What is Prevention of Money Laundering Act (PMLA), 2002?
Historical Background
Key Points
10 points- 1.
Definition of Money Laundering: Section 3 defines the offense, including direct or indirect involvement in any process or activity connected with the 'proceeds of crime'.
- 2.
Predicate Offenses: Specifies a schedule of offenses (e.g., drug trafficking, corruption, fraud, terrorism) whose proceeds are considered 'proceeds of crime' under PMLA, triggering its application.
- 3.
Powers of ED: Grants the Enforcement Directorate (ED) extensive powers of investigation, search, seizure, arrest, and provisional attachment of properties.
- 4.
Provisional Attachment: Allows ED to provisionally attach properties for up to 180 days if it believes they are proceeds of crime and are likely to be concealed or transferred.
- 5.
Adjudicating Authority: A quasi-judicial body established under PMLA to confirm provisional attachments and hear appeals, ensuring due process.
- 6.
Special Courts: Designates Special Courts (PMLA Courts) for the expeditious trial of offenses under the Act, presided over by a Sessions Judge or Additional Sessions Judge.
- 7.
Confiscation: Provides for the confiscation of properties involved in money laundering upon conviction, depriving criminals of their ill-gotten wealth.
- 8.
Obligations on Financial Institutions: Mandates banks, financial institutions, and intermediaries to maintain records, verify client identity (KYC), and report suspicious transactions (STRs) to FIU-IND.
- 9.
Reverse Burden of Proof: In certain cases, the burden of proving that the property is not proceeds of crime may shift to the accused, especially if they are in possession of such property.
- 10.
Punishment: Prescribes rigorous imprisonment for a term of 3 to 7 years (extendable to 10 years for offenses related to the Narcotic Drugs and Psychotropic Substances Act) and fines.
Visual Insights
Legislative Journey of PMLA, 2002
This timeline illustrates the key events leading to the enactment and subsequent strengthening of India's principal anti-money laundering law, PMLA, reflecting national and international efforts.
PMLA's evolution demonstrates India's commitment to combat money laundering, driven by international obligations and the need to strengthen its domestic legal framework against financial crimes. The recent Supreme Court judgment has further solidified its legal standing.
- 1988UN Vienna Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (International impetus).
- 1989Financial Action Task Force (FATF) established to set AML standards.
- 2000UN Convention against Transnational Organized Crime (Palermo Convention) signed.
- 2002Prevention of Money Laundering Act (PMLA) enacted by Indian Parliament.
- 2005PMLA comes into force (July 1, 2005), establishing ED's powers.
- 2005, 2009, 2012Key amendments to PMLA to strengthen provisions and align with FATF recommendations.
- 2019Significant amendments to PMLA, expanding 'proceeds of crime' definition and ED's powers.
- 2022Supreme Court upholds constitutional validity of key PMLA provisions (e.g., arrest, search, seizure, reverse burden of proof).
- 2024ED attaches Reliance Group assets under PMLA (Current News).
PMLA, 2002: Key Provisions & Framework
This mind map breaks down the Prevention of Money Laundering Act, 2002, into its core components, illustrating its definition of money laundering, the powers it grants, and the institutional mechanisms it establishes.
Prevention of Money Laundering Act (PMLA), 2002
- ●Objective
- ●Definition of Money Laundering (Section 3)
- ●Powers of Enforcement Directorate (ED)
- ●Institutional Framework
- ●Other Key Provisions
- ●Recent Developments
Recent Developments
5 developmentsSupreme Court's landmark 2022 judgment upheld the constitutional validity of key PMLA provisions, including ED's powers of arrest, search, and seizure, and the reverse burden of proof, reinforcing the Act's strength.
Amendments in 2019 expanded the definition of 'proceeds of crime' to include properties derived from criminal activity even if not directly related to the scheduled offense, and enhanced ED's powers.
Increased scrutiny of the Act's implementation and potential for misuse, leading to ongoing public and legal debates.
Inclusion of new offenses in the schedule of predicate offenses to cover a wider range of financial crimes.
Focus on tracing and attaching assets located abroad through mutual legal assistance treaties.