Pmla, 2002
Pmla, 2002
Pmla, 2002
1. INTRODUCTION
Money Laundering
It is a highly sophisticated act to cover up or camouflage the
identity/origin of illegally obtained earnings so that they appear to have
derived from lawful sources.
It is the process by which illegal funds and assets are converted into
legitimate funds and assets. In other words it is basically the process
of converting illegal/ black money of a person in a legal or white money. It is the process used by
criminals’ to wash their “tainted” money to make it “clean.”
The Prevention of Money Laundering Act, 2002 is known to have been legislated basically to
sub-serve twin purpose firstly, is to prevent money laundering and secondly to provide for
confiscation of property derived from, or involved in money laundering, and to ensure of the
curbing of the tendency of committing scheduled offences.
Money laundering is a single process however; its cycle can be broken down into three distinct
stages
1. Placement: It is the first and the initial stage when the crime money is injected into the formal
financial System.
2. Layering: Then under the second stage, money injected into the system is layered and
moved or spread over various transactions in different accounts and different countries. Thus,
it will become difficult to detect the origin of the money.
3. Integration: Under the third and final stage, money enters the financial system in such a way
that original association with the crime is sought to be obliterated so that the money can then
be used by the offender or person receiving as clean money.
There are multiple methods through which money can be laundered and huge profit is being made,
some of them are:
• Cash Smuggling: Moving cash from one location to another or depositing the cash in Swiss
Bank Account;
• Structuring: Cash is broken down into formal receipts to buy money orders etc., smaller
amounts are hard to detect;
• Laundering via Real Estate: Buying a land for money and then selling it making the profits
legal.
• Stock Markets scams
• By creating bogus companies.
• Drug Trafficking;
• Bribery and Corruption;
• Kidnapping and Extortion.
If left unchecked, money laundering can erode a nation’s economy by changing the demand for
cash, making interest and exchange rates more volatile, and by causing high inflation in countries
where criminal elements are operating. The draining of huge amounts of money a year from
normal economic growth poses a real danger for the financial health of every country which in turn
adversely affects the global market.
In view of an urgent need for the enactment of a comprehensive legislation for preventing money
laundering and connected activities, confiscation of proceeds of crime, setting up of agencies and
mechanisms for coordinating measures for combating money laundering etc., the Prevention of
Money Laundering Bill 1998 was introduced in the Parliament on 4th August, 1998. The Bill
received the assent of the President and became the Prevention of Money Laundering Act, 2002
on 17th January 2003. The Act has come into force with effect from 1st July 2005. It has been
amended in 2005, 2009 and then in 2012.
The objective of the Act is to prevent money-laundering and to provide for confiscation of property
derived from, or involved in, money-laundering and for matters connected.
Understanding Money Laundering
Let us understand Money Laundering with the example of Hawala.
How Hawala Works: Hawala system works with a network of operators called Hawaladars or
Hawala agents. For a Hawala transaction a customer contacts a Hawala agent at the source
location. The Hawala agent at that end collects money from the person who wishes to make a
transfer. The agent then calls up his counterpart in the country where the transfer has to be made.
This counterpart then hands over the cash to the recipient after deducting a commission. The
source agent promises to settle the debt to the destination agent through an informal settlement.
For example, a person in country ‘A’ who wants to transfer some money to someone in country ‘B’
gives the money to the Hawala broker in country ‘A’. The agent accepts it and calls up his
colleague in country ‘B’. His colleague gives the money in country ‘B’s’ currency to the person in
country ‘B’ to whom it has to be transferred. An identification code is requested, ensuring the
authenticity of the receiver.
In a Hawala transfer, the money enters the hawala system in local currency and leaves as foreign
currency. The currency exchange happens at a rate set by the agents and not the official rates.
This way they make an addition profit than the commission.
Then, if anybody does the act which is in contravention to above, or in contravention to the
provision of the Act will be liable for the punishment under section 4 of the Act.
2. DEFINITIONS
To understand the meaning of money – laundering it is essential to define proceeds of crime,
property and scheduled offence. Infact, all the above definitions have to be read together.
