Wednesday, December 28, 2011

Money-Laundering (Amendment) Bill, 2011

Money laundering refers to the process of concealing the source of illegally obtained money. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount of money laundered, either worldwide or within their national economy. In 1996, the International Monetary Fund (IMF) estimated that two to five percent of the worldwide global economy involved laundered money. However, the Financial Action Task Force on Money Laundering (FATF), an intergovernmental body set up to combat money laundering, admitted that "overall it is absolutely impossible to produce a reliable estimate of the amount of money laundered and therefore the FATF does not publish any figures in this regard." Academic commentators have likewise been unable to estimate the volume of money with any degree of assurance.
Regardless of the difficulty in measurement, the amount of money laundered each year is in the billions (US dollars) and poses a significant policy concern for governments. As a result, governments and international bodies have undertaken efforts to deter, prevent and apprehend money launderers.
PMLA (Amendment) Bill, 2011
Keeping these points in view and to bring prevention of money laundering legislation on par with global norms, Finance Minister Pranab Mukherjee has introduced PMLA (Amendment) Bill, 2011in the Lok Sabha. The Bill seeks to allow confiscation of proceeds of crime even during the trial.
The Bill also provides that in any proceedings relating to proceeds of crime " shall be presumed that such proceeds of crime is involved in money-laundering".
The proposed Bill has provision for attachment and confiscation of the proceeds of crime even before conviction, "so long as it is proved that offence of money-laundering has taken place and property in question is involved in money-laundering. The amendment was necessiated in view of India being an important member of the FATF and also chairing its Asia Pacific group. Therefore, it was important to make the existing PMLA in tune with the practice being followed across the world.
Provisions of Indian Law
The Bill proposes to introduce the concept of corresponding law to link the provisions of Indian law with the laws of foreign countries and provide for transfer of the proceeds of the foreign predicate offence in any manner in India.
The Prevention of Money-laundering Act, 2002 was enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering. The Act was amended in the year 2005 and 2009 to remove the difficulties arisen in implementation of the Act.
Moreover, the amendment bill seeks to use proceeds of crime as criminal activities and remove existing limit of five lakh rupees of fine under the Act.
About FATF
The FATF, formed by the G7 countries in 1989, is an intergovernmental body whose purpose is to develop and promote an international response to combat money laundering. The FATF Secretariat is housed at the headquarters of the Organization of Economic Cooperation Countries (OECD) in Paris. In October 2001, FATF expanded its mission to include combating the financing of terrorism. FATF is a policy-making body, which brings together legal, financial and law enforcement experts to achieve national legislation and regulatory AML and CFT reforms. Currently, its membership consists of 34 nations and territories and two regional organizations.
In addition, FATF works in collaboration with a number of international bodies and organizations. These entities have observer status with FATF, which does not entitle them to vote, but permits full participation in plenary sessions and working groups.
FATF has developed 40 Recommendations on money laundering and 9 Special Recommendations regarding terrorist financing. FATF assesses each member country against these recommendations in published reports. Countries seen as not being sufficiently compliant with such recommendations are subjected to financial sanctions.

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