s investigation abroad or outside the territory of India. But now ED can proceed against assets of equivalent value located even outside the country.
4.Under CrPC Section 157 an arrest can only be made after making an FIR(First Information Report). The same law was applicable in PMLA too under provisions contained in Sections 17 (1) and 18 (1). This restricted the swift and fast proceedings of the investigating agency.
Through the Amendment of 2019 the Government deleted the provisions of Section 17 (1) and 18 (1) and allowed ED to arrest or to conduct search actions even without making an FIR which was essential according to the Section 157 of CrPC by bringing Sections 17 and 18 at par with Section 19 – where there is no pre-condition to forward a report under Section 157 of CrPC or to seek warrants from the Court for making an arrest.
5.Furthermore, a new provision to Section 44 (1) has been inserted, which provides for closure of investigation in cases where no offence of money-laundering is made out. It requires filing of complaint under Section 44 (1) (b), and the relevant authority to submit a closure report before the Special Court under the PMLA.
6.Finance Minister in Lok Sabha also mentioned that a new clause will be added in the PMLA which will make the clubbing of two cases happening in two courts impossible. This is important to be done inorder to not lose the importance of the cases. By clubbing together both the cases will be merged into one and it will deter the chances of giving maximum punishment to the Culprit.
7.The Government has also brought changes to Section 5(1) to exclude the period of stay granted by a Court from the 180-day limit for the validity of provisional attachment orders and also to provide a further period of not more than 30 days to take care of delays in communication of judicial orders. Earlier, the ED had to seek a waiver.
The proposed Section 8(3) of the Act gives 90 more days to the ED to file charge sheets, after confirmation of attachment orders by the adjudicating authority. The existing provision does not allow even a single day after the orders are confirmed. The 2019 Act also includes a crucial amendment that empowers the Special Court to restore confiscated assets to the rightful claimants even during the trial. The amended Section 8(8) now allows the Special Court, if it deems fit, to consider the claims for the purposes of restoration of such properties also during the trial. Earlier, the assets could be restored only after completion of the trial.
8.Section 45 of the PMLA Act provides that no person can be granted bail for any offence under the Act unless the public prosecutor, appointed by the Government, gets a chance to oppose his bail. If the public prosecutor does so, the court has to be convinced that the accused was not guilty of the crime and additionally that they were not likely to commit any offence while out on bail. The excessive bail conditions imposed by Section 45 had been previously set aside in November, 2017 by the Supreme Court of India on grounds of unconstitutionality.
In a move to de-link PMLA proceedings from those in scheduled offences pursued by other agencies, an amendment has been brought to Section 45(1) which proposes uniform applicability of bail conditions, instead of only those crimes listed in its schedule that attract more than three years’ imprisonment. A further limit of INR 1 crore (USD 140,200) involved in the alleged offence would allow the court to apply bail provisions more leniently to less serious PMLA cases. Section 45 of the PMLA has been tweaked in order to make it difficult for launderers to get bail if the offence is cognizable. The norms empower the investigating agency to arrest without a warrant if the conditions entailed in the section are fulfilled. The amendment reads, “[It] is clarified that the expression ‘offences’ to be cognizable and non-bailable shall mean to have always meant that all offences under the Act shall be cognizable notwithstanding anything to the contrary contained in the Code of Criminal Procedure.”
9.For making the PMLA more effective and efficient Section 12AA has been introduced which include requiring every reporting entity to take additional steps to examine a client’s ownership and financial position, including sources of funds of the client, prior to the commencement of each transaction. Now the reporting entities has to be very careful and should take additional steps to record the purpose behind conducting the specified transaction and the intended nature of the relationship between the transacting parties.
Further it also added that while making transactions and to detect dubious transactions the partners should follow up with the monitoring of the business relation and also extra limitations and greater scrutiny of transactions has been set up like that of Aadhaar Verification and authentication.
It further mandates that such information obtained while applying the enhanced due-diligence measures under Section 12AA shall be maintained for a period of five years from the date of the transaction between a client and the reporting entity
10.The Government has introduced a new Sub-Section (2) to Section 66, making it mandatory for the ED to share relevant details with other agencies in order to ensure effective information sharing in compliance with the Financial Action Task Force (“FATF”) Recommendations. There is also a suggestion to create an inter-agency task force to combat money laundering and terror financing. Another suggested change is the inclusion of Section 447 of the Companies Act in the list of scheduled offences under the PMLA, which will allow the Registrar of Companies to report suitable cases to the ED for a money laundering probe.
CONCLUSION
The PMLA Amendment Act of 2019 has been generally considered as a positive step towards strengthening India’s anti-money laundering laws. The amendments have given more power to the enforcement agencies to investigate, seize and confiscate the proceeds of crime, and have also increased the penalty for those who indulge in money laundering.
By empowering the Director of the Enforcement Directorate to conduct search and seizure operations and arrest individuals without a warrant, the amendment has made the process of investigation more efficient and effective. The provision for the creation of a special court to hear cases under the PMLA has also been seen as a positive development.
The extension of the time period for investigation from 90 days to 365 days has been considered necessary to carry out a thorough investigation into complex cases of money laundering. The appointment of an Adjudicating Authority to deal with cases relating to the confiscation of properties has been seen as a measure to speed up the legal process.
The amendments thus are aimed at strengthening the legal framework to prevent money laundering and to bring to book the offenders who indulge in such activities. The amendments have also brought India’s PMLA regime in line with international standards, and have increased the scope of action against money laundering and terrorist financing.
Overall, the PMLA Amendment Act of 2019 has been viewed as a step in the right direction towards strengthening India’s anti-money laundering laws and to curb the menace of money laundering and terrorist financing.
REFERENCES
1.https://corporate.cyrilamarchandblogs.com/2019/09/finance-act-2019-prevention-money-laundering-act-amendment/#:~:text=The%202019%20Act%20broadens%20the,Court%20for%20making%20an%20arrest
2.https://www.barandbench.com/columns/amendments-to-pmla-by-finance-act-2019-widening-the-scope-of-the-legislation
3.https://enforcementdirectorate.gov.in/pmla?page=1
0 Comments