All You Need To Know About The Prevention Of Money Laundering Act 2002 (PMLA) – Latest Amendments & Impact

By this article I shall deal with the evolution of the act called “The Prevention Of Money Laundering Act 2002 (PMLA)” which was formulated in the year 2002 under the NDA government and has undergone various critical changes from time to time in order to give itself more strength  and meaning in order to deal with the offence of money laundering.

But before I move on to discuss all the imperative amendments that have taken place in this act over the years which has changed the shape of this act, let us first come to know the legal definition of the term “Money-Laundering”.

Section 3 of the Prevention Of Money Laundering Act 2002

(PMLA)defines the offence of Money Laundering as follows:

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.

The above definition is the result of amendment done via the Prevention of Money-Laundering Amendments Act (2012) by which the legislature had intended to further specify the term of “Money Laundering” as after the amendment the offence of money laundering did not only cover the proceeds of crime but its concealment, possession, acquisition or use also became the part of the offence of money-laundering.

This definition of money laundering underwent another change by the amendment act 2019 as this amendment added an explanation to the section of defining the term money laundering which stated that the person shall be accused of money laundering if in any manner whatsoever that person is involved in the

(a) concealment; or

(b) possession; or

(c) acquisition; or

(d) use; or

(e) projecting as untainted property; or

(f) claiming as untainted property,

This amendment further mentioned that the person will be considered to be involved in the offence of money laundering till the time that person is getting the fruits of activities related to money laundering  as this offence is of a continuing nature.

Here it is also needs to be seen that the term “Proceeds of crime” has been given a broad meaning under the Prevention Of Money Laundering Amendment Act 2015.

The term proceeds of crime which basically relates to the property derived or obtained by anyone as a result of the offence of money laundering or the value any such property but after this amendment the term now also deals or includes that property which is equivalent in value to the property that has been taken outside the nation or is held outside the territory.

The definition of proceeds of crime underwent yet another amendment under the amendment act of 2019, as to further widen the definition an explanation was inserted to this section which states that, the term proceeds of crime includes not only the property derived from scheduled offence but would also include any other property derived or obtained indulging into any criminal activity relate-able or similar to the scheduled offence.

The Prevention of Money Laundering Act is a evolutionary act in a sense that over the years this act has undergone  various amendments that has restructured the act in one way or the other and the series of amendments under this act commenced three years after the introduction of the original or one can say the parent act.

Now in order to understand the changes and the magnitude of their impact on this act it is very much essential to go through the major or impactful amendments that were brought under this act over the years chronologically.

The act of Prevention of Money Laundering got amended for the first time in the year 2005 wherein the under section 44 sub-section (1) clause (b) there came a change with regard to the fact that unlike the parent act of 2002 under which the court could have taken the cognizance of the offence of money laundering upon the police report also, after the amendment this provision ceased in a sense that now special court can take cognizance of the offence only in that case where the complaint is made about the offence by the specified authority so essentially this amendment led to the outser of the police authority from this act for the purpose of taking the cognizance and giving full fledged power to the authorized authority to act as per the law in the event commission of this offence.

Moreover after the 2012 amendment under this provision it is stated that the accused need not committed for trial at the time of taking cognizance of the offence unlike the parent act where without committing the accused for trial the cognizance was impossible.

The amendment act of 2019 brought an addition to section 44 by inserting a provision after sub-section(1) clause (b) which states makes it obligatory on the part of the authorized authority to file the closure report before the special court that had taken the cognizance of the offence in a situation when no offence is made out after conducting the investigation;

And not only this amendment act of 2019 also brought an addition to section 44 by inserting an explanation after sub-section (1) clause (d) which states that the court that deals with the offence under this by way trial, investigation or enquiry shall not depend itself upon the orders that the same court shall pass with regard to the scheduled offence and the trial of both the offences shall not be a joint trial, further this explanation also states that the complaint by the authorized authority not only means the original complaint but also includes any subsequent complaint that is the result of further investigation to bring out any other evidence against any accused who was not the party to the original complaint.

Although no one can be made an accused under this act on the basis of police report yet the police authority has been provided with the responsibility of conducting an investigation into the offence of money laundering, the police authority governess this power on account of the insertion of the new provision i.e., section 45 (1A) vide 2005 amendment,  but this is an exceptional scenario and is possible only when the central government specifically authorizes it under the special or general order subject to the conditions as prescribed in the order. It is also to be noted that the newly inserted sub-clause (ua) vide 2005 amendment under section (73)(2) confers upon the central government the power of determining the terms and conditions under which the police authority will be entitled to investigate an offence under this act.

In the series of amendments under this act another series of critical amendments came in the year 2009 where for the first time the term defining the implications of the offence committed under this act came into the picture in the name of “Cross Border Implications” defined under section 2 clause (1)sub-clause (ra).,by this term the legislature widened the area of the act as now if any person acted in such a manner that constituted an offence in the other territory of the same nature as defined under Part A,B or C of the schedule had it been committed in India and if such person tries to transfer the proceeds or part of the proceeds of crime on Indian soil from the3 foreign land then in such a situation the person shall be liable to be prosecuted under the similar act prevailing in the foreign territory, further if the proceeds of crime

or part of it has been transferred or attempted to be transferred to the the foreign land and the offence has taken place in the Indian territory, the accused shall be prosecuted as per the laws of this nation under this act.

