A Practical Guide to The Prevention of Money Laundering Act, 2002

About A Practical Guide to The Prevention of Money Laundering Act, 2002

INTRODUCTION 1
• Basic Steps of Money-Laundering ……………………………………………………………. 2
• Statement of Objects and Reasons ……………………………………………………………. 3
• The PMLA, 2002 ………………………………………………………………………………………. 4
• Frequently Asked Questions (FAQs)………………………………………………………… 6
CHAPTER 1: PRELIMINARY 14
• Section 1. Short title, extent and commencement……………………………………. 14
• Case Laws ………………………………………………………………………………………………. 14
• Section 2. Definitions………………………………………………………………………………. 15
• Case Law………………………………………………………………………………………………… 16
• Frequently Asked Questions (FAQs)………………………………………………………. 38
CHAPTER 2 : OFFENCE OF MONEY-LAUNDERING 46
• Section 3 – Offence of Money-laundering……………………………………………….. 46
• Explanation…………………………………………………………………………………………….. 46
• Methods of Money-laundering ………………………………………………………………. 48
• Mens rea…………………………………………………………………………………………………. 48
• Conscious possession……………………………………………………………………………… 48
• Stand-alone offence ………………………………………………………………………………… 49
• Relevant date………………………………………………………………………………………….. 49
• Burden of Proof………………………………………………………………………………………. 50
• If the property derived from the scheduled offence is not available ……….. 50
• Insertion of Explanation below section 3 of the Act………………………………… 50
• Case Laws ………………………………………………………………………………………………. 52
• Section 4. Punishment for money-laundering…………………………………………. 54
• Case Laws ………………………………………………………………………………………………. 55
• Frequently Asked Questions (FAQs)………………………………………………………. 57
xii Contents
CHAPTER 3 : Attachment, Adjudication and Confiscation 73
• Section 5. Attachment of property involved in money-laundering …………. 73
• Insolvency Proceedings ………………………………………………………………………….. 82
• Section 6. Adjudicating Authority, composition, powers, etc………………….. 90
• Section 7. Staff of Adjudicating Authorities…………………………………………….. 96
• Section 8. Adjudication…………………………………………………………………………… 96
• Adjudication vis-à-vis appeal……………………………………………………………….. 104
• Time period of 365 days ……………………………………………………………………….. 104
• Taking possession under Section 8(4) of the Act……………………………………. 104
• Attachment of a property purchased by a bonafide purchaser……………… 105
• Impact of action under PMLA on other penal laws-……………………………… 105
• Role of Adjudicating Authority in confiscation of (tainted) properties….. 105
• Whether the properties purchased prior to the commission of scheduled
offence can be attached? ……………………………………………………………………….. 106
• Mens rea……………………………………………………………………………………………….. 106
• Opportunity of being heard………………………………………………………………….. 106
• Reason to Believe………………………………………………………………………………….. 113
• Section 9. Vesting of property in Central Government………………………….. 116
• Section 10 Management of properties confiscated under this chapter…… 117
• Section 11. Powers regarding summons, production of documents,
evidence, etc. ………………………………………………………………………………………… 118
• Section 11A—Verification of Identity by Reporting Entity……………………. 120
• Explanation…………………………………………………………………………………………… 121
• The Circular………………………………………………………………………………………….. 121
• Frequently Asked Questions (FAQs)…………………………………………………….. 122
CHAPTER 4 : Obligations of Banking Companies, Financial
Institutions and Intermediaries 133
• Section–12. Reporting Entity to maintain records …………………………………. 133
• Section 12A. Access to Information ………………………………………………………. 137
• Section 12AA. Enhanced due diligence…………………………………………………. 138
• Explanation…………………………………………………………………………………………… 138
• Section 13. Powers of Director to impose fine……………………………………….. 139
• Explanation…………………………………………………………………………………………… 140
• Section 14. No civil or criminal proceedings against reporting entity,
its directors and employees in certain cases………………………………………….. 141
• Section 15—Procedure and manner of furnishing information by
reporting entities ………………………………………………………………………………….. 142
• Procedure and manner of furnishing information………………………………… 143
• Manner of furnishing information to the Director………………………………… 143
Contents xiii
