The document summarizes key aspects of the Prevention of Money Laundering Act (PMLA) 2002 in India. It defines key terms like money laundering, proceeds of crime, and scheduled offences. It outlines the 3 stages of money laundering: placement, layering, and integration. It describes the obligations of banking companies, financial institutions, and intermediaries to report transactions and verify identities. It discusses the attachments, adjudications, and confiscation process as well as the roles of the Adjudicating Authority, Appellate Tribunal, and Special Courts in enforcing the law. Punishments are outlined for money laundering and for providing false information.

1. Prevention
of
Money Laundering Act,
2002
Dr Ramandeep
Assistant Professor
Deptt. of Commerce
GCW, Sirsa (Haryana)

2. • Smuggling
• Abducting /kidnapping
• Gambling
• Fraud
• Prostitution
• Drug trafficking
• Committing any other crime
How can One Earn Bad Money

3. How to Convert bad Money into Good Money
The person purchases insurance policies and within a
• short time period surrenders the policy and get the
money in cash

4. How to Convert bad Money into Good Money
Launderer deposits bad money into the bank and bank in turn provides the
same money as loan.
LOAN BACK
Scheme- A
Money
Laundering
Technique

5. Meaning of Money Laundering
It is the process by which illegal funds and assets are
converted into legitimate funds and assets.
In other words it is basically the process of converting
illegal/ black money of a person in a legal or white
money.
It is the process used by criminals’ to wash their
“tainted” money to make it “clean.”

6. Meaning of Money Laundering
Conversion
Illegal/
Dirty
Money
Legitimate/
White Money

7. Stages in Money Laundering
The cycle of money laundering can be broken down into 3 stages-
1. Placement: It is the first and the initial stage when the crime
money is injected into the formal financial System.
2. Layering: The injected money is layered and moved or spread
over various transactions in different accounts and different
countries.
3. Integration: The money enters the financial system in such a way
that the money can then be used by the offender or person
receiving as clean money.

8. The PMLA, 2002: Introduction
• Came into force w.e.f. 1st July 2005.
• It extends to whole of India.
• Intends to fight against all sorts of economic
crimes/ white collar offences.
• It aims at combating canalization of money into
illegal activities, provides for attachment and
seizure of property and records.

9. Objective of the Act
The objective of the Act is to
- prevent money-laundering and to
- provide for confiscation of property derived from, or
involved in, money-laundering and
- for matters connected.

10. Definitions

11. “Money Laundering”
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.

12. “Proceeds of crime"
proceeds of
crime
property
derived or
obtained
as a result of
criminal
activity
relating to a
scheduled
offence or the
value of any such
property or where such property
is held outside
country, then the
property equivalent
in value held within
the country

13. “Property”
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.

14. “Scheduled Offence"
(a) the offences specified under Part A of the Schedule;
or
(b) the offences specified under Part B of the Schedule if
the total value involved in such offences is 1 crore
rupees or more; or
(c) The offences specified under Part C of the Schedule.

15. “Transfer”
includes sale, purchase, mortgage, pledge, gift,
loan or any other form of transfer of right,
title, possession or lien.

16. “Banking company”
means a banking company or a co-operative
bank to which the Banking Regulation Act,
1949 applies.

17. “Financial Institution”
means a financial institution and includes
a chit fund company,
a housing finance institution,
an authorised person,
a payment system operator,
a non banking financial company
and Department of Posts.

18. “Intermediary”
i) 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 or
any other intermediary
(ii) an association registered under the Forward Contracts (Regulation)
Act, 1952; or
(iii) intermediary registered by the Pension Fund Regulatory and
Development Authority; or
(iv) a recognised stock exchange.

19. “Reporting entity”
means a banking company, financial institution,
intermediary or a person carrying on a
designated business or profession.

20. Punishment for the
Offence of Money
Laundering
(section 4)

21. Punishment
Fine up to Rs.5 lakh Fine up to Rs.5lakh
In addition, the property shall be confiscated by the Central
Government.
AND AND

22. Obligation of Banking Companies,
Financial Institutions and
Intermediaries

23. Obligation of Banking Companies, Financial Institutions and
Intermediaries.
all are required to maintain such record of all transactions, for
a period of 5 years, and furnish to the concerned Authorities
under the Act, all information relating to such transactions,
– the nature and value of such transactions;
– verify the identity of its clients and
– the beneficial owner, if any; and
– maintain record of documents evidencing identity of
its clients and beneficial owners.

24. Power of Director to Impose Fine (Sec 13)

25. Attachment, Adjudication
and Confiscation

26. “Attachment”
means prohibition of transfer, conversion,
disposition or movement of property by an
order issued under Chapter III of the Act.

27. Attachment of property involved in money-laundering
If the Director, or Deputy Director has reason to believe (in writing) that-
Any Proceeds of crime are likely to be
– Concealed,
– Transferred, or
– dealt with in any manner which may result in frustrating any proceedings
relating to confiscation,
may, by order in writing, provisionally attach such property for a period not
exceeding 180 days.
The Director or any other officer shall, within a period of 30 days from such
attachment, file a complaint before the Adjudicating Authority.

28. High Court
Special Court
Appellate Tribunal
Adjudicating
Authority

29. Composition of Adjudicating Authority
The CG shall, by notification, appoint an
Adjudicating Authority to exercise jurisdiction,
powers conferred by or under this Act.
It shall consist of a Chairperson and 2 other
Members. One Member each shall be a person
having experience in the field of law,
administration, finance or accountancy.

30. Adjudication Process
On receipt of complaint, if the Adjudicating
Authority has reason to believe that any person
has committed an offence, it may serve a
notice of not less than 30 days on such person
calling upon him to indicate the sources of his
income, earnings or assets.

