PML Act 2002:Obligations of financial institutions and intermediaries

Prevention of Money Laundering Act, 2002 came into force with effect from July 1; 2005.  The Government of India has enacted PML Act to prevent money-laundering and to provide for confiscation of property derived from or involved in, money-laundering.  The Directorate of Enforcement in the Department of Revenue, Ministry of Finance is responsible for investigating the offences of money laundering under the PMLA. The authority has the power to carry out measures like survey, search, and seizure, and arrest the accused. If the authority suspects that assets found by them are the proceeds of a crime, the same can be confiscated. The offence of money laundering is cognizable which means an arrest can be made without a warrant.

Some of the important sections of PMLA are as under.

1. Obligations of Banking companies, financial institutions, and intermediaries:

It is mandatory under section 12 of PMLA that all Banking Companies, Financial Institutions, and Intermediaries should maintain records of all transactions, including information relating to transactions for a period of 5 years, in such a manner as to enable the investigating agency/Court to reconstruct individual transactions and find out criminality. It is also obligatory to the above institutions that they need to submit all the information relating to such transactions whether attempted or executed; the nature and value of such transactions. The subject institution shall verify the identity of its client and beneficial owners as well as account files and business correspondence relating to their customers.

2. Punishments:

 Since the offence of Money laundering is intricately connected with the predicate offence, the 2013 amendments to the PMLA provided that the trial for the predicate offence as well as the offence punishable under Section 4 shall be conducted by a Special Court. Any person found guilty of money laundering shall be punishable with rigorous imprisonment from three years to seven years. If the proceeds of the crime involved relate to any offence under the Narcotic Drugs and Psychotropic Substance Act, 1985, the maximum punishment may extend to 10 years instead of 7 years.

3. Attachment of properties:

 Under Section 5 of the PMLA, the properties believed to be “proceeds of crime” can be provisionally attached for 180 days by appropriate authorities who have to be confirmed by an independent Adjudicating Authority. The Adjudicating Authority takes the decisions on whether any of the property attached or seized by appropriate authority is involved in money laundering and may regulate its own procedure (need not necessarily follow Code of Civil Procedure1908). However, the procedure adopted by the adjudicating authority shall be guided by the principles of natural justice and subject to the other provisions of PMLA.

4. Search of Premises

Section 17 provides powers of search and seizure to the investigating agency. If the investigating agency has reason to believe that the offence is committed by any person including a legal person under the PMLA and in possession of proceeds of crime, it can enter and seize property/records, etc., make an inventory of the same. Whereas this section 17 provides for a search of premises, Section 18 provides for a search of an individual.

5. Inter-connected transactions:

 Section 23 of the PML act provides that in the cases of money laundering which involves two or more inter-connected transactions and one or more such transactions is or are proved to be involved in money laundering, then for the purpose of adjudication or confiscation, it is presumed that the remaining transactions form part of such inter-connected transactions.

6. The burden of proof:

When a person is accused of money laundering, under Section 24 of PMLA, the onus of proving that alleged proceeds of crime are in fact lawful property will be on the accused.

7. Appellate Tribunal:

The orders of Adjudicating Authority or any other authority under the PML act can be heard by the Appellate Tribunal appointed by the Government of India. The orders of the tribunal can be appealed to the High Court of the jurisdiction and finally to the Supreme Court.

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