• Frequently Asked Questions(FAQs)……………………………………………………… 144
CHAPTER 5 : Summons, Searches and Seizures, Etc. 146
• Section–16. Power of Survey…………………………………………………………………. 146
• Section 17–Search and Seizure………………………………………………………………. 149
• Deletion of proviso under section 17(1) of the Act………………………………… 153
• Section 18. Search of Persons ………………………………………………………………… 158
• Deletion of proviso under section 18(1) of the Act………………………………… 161
• Section 19. Power to Arrest …………………………………………………………………… 166
• Difference between Detention and Arrest …………………………………………….. 167
• Section 20. Retention of Property………………………………………………………….. 173
• Section 21–Retention of records ……………………………………………………………. 175
• Section 22. Presumption as to records or property in certain cases……….. 178
• Section 23. Presumption in interconnected transaction…………………………. 180
• Section 24. Burden of Proof…………………………………………………………………… 182
• Frequently Asked Questions(FAQs)……………………………………………………… 184
CHAPTER 6 : Appellate Tribunal 199
• Section 25—Appellate Tribunal ……………………………………………………………. 199
• Section 26. Appeals to Appellate Tribunal—…………………………………………. 200
• Sections 27 to 34—[***]………………………………………………………………………….. 204
• Section 35. Procedure and powers of Appellate Tribunal……………………… 206
• Meaning of principles of natural justice………………………………………………… 207
• Section 36. Distribution of business amongst Benches ………………………….. 212
• Section 37—Power of [Chairman] to transfer cases……………………………….. 212
• Section 38. Decision to be by majority…………………………………………………… 212
• Section 39. Right of the appellant to take assistance of authorised
representative and of Government to appoint presenting officers ………… 213
• Explanation…………………………………………………………………………………………… 213
• Section 40. Members, etc., to be public servants ……………………………………. 214
• Public Servant ………………………………………………………………………………………. 215
• Section 41. Civil Court not to have jurisdiction …………………………………….. 215
• Section 42. Appeal to High Court …………………………………………………………. 215
• Explanation…………………………………………………………………………………………… 216
• Frequently Asked Questions (FAQs)…………………………………………………….. 219
CHAPTER 7 : Special Courts 226
• Section 43. Special Courts……………………………………………………………………… 226
• Explanation…………………………………………………………………………………………… 226
• Section 44. Offences triable by Special Courts— …………………………………… 228
• Explanation…………………………………………………………………………………………… 229
xiv Contents
• Section 45—Offences to be cognizable and non-bailable ………………………. 238
• Explanation…………………………………………………………………………………………… 238
• The amendment made in section 45 in 2018 (w.e.f. 19-4-2018) and
its effect ………………………………………………………………………………………………… 252
• Section 46. Application of the Code of Criminal Procedure, 1973 to
proceedings before Special Court …………………………………………………………. 261
• Section 47. Appeal and revision ……………………………………………………………. 263
• Frequently Asked Questions (FAQs)…………………………………………………….. 264
• Amendment made in section 44(1)(d) of the Act w.e.f. 1-8-2019……………. 267
CHAPTER 8 : Authorities 277
• Section 48. Authorities under the Act…………………………………………………. 277
• Section 49. Appointment and powers of authorities and other officers …. 278
• Section 50. Powers of authorities regarding summons, production of
documents and to give evidence, etc…………………………………………………….. 279
• Section 51. Jurisdiction of authorities ………………………………………………… 286
• Section 52. Power of Central Government to issue directions, etc…………. 287
• Section 53. Empowerment of certain officers ………………………………………… 288
• Section 54. Certain officers to assist in inquiry, etc………………………………… 288
• Frequently Asked Questions (FAQs)…………………………………………………….. 289
CHAPTER 9 : Reciprocal Arrangement for Assistance in Certain
Matters And Procedure for Attachment and
Confiscation of Property 296
• Section 55. Definitions…………………………………………………………………………… 296
• Section 56. Agreements with foreign countries……………………………………… 298
• Section 57. Letter of request to a Contracting State in certain cases ………. 299
• Section 58. Assistance to a Contracting State in certain cases………………… 301
• Section 58A. Special Court to release the property ……………………………….. 303
