Examine the recently proposed changes in the various provisions of Prevention of Money Laundering Act (PMLA).

Published: February 19, 2018

Finance bill has proposed various amendments to the Prevention of money laundering act (PMLA) to strengthen the institutional mechanisms against money laundering.
The amendments include

  • Empowering the Special Court to restore confiscated assets to the rightful claimants even during the trial.
  • Government makes it mandatory for the ED to share relevant details with other agencies for necessary action.

Sharing of relevant details with other agencies will provide for an integrated and institutionalised to fight money laundering. Restoring the confiscated properties even during trial will aid in providing quick relief in cases where public money is involved ex Ponzi schemes.
In order to strengthen the fight against money laundering, government has brought in measures like amendments to money laundering act, amendments to DTAA with tax heavens, electoral funding reforms etc. These increased institutional mechanisms had brought in renewed attention and vigor in fight against money laundering. Ex: after the amendments to DTAA, Mauritius was dislodged as the largest FDI investor in India due to reduced round tripping.
But the fight against money laundering is faced with challenges like

  • Large informal sector in the economy which is outside the ambit of regulatory bodies.
  • Anonymity provisions of political funding aiding the money laundering activities.
  • Lack of financial literacy resulting in people falling prey to ponzi schemes whose promoters are using these schemes for money laundering.

The various loopholes still existing are encashed for money laundering through round tripping, cash donations to political parties etc which needs to be addressed in a holistic manner.

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