What is Money laundering? How it is different from Black Money? Discuss salient provisions of the Anti Money Laundering law in India.

Published: February 7, 2016

Model Answer:
Money laundering is the process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source. Black money is that amount money which is liable for taxation, but on which tax is not paid or evaded. It is usually received in cash from underground economic activity and, as such, is not taxed. But in Money laundering, the black money must involve a predicate crime such as the violation of Indian Penal Code, IPC, Narcotics, Prevention of Corruption Act and Human Trafficking. To cope up with this challenge government of India launched the Prevention of Money laundering act in 2002
The Prevention of Money Laundering (Amendment) Act 2012

  • The PMLA was enacted in 2002, but was amended thrice, first in 2005, then in 2009 and then 2012.
  • The enactment of Corresponding law to link the provisions of Indian law with the laws of foreign countries and to provide for transfer of the proceeds of foreign predicate offence committed in any manner in India.
  • It also adds the concept of ‘reporting entity’ which would include a banking company, financial institution, intermediary or a person carrying on a designated business or profession.
  • The Prevention of Money Laundering Act, 2002 levied a fine up to Rs 5 lakh. The amendment act has removed this upper limit.
  • The act has provided for provisional attachment and confiscation of property of any person (for a period not exceeding 180 days).
  • The agency monitoring the anti-Money laundering activities in India is the Financial Intelligence Unit (FIU-IND).
  • Obligation of banking companies, financial Institutions and Intermediaries to follow the KYC norms and maintain records for a minimum period of 10 Years.

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