I. Clause (p) of sub section (1) of section 2 provides that "money-laundering" has the
meaning assigned to it in section 3. Moving to section 3, it is observed that 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.
• Whosoever (directly or indirectly)
o attempts to
o indulge or
o knowingly assists or
o knowingly is a party or
o is actually involved
• in any process or activity
o 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
II. Section 2(1)(u) defines "proceeds of crime" as 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 or where such property is taken/held outside the country, then the
property equivalent in value held within the country.
III. Now, let us understand what is this Property as talked above. In terms of clause (v) of sub –
section (1) of section 2, "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.
Explanation: Property includes property of any kind used in the commission of an offence
under this Act/any of the scheduled offences.
IV. In terms of clause (rb) of sub – section (1) of section 2 "payment system" means a system
that enables payment to be effected between a payer and a beneficiary, involving clearing,
payment or settlement service or all of them.
It includes the systems enabling credit card operations, debit card operations, smart card
operations, money transfer operations or similar operations;
V. The term “scheduled offence" has been defined in clause (y) of sub-section (1) of section 2.
It means –
(a) the offences specified under Part A of the Schedule; or
(b) the offences specified under Part B of the Schedule if the total value involved in such
offences is one crore rupees or more; or
(c) The offences specified under Part C of the Schedule.
VI. “Transfer” includes sale, purchase, mortgage, pledge, gift, loan or any other form of transfer
of right, title, possession or lien.
Other Definitions
“Banking company” means a banking company or a co-operative bank to which the Banking
Regulation Act, 1949 applies and includes any bank or banking institution referred to in section 51
of that Act.
“Beneficial owner” means an individual who ultimately owns or controls a client of a reporting
entity or the person on whose behalf a transaction is being conducted and includes a person who
exercises ultimate effective control over a juridical person
“Client” means a person who is engaged in a financial transaction or activity with a reporting
entity and includes a person on whose behalf the person who engaged in the transaction or
activity, is acting.
“Financial institution” means a financial institution as defined in clause (c) of section 45 I of the
Reserve Bank of India Act, 1934 and includes a chit fund company, a housing finance institution,
an authorised person, a payment system operator, a non-banking financial company and the
Department of Posts in the Government of India.
“Intermediary” means,
(i) a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee to a trust deed,
registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser or
any other intermediary associated with securities market and registered under section 12 of
the Securities and Exchange Board of India Act, 1992; or
(ii) an association recognised or registered under the Forward Contracts (Regulation) Act, 1952
or any member of such association; or
(iii) intermediary registered by the Pension Fund Regulatory and Development Authority; or
(iv) a recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts
(Regulation) Act, 1956.
“Records” include the records maintained in the form of books or stored in a computer or such
other form as may be prescribed.
“Reporting entity” means a banking company, financial institution, intermediary or a person
carrying on a designated business or profession.
not be less than three years but which may extend to seven years and shall also be liable to fine.
But where the proceeds of crime involved in money-laundering relate to any offence specified
under paragraph 2 of Part A of the Schedule (i.e. Offences under the Narcotic Drugs and
Psychotropic Substances Act, 1985) 1, the maximum punishment may extend to ten years instead
of seven years.
Yes No
1 Paragraph 2 of Part A deals with Offences under the Narcotics Drugs and Psychotropic Substances Act, 1985,
which mainly consist of contravention in relation to poppy straw, opium, cannabis plant, cannabis, psychotropic
substances, manufactured drugs.
be prescribed;
(c) verify the identity of its clients in such manner and subject to such conditions, as may be
prescribed;
(d) identify the beneficial owner, if any, of such of its clients, as may be prescribed;
(e) maintain record of documents evidencing identity of its clients and beneficial owners as
well as account files and business correspondence relating to its clients.
transactions Clients
• maintain a record of all • verify the identity of maintain record of
transactions its clients documents
• furnish to the Director • identify the evidencing identity of
information relating to beneficial owner, if its clients and
such transactions beneficial owners
any, of such of its
clients
5. The Director shall forward a copy of the order passed under sub-section (2) to every banking
company, financial institution or intermediary or person who is a party to the proceedings
under that sub-section.
