With Globalization, and embrace of the new open economy culture came into existence another menace – MONEY LAUNDERING.
The global community realized and established that perhaps the tool designed and created for growth of an economy became the termite that could eat it too. With that realization and finding, Political Declaration and Global Programme of Action, annexed to the resolution S-17/2 was adopted by the General Assembly of the United Nations at its seventeenth special session on the twenty-third day of February, 1990.
In India, the same was adopted by the Parliament as Prevention of Money Laundering Act, focused and committed towards prevention of making available or movement of funds for criminal activities, including but not limited to crimes of tax evasions, terrorism, violence, smuggling, sham transactions with shell entities, and much more.
The intent of law is summarized clearly in Chapter III, Section 3 of the Act:
“Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.”
The enforcement and execution of penal provisions surrounding such offence were not as draconian or intimidating as some of its peers in Foreign Exchange Management Act, 1999 and Income Tax Act, 1961 or the recently updated Companies Act, 2013.
Starting with the United States, Global eyeballs turned towards the seriousness of this offence primarily with the notice of a reputed Global bank ending up paying more than a Billion Dollar penalties for casual implementation of regulating money laundering through their banking systems.
Since 2016, India has been taking serious actions against money laundering crimes, which not only erodes the foreign exchange reserves from India, but also directly or indirectly facilitates criminal activities.
With increased international trade and fund movements, it is essential in current scenario to ensure proper documentation and due diligence of parties involved in such transactions.
Currently, this prevention of Money Laundering Act, 2002 is moving from a toothless dragon to a structured armed artillery backed with professional investigative agencies.
According to Section 4 of Prevention of Money Laundering Act (PMLA), 2002,
“Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine.”
Very recently, the Indian government has set up an inter-ministerial committee chaired by the Revenue Secretary for better coordination among various departments and Law enforcement agencies to prevent money laundering activities. This points to the seriousness of the government towards the goal of better governance and executing tools to enforce penalties on defaulting parties.
Global trade compliance, international fund movements and regulations are at their best currently, in terms of understanding the complexities and commitments to regulate and prevent such illegal movement of funds.