Section 3 of the Act defines activities of money laundering as directly or indirectly attempting to indulge or, knowingly assist or, knowingly being a part or, actually involving in any process or activity connected with the proceed of crimes and projecting it as untainted property. Such an offence is considered offence of money laundering.
The entire charging section revolves round the term “proceed of crime”. The term ‘proceed of crime’ has been defined under section 2(a) as follows:-
“proceed of crime “ means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property”.
The crimes which can result in ‘proceed of crime’ are mentioned in schedule to the Act. Hence, any property which is sourced, whether directly or indirectly, from the crimes committed under these Acts, is treated as ‘proceed of crime’. The ‘property’ may be in any form i.e. money or any other intangible like title, interest etc., and may be located anywhere including outside India. It has been given meaning as-
“property means any property or asset of every description, whether corporeal or incorporeal, moveable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interests in, such property or assets, wherever located”.
By including interest in an asset, the Act has included even the beneficiary interest in the property. Hence, even if the person is the beneficial owner of the property which is derived from the proceed of crime, he can be convicted of money laundering.
MONEY LAUNDERING ACTIVITIES
Broadly stated, projecting ‘proceeds of crime’ as untainted property is taken to be an activity of money laundering. Indulging in such activities, involve following elements-
¾ Possession or ownership of the proceed of crime or, property acquired from the proceed of crime;
¾ Transaction relating to proceed of crime like correcting its form. The very purpose of the Act is to punish the act of converting the tainted property derived from commission of crime to untainted property and bringing it into the mainstream of the system so as not to raise eyebrows or create suspicion or generate enquiries about its legality. This is done generally by creating a ladder of transactions so as to erase the trace of it origin;
¾ Concealment of the original transaction and / or creating ghost transactions for concealing the actual transaction. This is another way by which the origin of the proceed of crime itself is disguised by ghost transaction to lend colour of legality.
A clear nexus between the proceeds of crime with any of the above three elements is necessary.
PUNISHMENT FOR MONEY LAUNDERING
PMLA provides for minimum punishment as rigorous imprisonment for three years along with fine, which could have extended to INR 5,00,000. However vide amendment in 2012 the upper ceiling on the quantum of fine has been done away with. The maximum punishment is of seven years in general offences. If the person is convicted of specific offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 as detailed in part A of the schedule of offences, he may be imprisoned for as many as ten years.
ATTACHMENT, ADJUDICATION AND CONFISCATION
The Act provides for power of provisional attachment which is vested with the Director or any other authorised officer not below the rank of Deputy Director. When an authorised officer under the Act acquires any information or material which leads him to believe that an activity of money laundering has taken place or is likely to take place, he is empowered to start the proceeding for attachment after recording the reasons in writing which need not be communicated. The order remains provisional till the expiry of 180days or till an order has been passed by the adjudicating authority.
After the attachment becomes final, the property may be sold or a receiver be appointed for the management of the attached property. The sale proceed shall first be used to settle the amount due as mentioned in the certificate of attachment and cost of execution. Surplus, if any being the proceed of crime cannot be refunded to the money launderer.
CRIMINAL PROCEEDINGS AFTER ATTACHMENT
The person whose property is attached shall be tried in a separate proceeding for the alleged scheduled offence before a Court. The attachment becomes final if the court finds the person guilty. Where the property is immovable the attachment can be made by an order prohibiting the judgement debtor from transferring or charging the property in anyway.
CONFISCATION OF PROPERTY
When the attachment gets confirmed after conviction of the accused, the authorised officer shall take possession of the property immediately and pass an order of confiscation of the property after giving an opportunity of hearing. Section 9 vests all powers in the Central Government in the confiscated property which is involved in money laundering. The right of the central Government is absolute so much so as to state that if any encumbrance on the property or leasehold interest is created and in the opinion of the Adjudicating Authority, it is created to defeat the purpose of confiscation, it shall be treated as invalid and property shall be transferred to the Government free from the charge.
As mentioned, the whole scheme of PMLA is based on commission of a crime under the specified offences and deriving proceed of such crime. When such proceed is projected or attempted to be projected as untainted money, an offence is committed under the Prevention of Money Laundering Act inviting attachment and confiscation of the property representing the proceed of crime and punishment under the Act.