For the purpose of this section, "accountant" shall mean a chartered accountant within the
meaning of the Chartered Accountants Act, 1949.
Section 14 gives immunity to reporting entity, its directors and employees etc., against civil or
criminal proceedings for furnishing information under clause (b) of sub-section (1) of section 12.
Section 15 provides for prescribing the procedure and manner of furnishing information by
reporting entities. The Central Government may, in consultation with the Reserve Bank of India,
prescribe the procedure and the manner of maintaining and furnishing information under sub-
section (1) of section 12 for the purpose of implementing the provisions of this Act.
made under sub-section (1) of section 5 or retention of property or record seized or frozen
under section 17 or section 18 and record a finding to that effect, whereupon such attachment
or retention or freezing of the seized or frozen property or record shall—
(a) continue during the pendency of the proceedings relating to any offence under this Act
before a court or under the corresponding law of any other country, before the
competent court of criminal jurisdiction outside India, as the case may be; and
(b) become final after an order of confiscation is passed under sub-section (5) or sub-
section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Special
Court
(4) Where the provisional order of attachment made under sub-section (1) of section 5 has been
confirmed under sub-section (3), the Director or any other officer authorised by him in this
behalf shall forthwith take the possession of the property attached under section 5 or frozen
under sub-section (1A) of section 17, in such manner as may be prescribed:
Provided that if it is not practicable to take possession of a property frozen under sub-section
(1A) of section 17, the order of confiscation shall have the same effect as if the property had
been taken possession of.
(5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the
offence of money-laundering has been committed, it shall order that such property involved in
the money laundering or which has been used for commission of the offence of money-
laundering shall stand confiscated to the Central Government.
(6) Where on conclusion of a trial under this Act, the Special Court finds that the offence of
money laundering has not taken place or the property is not involved in money-laundering, it
shall order release of such property to the person entitled to receive it.
(7) Where the trial under this Act cannot be conducted by reason of the death of the accused or
the accused being declared a proclaimed offender or for any other reason or having
commenced but could not be concluded, the Special Court shall, on an application moved by
the Director or a person claiming to be entitled to possession of a property in respect of which
an order has been passed under sub-section (3) of section 8, pass appropriate orders
regarding confiscation or release of the property, as the case may be, involved in the offence
of money-laundering after having regard to the material before it.
(8) Where a property stands confiscated to the Central Government under sub-section (5), the
Special Court, in such manner as may be prescribed, may also direct the Central Government
to restore such confiscated property or part thereof of a claimant with a legitimate interest in
the property, who may have suffered a quantifiable loss as a result of the offence of money
laundering:
Provided that the Special Court shall not consider such claim unless it is satisfied that the
claimant has acted in good faith and has suffered the loss despite having taken all
reasonable precautions and is not involved in the offence of money laundering.
Vesting of property in Central Government [Section 9]
Where an order of confiscation has been made under sub-section (5) or sub-section (7) of section
8 or section 58B or sub-section (2A) of section 60 in respect of any property of a person, all the
rights and title in such property shall vest absolutely in the Central Government free from all
encumbrances.
However, where the Special Court or the Adjudicating Authority, as the case may be, after giving
an opportunity of being heard to any other person interested in the property attached under this
Chapter, or seized or frozen under Chapter V, is of the opinion that any encumbrance on the
property or lease-hold interest has been created with a view to defeat the provisions of this
Chapter, it may, by order, declare such encumbrance or lease-hold interest to be void and
thereupon the aforesaid property shall vest in the Central Government free from such
encumbrances or lease-hold interest.
Further, nothing in this section shall operate to discharge any person from any liability in respect of
such encumbrances which may be enforced against such person by a suit for damages.
6. APPELLATE TRIBUNAL
Hierarchy under the Prevention of Money Laundering Act, 2002
High Court
Special Court
Appellate Tribunal
Adjudicating Authority
Section 48 provides for the following classes of authorities for the purposes of this Act, namely:-
1. Director or Additional Director or Joint Director,
2. Deputy Director,
3. Assistant Director, and
4. such other class of officers as may be appointed for the purposes of this Act.
