Money laundering has developed into a critical threat to the financial system of every country, mainly as regard the respective veracity and sovereignty. To counteract this serious threatthe International Community came up with a comprehensive legislation, and have also, made a declaration emphasizing the need to combat money laundering, to which India is also a signatory. This statute came into being so as to fill the gap in the criminal justice system where attachment of proceeds of crime was not possible in the related criminal acts. The need for anti- money laundering act was also felt as a part of commitment amongst nations to fight narcotics trafficking, terrorism and other planned crimes by targeting their financial resources.
The Directorate of Enforcement (ED), under the Department of Revenue, Ministry of Finance, Government of India, has been assigned the power to investigate cases of money laundering. Various authorities under this Act are authorized to initiate proceedings of attachment of property and to lounge prosecution in the designated special courts. ED is also an important investigative agency mandated to enforce FEMA and Prevention of Money Laundering Act, 2002 (PMLA) brought into force w.e.f. 1st July 2005 and amended few times therafter.
Money Laundering is basically an act of washing of the tainted money earned from illegal activities and mixing up the said illegitimate money with the legitimate funds, in a manner that the original source is concealed and it appears as if earned from a legitimate source. The Act contains punishment for offences of money laundering as vigorous imprisonment upto a term of 10 years along with a fine of INR 5, 00,000/- besides provisional attachment of suspected properties. The basic inputs of defaulters are provided by CBI, Police, Customs, SEBI and Pollution Control Board.
Banks, Financial Institutions, and other intermediaries are obliged to maintain complete record of suspected transactions and furnish the same to the ED who also identifies the client / customer and the beneficial owner of such transactions. Certain offences under the Indian Penal Code, Immoral Traffic Act, Customs Act, Prevention of Corruption Act, Passports Act, Copyright and Trade Marks Act, Information Technology Act, Pollution Control Board Act, and Customs Act are part of the Scheduled offences under PMLA.
A random sampling of Suspicious Activity Reports describing commercial real estate transactions revealed that property management, real estate investment, realty, and real estate development companies were the most commonly reported entities associated with money laundering and related illicit activity. A U.S. bank reported that one of its account holders approached the bank to apply for a substantial loan to purchase a business. The account holder received wires totaling in the hundreds of thousands of dollars from his country of origin. According to bank records, this individual had a low income. Nonetheless, he claimed to have been a government official in his native country.
During our day-to-day banking transactions and business activities there are possibilities of getting misled and misguided; therefore, PMLA forces us to be careful. For example, the money moves into a county by overvalued exports, undervalued imports and variation in quality and quantity of exports/imports by using techniques like over- invoicing, under- invoicing, multiple- invoicing, over/under shipments or no shipment and manipulation in description of goods etc.
The PMLA has also recently been amended vide Black Money Act, 2015.