In an unprecedented move, the Union government in India recently issued a notification outlining certain changes to the Prevention of Money Laundering Act (PMLA). The goal of these changes is to empower the Enforcement Directorate (ED) with additional means to address cases of money laundering more efficiently.
Details of the Proposed Amendments
The amendments propose that money laundering should be viewed as a stand-alone crime, abandoning its earlier dependency on a ‘predicate offence’ or ‘scheduled offence’. In addition, the definition of “proceeds of crime” will be expanded to encompass properties “which may directly or indirectly be derived or obtained as a result of any criminal activity.”
Crucial amendments include removals of provisions in subsections (1) of Section 17 (Search and Seizure) and Section 18 (Search of Persons), which necessitated an FIR or charge sheet by other probing agencies for offences listed in the PMLA schedule. An added explanation to Section 45 confirms all PMLA offences as cognisable and non-bailable.
These changes will allow the ED to arrest an accused without a warrant, under specific conditions. The amendment also identifies concealment of proceeds of crime and claiming such property as untainted as complete and independent offences under the Act.
Section 72 allows the Centre to establish an Inter-Ministerial Coordination Committee to enhance inter-departmental and inter-agency coordination.
Understanding Money Laundering
Money laundering involves making the proceeds of criminal activities such as drug trafficking, arms sales, smuggling, insider trading, and computer fraud seem legitimate. The laundered money, often referred to as ‘dirty money’, is processed to appear as ‘clean’ or ‘legitimate’ funds.
Stages of Money Laundering
Money laundering typically involves three stages:
– Placement: The illicit money is introduced into the formal financial system.
– Layering: The money is distributed across various transactions to obscure its origins.
– Integration: The money is reintroduced into the financial system in such a way that its criminal associations are erased.
Below are some common methods of money laundering:
| Bulk Cash Smuggling | Cash Intensive Businesses |
| Trade-based laundering | Shell companies and trusts |
| Round-tripping | Bank Capture |
| Gambling | Real Estate |
| Black Salaries | Fictional Loans |
| Hawala | False invoicing |
Legal Framework for Money Laundering in India
The Prevention of Money-Laundering Act (PMLA), 2002, enacted to combat money laundering in India, has three key purposes:
– To prevent and control money laundering.
– To facilitate confiscation and seizure of property obtained from laundered money.
– To address any other issue connected with money laundering in India.
Enforcement Directorate (ED) is authorised to conduct money laundering investigations under the PMLA Act.
About the Enforcement Directorate
The Directorate of Enforcement is a specialist financial investigation agency under the Department of Revenue, Ministry of Finance, Government of India. Established as the ‘Enforcement Unit’ in 1956, it was renamed as the ‘Enforcement Directorate’ a year later. The ED enforces the Foreign Exchange Management Act,1999 (FEMA) and the Prevention of Money Laundering Act, 2002 (PMLA).