As per section 2(1) clause (b), Appellate Tribunal means the Appellate Tribunal referred to in
section 25.
Establishment of Appellate Tribunal [Section 25]
The Appellate Tribunal constituted under sub-section (1) of section 12 of the Smugglers and
Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 shall be the Appellate Tribunal
for hearing appeals against the orders of the Adjudicating Authority and the other authorities under
this Act.
Appeals to Appellate Tribunal [Section 26]
Section 26 deals with the right and time frame to make an appeal to the Appellate Tribunal.
1. Appeal by Director or any other person: The Director or any person aggrieved by an order
made by the Adjudicating Authority under this Act may prefer an appeal to the Appellate
Tribunal.
The appeal shall be filed within a period of 45 days from the date on which a copy of the
order made by the Adjudicating Authority is received and it shall be in such form and be
accompanied by prescribed fees.
2. Appeal by reporting entity: Any reporting entity aggrieved by any order of the Director
made under sub-section (2) of section 13 may prefer an appeal to the Appellate Tribunal.
The appeal shall be filed within a period of 45 days from the date on which a copy of the
order made by the Director is received and it shall be in such form and be accompanied by
prescribed fees.
3. Condonation of delay: The Appellate Tribunal may, after giving an opportunity of being
heard, entertain an appeal after the expiry of the said period of forty-five days if it is satisfied
that there was sufficient cause for not filing it within that period.
4. Passing of Order: On receipt of an appeal, the Appellate Tribunal may, after giving the
parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit,
confirming, modifying or setting aside the order appealed against.
5. Copy of Order: The Appellate Tribunal shall send a copy of every order made by it to the
parties to the appeal and to the concerned Adjudicating Authority or the Director, as the case
may be.
6. Time frame for disposing off appeal: The appeal filed before the Appellate Tribunal shall
be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose
of the appeal finally within 6 months from the date of filing of the appeal.
the appeal within the said period, allow it to be filed within a further period not exceeding sixty
days.
Here, “High Court” means—
(i) the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on
business or personally works for gain; and
(ii) where the Central Government is the aggrieved party, the High Court within the jurisdiction of
which the respondent, or in a case where there are more than one respondent, any of the
respondents, ordinarily resides or carries on business or personally works for gain.
7. SPECIAL COURTS
“Special Court” means a Court of Session designated as Special Court
under sub-section (1) of section 43.
Sections 43 – 47 deals with provision relating to Special Courts.
Section 43 empowers the Central Government in consultation with the
Chief Justice of the High Court for trial of offence of money laundering
(offence punishable under section 4), to designate one or more Courts of Sessions as Special
Court or Special Courts for such area or areas or for such cases as may be prescribed in the
notification to this effect.
Section 44 clearly provides for the offences triable by Special Courts. It overrides the provisions of
the Code of Criminal Procedure, 1973 and provides that –
(i) an offence punishable under section 4 and any scheduled offence connected to the offence
under that section shall be triable by the Special Court constituted for the area in which the
offence has been committed. The Special Court, trying a scheduled offence before the
commencement of this Act, shall continue to try such scheduled offence; or
(ii) a Special Court may, upon a complaint made by an authority authorised in this behalf under
this Act take cognizance of offence under section 3, without the accused being committed to
it for trial; or
(iii) if the court which has taken cognizance of the scheduled offence is other than the Special
Court which has taken cognizance of the complaint of the offence of money-laundering under
sub-clause (b), it shall, on an application by the authority authorised to file a complaint under
this Act, commit the case relating to the scheduled offence to the Special Court and the
Special Court shall, on receipt of such case proceed to deal with it from the stage at which it
is committed; or
(iv) a Special Court while trying the scheduled offence or the offence of money-laundering shall
hold trial in accordance with the provisions of the Code of Criminal Procedure, 1973, as it
applies to a trial before a Court of Session.
The provisions of Section 44 shall not be deemed to affect the special powers of the High Court
regarding bail under section 439 of the Code of Criminal Procedure, 1973 and the High Court may
exercise such powers including the power under clause (b) of sub-section (1) of that section as if
the reference to "Magistrate" in that section includes also a reference to a "Special Court"
designated under section 43.
