The Money Laundering Act, 2002

The Money Laundering Act, 2002 was enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto.

The terms used in the Act are defined as under:

(1) “intermediary” means 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 and any other intermediary associated with securities market and registered under section 12 of the Securities and Exchange Board of India Act, 1992.

(2) “proceeds of crime” 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;

The term Money Laundering has been defined in Section 3 of the Act as 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 and projecting it as untainted property shall be guilty of offence of money-laundering.

Punishment for money-laundering

The punishment for money-laundering is rigorous imprisonment for a term which shall not less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees.

Banking companies, financial institutions and intermediaries to maintain records.

Section 12 of the Prevention of Money Laundering Act, 2002 lays down following obligations on banking companies, financial institutions and intermediaries.

(1) Every banking company, financial institution and intermediary shall —

(a) maintain a record of all transactions, the nature and value of which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions take place within a month;

(b) furnish information of transactions referred to in clause (a) to the Director within such time and as may be prescribed;

(c) verify and maintain the records of the identity of all its clients, in such manner as may be prescribed:

Provided that where the principal officer of a banking company or financial institution or intermediary, as the case may be, has reason to believe that a single transaction or series of transactions integrally connected to each other have been valued below the prescribed value so as to defeat the provisions of this section, such officer shall furnish information in respect of such transactions to the Director within the prescribed time.

(2) The records referred to in sub-section (1) shall be maintained for a period of ten years from the date of cessation of the transactions between the clients and the banking company or financial institution or intermediary, as the case may be.”

The Financial Intelligence Unit India (FIU- IND) has been set up as a multidisciplinary unit for establishing links between suspicious or unusual financial transactions and underlying criminal activities. It coordinates and support efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and related crimes. The FIU-IND is the central nodal agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions to these agencies who shall protect the information against misuse.

Authorities under the Act

The Act provides that every order of attachment of property involved in money-laundering, order of seizure of property/records etc. shall be forwarded along with a complaint or application to the Adjudicating Authority within a period of thirty days. Such order is to be confirmed by the Adjudicating Authority within a certain time-limit. The Adjudicating Authority is constituted separately. The appeal against the orders of the Director or the Adjudicating Authority can be filed before the Appellate Tribunal being set up under the Prevention of Money Laundering Act. The following are classes of authorities for the purposes of the Act, namely:

(a) Director or Additional Director or Joint Director,

(b) Deputy Director,

(c) Assistant Director, and

(d) Such other class of officers as may be appointed for the purposes of this Act.

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