• Section 58B. Letter of request of a Contracting State or authority for
confiscation or release the property………………………………………………………. 304
• Section 59. Reciprocal arrangements for processes and assistance for
transfer of accused persons…………………………………………………………………… 304
• Section 60. Attachment, seizure, confiscation, etc., of property in a
Contracting State or India …………………………………………………………………….. 307
• Section 61. Procedure in respect of letter of request………………………………. 310
• Frequently Asked Questions (FAQs)…………………………………………………….. 310
CHAPTER 10 : Miscellaneous 314
• Section 62. Punishment for vexatious search ………………………………………… 314
Contents xv
• Section 63. Punishment for false information or failure to give
information, etc…………………………………………………………………………………….. 315
• Section 64. Cognizance of offences ……………………………………………………….. 317
• Section 65. Code of Criminal Procedure, 1973, to apply………………………… 317
• Section 66. Disclosure of information……………………………………………………. 319
• Section 67. Bar of suits in civil courts ……………………………………………………. 322
• Section 68. Notice, etc., not to be invalid on certain grounds ………………… 323
• Section 69. Recovery of fine or penalty …………………………………………………. 324
• Section 70. Offences by companies ……………………………………………………….. 325
• Section 71. Act to have overriding effect……………………………………………….. 329
• Section 72. Continuation of proceedings in the event of death or
insolvency…………………………………………………………………………………………….. 330
• [Section 72A. Inter-ministerial co-ordination committee ………………………. 333
• Section 73. Power to make rules……………………………………………………………. 333
• Section 74. Rules to be laid before Parliament……………………………………….. 337
• Section 75. Power to remove difficulties ……………………………………………….. 338
• Crypto Transaction brought under Anti-Money Laundering Laws………. 338
• Client due Diligence-The Beneficial Ownership in an Account…………….. 340
• ED Report Card ……………………………………………………………………………………. 340
• Frequently Asked Questions (FAQs)…………………………………………………….. 341
CHAPTER 11 : Suggestions 347
The Schedule [See Section 2(Y)] [Part A] 352
APPENDICES
• The Prevention of Money-Laundering Act, 2002……………………………..363-418
• The Prevention of Money-Laundering (Manner of Receiving the
Records authenticated Outside India) Rules, 2005……………………………… 419
• The Prevention of Money-Laundering (The Manner of Forwarding
A Copy of the Order of Provisional Attachment of Property along
with the Material, and Copy of the Reasons along with the Material in
Respect of Survey, to the Adjudicating Authority and Its Period
of Retention) Rules, 2005 …………………………………………………………………420-429
• The Prevention of Money-Laundering (Receipt and Management
of Confiscated Properties) Rules, 2005 ………………………………………………….. 425
• The Prevention of Money-Laundering (Maintenance of Records)
Rules, 2005 ………………………………………………………………………………………427-450
• The Prevention of Money-Laundering (Forms, Search and Seizure
or Freezing and the Manner of Forwarding the Reasons and Material
to the Adjudicating Authority, Impounding and Custody of Records
and the Period of Retention) Rules, 2005 …………………………………………451-461
xvi Contents
• The Prevention of Money-Laundering (the Forms and the Manner
of Forwarding a Copy of order of Arrest of A Person along with the
Material to the Adjudicating Authority and Its Period of Retention)
Rules, 2005 ………………………………………………………………………………………462-465
• The Prevention of Money-Laundering (the Manner of Forwarding
A Copy of the Order of Retention of Seized Property along with
the Material to the Adjudicating Authority and the Period of its
Retention) Rules, 2005……………………………………………………………………..466-469
• The Prevention of Money-Laundering (Issuance of provisional
Attachment Order) Rules, 2013 ……………………………………………………….470-471
• The Prevention of Money-Laundering (Taking possession of
Attached or Frozen Properties Confirmed by the Adjudicating
Authority) Rules, 2013 …………………………………………………………………….472-477
• The Prevention of Money-Laundering (Restoration of Confiscated
Property) Rules, 2016 ………………………………………………………………………478-479
• The Adjudicating Authority (Procedure) Regulations, 2013…………….480-493
Recent Notification dated 3-05-2023……………………………………………….510