Section 45 provides that the offences under the Act shall be cognizable and non-bailable.
Notwithstanding anything contained in the Code of Criminal Procedure, 1973, no person accused
of an offence punishable for a term of imprisonment of more than three years under Part A of the
Schedule shall be released on bail or on his own bond unless-
(i) The Public Prosecutor has been given an opportunity to oppose the application for such
release and
(ii) Where the Public Prosecutor opposes the application, the court is satisfied that there are
reasonable grounds for believing that he is not guilty of such offence and that he is not likely
to commit any offence while on bail.
In case of any person who is under the age of 16 years or in case of a woman or in case of a sick
or infirm person, the Special Court can direct the release of such person on bail.
The Special Court cannot take cognizance of any offence under the Act, unless a complaint in
writing is made by:-
(a) The Director or
(b) Any officer of the Central Government or a State Government authorised in writing in this
behalf by the Central Government by a general or special order made in this behalf by that
Government.
Notwithstanding anything contained in the Code of Criminal Procedure, 1973, or any other
provision of this Act, no police officer shall investigate into an offence under this Act unless
specifically authorised, by the Central Government by a general or special order, and, subject to
such conditions as may be prescribed.
The limitation on granting of bail specified in sub- section (1) is in addition to the limitations under
the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting of
bail.
Section 46 provides that the provisions of the Code of Criminal Procedure, 1973 (including the
provisions as to bails or bonds) shall apply to the proceedings before a Special Court and the
Special Court shall be deemed to be a Court of Session and the persons conducting the
Enforcing the
Exchange of
provisions of this
information
Act
Prevention of
Investigation of
Prevention of any offence under
cases relating to any
offence under this corresponding law
offence under this
Act in force in that
Act
country
(ii) take such steps as the Special Court may specify in such letter of request, and
(iii) forward all the evidence so taken or collected to the Special Court issuing such letter of
request.
2. The letter of request shall be transmitted in such manner as the Central Government may
specify in this behalf.
3. Every statement recorded or document or thing received shall be deemed to be the evidence
collected during the course of investigation.
Letter of When: When an application is received by Special court that any evidence is required in
respect of investigation
request to
contracting From whom: (i) by the Investigating Officer or
(ii) any officer superior in rank to the Investigating Office
state
Opinion of officer: That such evidence may be available with contracting state
Letter to whom: to a court or an authority in the contracting State competent to deal with
such request
For: request for investigation into an offence or proceedings under this Act
produce books of account or other documents at a certain place and time, omits to
attend or produce books of account or documents at the place or time,
he shall pay, by way of penalty, a sum which shall not be less than 500 rupees but which may
extend to 10,000 rupees for each such default or failure.
3. No order under this section shall be passed by an authority referred to in sub-section (2) (i.e.
point 2 above) unless the person on whom the penalty is proposed to be imposed is given an
opportunity of being heard in the matter by such authority.
4. Notwithstanding anything contained in clause (c) of sub-section (2), a person who
intentionally disobeys any direction issued under section 50 shall also be liable to be
proceeded against under section 174 of the Indian Penal Code.
Cognizance of offences [Section 64]
1. No court shall take cognizance of any offence under section 62 or sub-section (1) of section
63 except with the previous sanction of the Central Government.
2. The Central Government shall, by an order, either give sanction or refuse to give sanction
within ninety days of the receipt of the request in this behalf.
Code of Criminal Procedure, 1973 to apply [Section 65]
The provisions of the Code of Criminal Procedure, 1973 shall apply, in so far as they are not
inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation
investigation, prosecution and all other proceedings under this Act.
Recovery of fine or penalty [Section 69]
Where any fine or penalty imposed on any person under section 13 or section 63 is not paid within
six months from the day of imposition of fine or penalty, the Director or any other officer authorised
by him in this behalf may proceed to recover the amount from the said person in the same manner
as prescribed in Schedule II of the Income-tax Act, 1961 for the recovery of arrears and he or any
officer authorised by him in this behalf shall have all the powers of the Tax Recovery Officer
mentioned in the said Schedule for the said purpose.