The offences which may result in proceed of crime are termed “Scheduled offences” which are defined in Sec 2(y) as-
“Schedule offences means-
(i) The offences specified in Part A of the Schedule; or
(ii)The offences specified under part B of the Schedule if the total value involved in such offence is thirty lakhs rupees or more.”
[Part B of the schedule which originally contained offences under the Indian Penal Code was omitted by Act 2 of 2013 w.e.f. 15-02-2013 and hence this part ceased to have validity. However, Part B has again been inserted by the Finance Act, 2015 which relates to offences under Customs Act relating to false declaration, false documents etc. The Finance Act, 2015 further raised the value involved in such offences from earlier thirty lakhs to rupees one Crore.]
After amendments made from time to time adding to or deleting certain offences from the Schedule, the latest position of Scheduled offences as given in the Schedule to the Act is as under-
- Part A having 28 paragraphs listing offences and the Acts under which such offences fall;
- Part B of the schedule containing offences under Indian Penal Code was omitted w.e.f. 15-02-2013. The same has now been reintroduced and mention offences under Customs Act relating to false declaration and false documents etc., with the value of Rupee One Crore and above;
- Part C of the Schedule introduced by Finance Act, 2015 mentioning offence which is the offence of cross border implications and which is committed under the offences listed in Part A and B as well as offences against property under chapter XVII of the Indian Penal Code.
STEPS RELATING TO BLACK MONEY THROUGH FINANCE ACT, 2015
The F.M. while presenting the budget for the year 2015 announced in his speech
“(7) The offence of concealment of income or evasion of tax in relation to a foreign asset will be made a predicate offence under the Prevention of Money-Laundering Act , 2002(PMPL). This provision would enable the enforcement agencies to attach and confiscate unaccounted assets held abroad and launch prosecution against persons including in laundering of black money.
(8)The definition of ‘proceeds of crime’ under PMLA is being amended to enable attachment and confiscation of equivalent asset in India where the asset located abroad cannot be forfeited.”
In keeping with the announcement, amendments have been carried out in the PMLA, 2002 by clause 171 to 178 in Part VII of the Finance Act, 2015(Appendix-3 to the book). Amendments having impact on undisclosed foreign income/assets are-
The definition of proceeds of crime has been extended to include the property equivalent in value held within the country, where the property is taken or held outside the country. The impact of the amendment will be that where the proceed of crime was a property held out of India, a property in India of equal value will be considered as the proceed of crime and can be subjected to all the provisions of attachment, sale or confiscation as they apply to the proceed of crime in India;
In the schedule offences as per the schedule to the Act part B of the Schedule which was omitted has been reinserted in respect of offence under the Customs Act, 1962 and the offence mentioned is under section 132 of that Act relating to false declaration false document etc. Further, only those offences under this Part will be scheduled offences which involve a monetary value of rupees one crore and above;
In relation to provisions of attachment and / or confiscation it is provided that where a property stands confiscated to the central Government under sub-section (5), the special court, in such manner as may be prescribed, may also direct the central Government to restore such confiscated property or part thereof to a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering.
AMEDMENT THROUGH THE BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015.
By Sec. 88 of the Undisclosed Foreign Income and Assets Act, Part C of the Schedule which was introduced by Finance Act. 2015 and lists out offence of cross border implications specified in Part A and offence against property under Chapter XVII of the Indian Penal Code. Has been extended to include the following.
“(4) The offence of willful attempt to evade any tax, penalty or interest referred to in section 51 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2014”.
As a consequence evasion of tax penalty or interest under this Act. Apart from prosecution under the Undisclosed Foreign Income Act as mentioned in Chapter V, will also be subject to prosecution under the PMLA and being constructed as proceed of crime will be subject to all the provisions relating to attachment, confiscation or sale, as they apply to all other scheduled offences.
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(These are personal views of the contributor .These should not be construed as legal or professional advise. The contributor is not responsible for any decision taken by readers on the basis of this Article.)