ED to propose amendment to money laundering laws

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The amendment to Prevention of Money Laundering Act, 2002 (PMLA) will allow ED to pursue a case even if CBI investigation in the same matter falls through.

Highlights

The Enforcement Directorate (ED) is in the process of proposing an amendment to the Prevention of Money Laundering Act 2002 (PMLA) which, if cleared by the Parliament, will help tighten the law against corruption and attempts to legitimize undeclared wealth.

It will also bring the Act at par with those in Australia and the UK.

Current function of ED

ED looks into the money trail and CBI probes corruption cases. In case of the 2G spectrum case, it was a joint case by both agencies, which fell through after the accused were acquitted, prompting both agencies to file an appeal against the verdict.

At present, the ED (under the PMLA Act) and the CBI (under the Prevention of Corruption Act) have separate ongoing cases against business tycoon Vijay Mallya as well as Rashtriya Janata Dal chief Lalu Prasad and his relatives.

The Directorate of Enforcement

It is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India. It is part of the Department of Revenue, Ministry of Finance. It comprises officers of the Indian Revenue Service, Indian Police Service and the

The origin of this Directorate goes back to 1 May 1956, when an ‘Enforcement Unit’ was formed, in Department of Economic Affairs, for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947. In the year 1957, this Unit was renamed as ‘Enforcement Directorate’.

Objective

The prime objective of the Enforcement Directorate is the enforcement of two key Acts of the Government of India namely, the Foreign Exchange Management Act 1999 (FEMA) and the Prevention of Money Laundering Act 2002 (PMLA)

The ED’s (Enforcement Directorate) official website enlists its other objectives which are primarily linked to checking money laundering in India. In fact this is an investigation agency so giving the whole details on public domain is against the rules of GOI.

Money Laundering

The process of creating the appearance that large amounts of money obtained from serious crimes has originated from a legitimate source.”

Illegal arms sales, smuggling, and other organized crime, including drug trafficking and prostitution rings, can generate huge amounts of money. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to “legitimize” the ill-gotten gains through money laundering. The money so generated is tainted and is in the nature of ‘dirty money’. Money Laundering is the process of conversion of such proceeds of crime, that is to say the ‘dirty money’, to make it appear as ‘legitimate’ money.

Prevention of Money Laundering Act 2002 (PMLA)

It is an Act of the Parliament of India enacted by the NDA government to prevent money-laundering and to provide for confiscation of property derived from money-laundering.

PMLA and the Rules notified there under came into force with effect from July 1, 2005. The Act and Rules notified there under impose obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information in prescribed form to Financial Intelligence Unit – India (FIU-IND).

The act was amended in the year 2005, 2009 and 2012.

Objectives

The PMLA seeks to combat money laundering in India and has three main objectives:

  • To prevent and control money laundering
  • To confiscate and seize the property obtained from the laundered money; and
  • To deal with any other issue connected with money laundering in India.

Key definitions

  • Attachment: Prohibition of transfer, conversion, disposition or movement of property by an appropriate legal order.
  • Proceeds of crime: Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence.
  • Money-laundering: Whosoever directly or indirectly attempts to indulge or assist other person or actually involved in any activity connected with the proceeds of crime and projecting it as untainted property.
  • Payment System: 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, debit card, smart card, money transfer or similar operations.

Punishment for money-laundering

The act prescribes that any person found guilty of money-laundering shall be punishable with rigorous imprisonment from three years to seven years and where the proceeds of crime involved relate to any offence under paragraph 2 of Part A of the Schedule (Offences under the Narcotic Drugs and Psychotropic Substance Act, 1985), the maximum punishment may extend to 10 years instead of 7 years

 

 

 

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