31. The Adjudicating Authority shall, after-
a) Considering thereply of the notice issued;
b) Hearing the aggrieved person and the director or any other;
and
c) Taking into account all the relevant materials placed on
record before him, by an order, record a finding whether all
or any of the properties are involved in money-laundering.
Adjudication Process

32. If any property is involved in money- laundering than he shall by an order in
writing, confirm the attachment of the property and record a finding of
that effect.
The Director or any other officer authorised by him in this behalf shall forthwith
take the possession of the property attached or frozen.
If Special Court finds that the offence of money-laundering has been committed,
it shall order that such property shall stand confiscated to the Central
Government.
If Special Court finds that the offence of money-laundering has not been
committed, it shall order release of such property to the person entitled to
receive it
Adjudication Process

33. Vesting of property in Central Government (Section 9)
Where an order of confiscation has been made in respect of any
property of a person, all the rights and title in such property
shall vest absolutely in the CG free from allencumbrances.
If any encumbrance on the property or lease-hold interest has
been created, then it may, by order declare such encumbrance or
lease-hold interest to be void and thereupon the aforesaid
property shall vest in the CG free from such encumbrance or
lease-hold interest.

34. High Court
Special Court
Appellate
Tribunal
Adjudicating Authority

35. Establishment of Appellate Tribunal [Section 25]
The Appellate Tribunal constituted under section 12
(1) of the Smugglers and Foreign Exchange
Manipulators (Forfeiture of Property) Act,
1976 shall be the Appellate Tribunal for hearing
appeals against the orders of the Adjudicating
Authority and the other authorities under this Act.

36. Appeals to Appellate Tribunal
• The director or any person aggrieved by an order made by
the Adjudicating Authority may prefer an appeal to the
Appellate Tribunal.
• Any reporting entity aggrieved by any order of the Director
may also prefer an appeal to the AppellateTribunal.
• Every appeal shall be filed within a period of 45 days from
the date of order is received.
• Appellate Tribunal may entertain an appeal after the expiry
of the said period.

37. Appeals to Appellate Tribunal
• On receipt of an appeal, the Appellate Tribunal may, after giving the
parties to the appeal an opportunity of being heard, pass such orders
thereon as it thinks fit, confirming, modifying or setting aside the
order appealed against.
• The Appellate Tribunal shall send a copy of every order made by it to
the parties to the appeal and to the concerned Adjudicating Authority
or Director, as the case maybe.
• The Appellate Tribunal shall dispose of the appeal within 6 months
from the date of filing of theappeal.

38. Power of Appellate Tribunal
According to section 35 (2), the Appellate
Tribunal shall have, for the purposes of
discharging its functions under this Act, the
same powers as are vested in a civil court
under the Code of Civil Procedure, 1908 while
trying a suit

39. Appeal to High Court
High Court
Special Court
Appellate Tribunal
Adjudicating Authority

40. Appeal to High Court
Any person aggrieved by any decision or order
of the Appellate Tribunal may file an appeal
to the High Court within 60 days from the
date of communication of the decision or order
of the Appellate Tribunal

41. Special Court
High Court
Special Court
Appellate Tribunal
Adjudicating Authority

42. Special Court
Special Court” means a Court of Session
designated as Special Court under sub-
section (1) of section 43.
Section 43 empowers the CG in consultation with the Chief Justice
of the High Court for trial of offence of money laundering to
designate one or more Courts of Sessions as Special Court or
Special Courts for such area or areas or for such cases as may be
prescribed in the notification to this effect.

43. Special Court
Section 45 provides that the offences under the Act shall be cognizable and non-
bailable.
No person accused of an offence punishable for a term of imprisonment of
more than 3 years under Part A of the Schedule shall be released on bail
unless-
(i) The Public Prosecutor has been given an opportunity to oppose the
application for such release and
(ii) Where the court is satisfied that there are reasonable grounds for believing
that he is not guilty of such offence and that he is not likely to commit any
offence while on bail.

44. Special Court
The Special Court cannot take cognizance of any offence
under the Act, unless a complaint in writing is made
by:-
(a) The Director or
(b) Any officer of the Central Government or a State
Government authorised in writing by a general or
special order made in this behalf by that Government.

45. No Police officer to investigate the matter
Notwithstanding anything contained in the Code of
Criminal Procedure, 1973, or any other provision of
this Act, no police officer shall investigate into an
offence under this Act unless specifically
authorised, by the CG by a general or special
order, and, subject to such conditions as may be
prescribed.

46. Fine
or
Penalty

47. Punishment for vexatious search
Any authority or officer who, without reasons recorded in
writing,-
(a) searches or causes to be searched any building or place; or
(b) detains or searches or arrests any person, shall for every
such offence be liable on conviction for imprisonment for a
term which may extend to 2 years or fine which may extend to
50,000 rupees or both.

48. Punishment for false information or failure to give
information
Any person willfully and maliciously giving false
information and so causing an arrest or a search to be
made under this act, then he shall be liable for
punishment , i.e.:-
 Imprisonment for a term up to 2 years, or
 Fine up to Rs. 50,000, or
 Both.

49. Punishment for failure to give information
If any person, -
a) Being legally bound to state the truth, refuses to answer any question,or
b) Refuses to sign any statement made by him, which an authority may legally
require to sign, or
c) Omits to attend or produce books of account or documents at the place or
time.
Then, he shall be liable for penalty, a sum which shall not be
less than Rs 500 but which may extend to Rs 10,000 for each
such default or failure.

50. Thank You