The 2009 amendment act saw the enlargement in the bracket of the scheduled offences by adding certain more offences under the heading of scheduled offences defined under section 2 clause (1)sub-clause (y) by specifying that apart from the offences listed under part A and Part B of the schedule ,the offences that are listed under part C of the schedule will also be termed as scheduled offences, it further needs to be observed that the amendment act of 2015 widened the grade of the offences which are under the part B of the schedule, this means that earlier the offences in part B of the scheduled were termed as scheduled offences if the total value of such offences were of 30 lakhs or more but now this total value needs to be of one crore or more ,then only it will be termed as a scheduled offence.

Another vital change that was brought under the 2009 amendment act was the increase in the age of director and other members under this act for holding the office from 62 years in the parent act to 65 years.

The original prevention of money laundering act talked about issuing a 30 days notice restricted to a person against whom a complaint is there that he may have committed an offence under this act for disclosing the means through which the property that has been attached or seized under the act was acquired and also to come up with the information or evidence in his defence so that he can disprove the suspicion that such assets or property are not result of money laundering but after the amendment of 2009, a notice may also be issued to a person who may have not committed such an offence but is holding the proceeds of crime and a burden is upon such person to disprove the suspicion that the assets or property is not the one which was involved in the offence of money laundering.

Another addition in the series of amendments in this act came in the year 2012 and this time around there were quite a number of significant amendments that took place and gave a new face to the parent act. Among many the first note able change was the introduction of the term “Reporting Entity” under section 2 clause (1) sub-clause (wa).This term is used in lieu of the terms like banking company, financial institution and intermediaries which were in use separately in the parent act simply because the function of the intermediary in the parent act was not parallel to the functions rendered by the other two entities but after the 2012 amendment intermediary started disposing the functions similar to that of the other entities and by this very reason a common name has now been given to all such entities under the act.

The 2012 amendment act amended the monetary punishment that can be levied upon the accused under this act as in the parent act the fine could be Rs.5,00,000 maximum but now after the amendment the figure of Rs.5,00,00 has been struck off which implies that now fine can extend to any amount which the special courts deems fit as per the case.

The 2012 amendment act also dealt with the status of the property under section 8 clause (7) which is confiscated or attached under the relevant provisions of the act in those circumstances when the trial under this act could not be commenced or commenced but not concluded on account of the death of the accused or the accused being declared proclaimed offender or due to some other reason which rendered the trial impossible, in such a scenario the special court shall, on being approached either by the director or by the person entitled to such property, pass orders of release or confiscation of the property as deems proper.

The power to confiscate the property has also been enlarged under the new act via 2012 amendments as now the property which is the part of the proceeds of crime can be confiscated on three occasions namely:(a)when the offence has taken place outside the boundaries and  of our nation and is being tried as per the parallel laws of the foreign nation (b) when the trial could not be commenced or concluded on account of the death of the accused or being declared proclaimed offender and (c) when the offence of money laundering stands proved.

The parent act of 2002 imposed upon the accused the burden to prove that the proceeds of the crime are not the part of the offence under this act but 2012 amendment did not talk about such burden as now it will be presumed by the special court or authority that the proceeds are the part of such offence unless contrary is proved,so now there is a presumption even before anything is proved.

The legislature with an aim to save the time and resources and to provide the speedy justice brought the section 44 clause (1) sub-clause (c) by the 2012 amendment which provides the authority under the act to get the scheduled offence transferred from the court trying the schedule offence and commit the same to the special court which is trying the offence of money laundering and the special court shall conduct the trial of both the offences as per the provisions of Cr.P.C.

The amendment act of 2012 introduced a new provision under section 58A which deals with the release of the property by the special court if it is proved that the offence of money laundering has not taken place in the foreign territory and the property in Indian territory is not the part of the offence of money laundering, this provision is a welcome addition as when there is no offence of money laundering then no purpose would be served by keeping the property attached or seized under this act.

The 2012 amended act also talks about the situation when the trial for the offence of money laundering under the provisions parallel to this act is not commenced or concluded in the foreign territory on account of the death of the accused or the accused being declared proclaimed offender or due to some other reason which rendered the trial impossible, in such a scenario the central govt shall, on receipt of a letter of request from the foreign territory with regard to the release or confiscation of the property forward the same to the director and thereafter special court shall, on being approached by the director, pass orders of release or confiscation of the property as deems proper.

So as we witnessed so many critical changes in this act, it can be concluded in a nut shell that all the above mentioned amendments that were brought into the act by the legislature have done the refining of this act to make it more sound, plausible, stringent and effective and consideration has also be given to the fact that the act serve the purpose for which it has come into existence and no misuse of the act takes place.

It can also be said that by looking at the numerous changes that have taken place over the years in this act, it cannot be denied completely that no further amendment would take place in future, as law is a subject that revolves around the needs of the society and changes according to the requirements of the society at large..

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Qualification: LL.B / Advocate
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Location: New Delhi , New Delhi, IN
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June 2021