Introduction of money laundering act

In layman’s language the term money laundering means converting the money earned from illegal sources to
legitimately earned money to convert the black money into white criminals by way of money laundering tend to
generate a copious amount of money it is processing of illegally earned criminal have scant reward for honestly
and ethical values therefore they carry out these illegal activities thus enabling them to earn huge profits without
jeopardizing their sources the past few year have seen a phenomenal increase in the case of money laundering
activities like sales of illegal arms prostitution smuggling human trafficking activities involving organized crime
drug trafficking embezzlement bribery computer fraud scams can yield a huge amount of proceeds however since
the proceeds generated from these activities are illegal the criminals earning from these activities need to stop
these ill-gotten games and this is exactly what money laundering means according to the legislation enacted
specifically to curb the issue of money laundering the prevention of money laundering act 2002 is known as PMLA
money laundering is defined as an act in which a person directly or indirectly knowingly or unknowingly gets
involved or assists someone in an activity connected with the possession , acquisition ,or use and projecting or
claiming that proceed as untainted property this definition of money laundering is provided in section 3 of the
PMLA.
OBJECTIVE OF MONEY LAUNDERING
▶PREVENTION and CONTROL – The primary objective of the Money Laundering act 2002 is to prevent and
control money laundering activities it aims to establish robust measures and mechanisms to identify investigate
and prevent the illegal conversion and illicitly obtained funds into legitimate assets.

▶CONFISCATION and SEIZURE – Another essential objective is confiscating and seizing properties or assets
derived from or involved in money laundering the act empower the government and law enforcement agencies
to take action against such assets and effectively disrupt the financial gains of money launderers

▶ADDRESSING RELATED ISSUES – The act also addresses other issues connected with money laundering it
provides a comprehensive legal framework to tackle various aspects of money laundering including
international cooperation mutual legal assistance and information sharing with foreign jurisdictions.

▶OBLIGATION ON FINANCIAL INSTITUTIONS – The act imposes obligations on banking companies financial
institution and intermediaries to maintain records and report suspicious transaction these entities must
implement stringent known your customer (KYC) procedures and other measures to prevent using their
plateform for money laundering activities.
Stages in Money Laundering
• PLACEMENT – Placement refers to the physical disposal of bulk cash proceeds derived from illegal activity
this is the first step of the Money Laundering process and the ultimate aim of this phase is to remove the cash
from the location of acquisition so as to avoid detection from authorities this is achieved by investing criminal
money into legal financial system by opening up a bank account in name of unknown individual or organization
and depositing the money in that account .

• LAYERING – Layering is the movement of funds from institution to institution to hide their origin it consists of
putting funds which have entered the financial system through series pf financial operation to mislead potential
investigators and to give the funds the appearance of having legal origins launderers may purchase expensive
items such yachts or cars to change the money from.

• INTEGRATION - It refers to the reinsertion of the laundered proceeds back into the economy in such a way that
they re-entered the financial system as normal business funds. The funds may be reintroduced in the economy
through for instance the purchase of luxury items through investment in assets such as shares in a company or
real estate.
PUNISHMENT FOR MONEY LAUNDERING IN INDIA
Section 4 of the PMLA provides for the punishment of the offences of money laundering it provides that a person
guilty of money laundering will be punished with imprisonment of 3 year which may extend to 7 year along with a
fine also imprisonment shall be rigorous however it is to be noted that in case concerning the offences under
Narcotic Drugs and psychotropic substances act 1985 the person shall be punished with rigorous imprisonment
which may extend to 10 year rather than 7 year section 5 of PMLA provides for the provision of the attachment of
property involved in money laundering the section provides that director joint director or deputy director is
empowered to attach the property for 180 days which is involved in money laundering provides that the director
joint director or deputy director shall have reason to believe that such a person is under the possession of criminal
proceeds this attachment is done in the manner prescribed in schedule second of the income tax act 1961 the
reason that the authority believes shall be in writing and order concerning such attachment shall be seal covered
after such attachment a complaint will be lodged before the adjudicating authority with in 30 days after the
property has been confiscated for the offence of money laundering such property shall from there and then vest in
the central government as provided under section 9 of PMLA thus after confiscation all the right and titles of the
property shall be of the government .