Offences by companies [Section 70]
1. Where a person committing a contravention of any of the provisions of this Act or of any rule,
direction or order made thereunder is a company, every person who, at the time the
contravention was committed, was in charge of and was responsible to the company, for the
conduct of the business of the company as well as the company, shall be deemed to be guilty
of the contravention and shall be liable to be proceeded against and punished accordingly.
Nothing contained in this sub-section shall render any such person liable to punishment if he
proves that the contravention took place without his knowledge or that he exercised all due
diligence to prevent such contravention.
2. Notwithstanding anything contained in sub-section (1), where a contravention of any of the
provisions of this Act or of any rule, direction or order made thereunder has been committed
by a company and it is proved that the contravention has taken place with the consent or
connivance of, or is attributable to any neglect on the part of any director, manager, secretary
or other officer of any company, such director, manager, secretary or other officer shall also
be deemed to be guilty of the contravention and shall be liable to be proceeded against and
punished accordingly.
Explanation 1- For the purposes of this section,
(i) “Company” means any body corporate and includes a firm or other association of
individuals; and
(ii) “Director”, in relation to a firm, means a partner in the firm.
Explanation 2- For the removal of doubts, it is hereby clarified that a company may be
prosecuted, notwithstanding whether the prosecution or conviction of any legal juridical
person shall be contingent on the prosecution or conviction of any individual.
Act to have overriding effect [Section 71]
The provisions of this Act shall have effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force.
Continuation of proceedings in the event of death or insolvency [Section 72]
1. Where-
(a) any property of a person has been attached under section 8 and no appeal against the
order attaching such property has been preferred; or
(b) any appeal has been preferred to the Appellate Tribunal, and-
(i) in a case referred to in clause (a), such person dies or is adjudicated an insolvent
before preferring an appeal to the Appellate Tribunal; or
(ii) in a case referred to in clause (b), such person dies or is adjudicated an insolvent
during the pendency of the appeal,
then, it shall be lawful for the legal representatives of such person or the official
assignee or the official receiver, as the case may be, to prefer an appeal to the
Appellate Tribunal or as the case may be, to continue the appeal before the Appellate
Tribunal, in place of such person and the provisions of section 26 shall, so far as may
be, apply, or continue to apply, to such appeal.
2. Where-
(a) after passing of a decision or order by the Appellate Tribunal, no appeal has been
preferred to the High court under section 42; or
(b) any such appeal has been preferred to the High Court,-
then-
(i) in a case referred to in clause (a), the person entitled to file the appeal dies or is
adjudicated an insolvent before preferring an appeal to the High Court, or
(ii) in a case referred to in clause (b), the person who had filed the appeal dies or is
adjudicated an insolvent during the pendency of the appeal before the High Court,
then, it shall be lawful for the legal representatives of such person, or the official assignee or
the official receiver, as the case may be, to prefer an appeal to the High Court or to continue
the appeal before the High Court in place of such person and the provisions of section 42
shall, so far as may be, apply, or continue to apply, to such appeal.
3. The powers of the official assignee or the official receiver under sub-section (1) or sub-
section (2) shall be exercised by him subject to the provisions of the Presidency-towns
Insolvency Act, 1909 or the Provincial Insolvency Act, 1920, as the case may be.
11. CONCLUSION
Does money laundering mean siphoning of fund. No, not just siphoning of fund, it actually refers to
a whole process or an entire system by which money is actually generated from serious crimes as
listed above, but they are given such shape (by disguising its origin into a series of transactions)
that it looks like it has originated from legitimate sources. The point to note is that the volume of
money generated by above activities is also very huge. But the fact remains how does it effect us.
The answer lies in observing the continuous increase in terrorist or militant or other criminal
activities worldwide (wide spreading global network of terrorists and others who deal in above
crimes) and we cannot be ignorant to the fact that such activities need huge funding and they
generate large volume of money. To curb the criminal activities, one needs to follow and hit at this
generation and utilization of revenue. PLMA, 2002 aims to achieve this. So, money laundering is
simply giving shape to the financial structure required and generated from serious crimes as listed
above. For example, a criminal may deposit all his money into a bank account or purchase a fixed
deposit or even buy a property. But sudden appearance of such a transaction, invites the attraction
of one and all. Hence he may resort to money laundering by making cash purchases from the
market and then selling the goods in the legal manner and at the end create an impression that the
money has come from the sales and not from the criminal activities. So the money has been
disguised by entering into a series of transactions and its origin now looks legitimate. India has
followed the recommendations of Financial Action Task Force (FATF) and criminalized money
laundering. FATF is an international government body. Financial Intelligence Unit of India
(FIU_IND) was also set up at New Delhi with an objective to coordinate and strengthen the
collection and sharing of financial intelligence through an effective national, regional and global
network to combat money laundering and all the related crimes. The subject is a major issue of
concern at the international level and all sectors of business across the globe, like insurance,
retail, real-estate, stock –market, entertainment – just to name a few are getting flooded with
money and more money and at this stage we can certainly doubt, that it might be a case of money
– laundering. Hence the need, significance and scope of operation of Prevention of Money
Laundering Act, 2002.
reasonable grounds for believing that he is not guilty of such offence and that he is not likely
to commit any offence while on bail.
In case of any person who is under the age of 16 years or in case of a woman or in case of a
sick or infirm person, the Special Court can direct the release of such person on bail.
Question 3
The Adjudicating Authority appointed under the Prevention of Money Laundering Act, 2002 issued
an order attaching certain properties of XYZ Limited alleged to be involved in money laundering for
a specified period. The company aggrieved by the order of the Adjudicating Authority seeks your
advice about the remedy that is available under the Act. Advise explaining the relevant provisions
of the Prevention of Money Laundering Act, 2002.
Answer
Establishment of Appellate Tribunal
According to section 25 of the Prevention of Money Laundering Act, 2002, the Appellate Tribunal
constituted under sub-section (1) of section 12 of the Smugglers and Foreign Exchange
Manipulators (Forfeiture of Property) Act, 1976 shall be the Appellate Tribunal for hearing appeals
against the orders of the Adjudicating Authority and the other authorities under this Act.
Appeals to Appellate Tribunal
Section 26 deals with the right and time frame to make an appeal to the Appellate Tribunal. The
Director or any person aggrieved by an order made by the Adjudicating Authority under this Act
may prefer an appeal to the Appellate Tribunal.
The appeal shall be filed within a period of 45 days from the date on which a copy of the order
made by the Adjudicating Authority is received and it shall be in such form and be accompanied by
prescribed fees. The appeal shall be in such form and be accompanied by such fee as may be
prescribed. The Appellate Tribunal may extend the period if it is satisfied that there was sufficient
cause for not filing it within the period of 45 days.
The Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard,
pass such order as it thinks fit, confirming, modifying or setting aside the order appealed against.
Appeals to High Court
The Act also provides further appeal. According to Section 42 any person aggrieved by any
decision or order of the Appellate Tribunal may file an appeal to the High Court within 60 days
from the date of communication of the order of the Appellate Tribunal.
In the light of the provisions of the Act explained above the company is advised to prefer an appeal
to Appellate Tribunal in the first instance.
Question 4
Mr. Gambler has been arrested for a cognizable and non-bailable offence punishable for a term of
imprisonment for more than three years under the Prevention of Money Laundering Act, 2002. He
seeks your advise as to how can he be released on bail. Advise him.
Answer
In accordance with the provisions of the Money Laundering Act, 2002, as contained under Section
45, the offences under the Act shall be cognizable and non-bailable. Notwithstanding anything
contained in the Code of Criminal Procedure, 1973, no person accused of an offence punishable
for a term of imprisonment of more than 3 years under Part A of the Schedule shall be released on
bail or on his own bond unless:
(i) The public Prosecutor has been given an opportunity to oppose the application for such
release; and
(ii) Where the Public Prosecutor opposes the application, the court is satisfied that there are
reasonable grounds for believing that he is not guilty of such offence and that he is not likely
to commit any offence while on bail.
In case of any person who is under the age of 16 years or in case of a woman or in case of a sick
or infirm person, the Special Court can direct the release of such person on bail.
Mr. Gambler may refer the above section 45 so that he can be released on bail.