Money and Crimes go hand in hand.
People commit crimes in order to escape from income taxes or
to accumulate more money illegally. One such offences is that of money laundering. Money
Laundering is a heinous crime that not only affects the social and economic fabric of the country but
also tends to promote other serious offenses. It is a growing problem that needs to be addressed and
the Prevention of Money Laundering Act was enacted in response to India’s global commitment to
combat the menace of money laundering.
The Prevention of Money Laundering Act (PMLA) is an Indian law passed in 2002 with the objective
of preventing and combating money laundering activities in the country. The Act criminalizes money
laundering and provides for the confiscation of property derived from, or involved in, money
laundering activities. The law also imposes various obligations on certain entities, including banks,
financial institutions, and intermediaries, to maintain records and report transactions that are
suspected of involving proceeds of crime or money laundering. The PMLA has been amended several
times since its enactment.
Money laundering is often associated with criminal activities such as drug trafficking, terrorism,
corruption, and fraud, and allowing these activities to continue unchecked can have serious
consequences for society as a whole. Money laundering success encourages criminals to continue
their illegal schemes—more fraud, more drugs on the streets, more drug-related crime, and so on. It
is a major source of terrorism financing. Terrorists have demonstrated adaptability and opportunism
in meeting their funding needs.
Additionally, it can facilitate the concealment of assets and income from tax authorities, which can
lead to revenue losses for governments and distort public policy decision-making. Organized crime
can infiltrate financial institutions, acquire control of large sectors of the economy through
investment, or offer bribes to public officials and indeed governments.
It’s estimated that money launderers scrub as much as $2 trillion (or 5 per cent of the world’s GDP)
every year. Massive influxes of dirty cash into particular areas of the economy that are desirable to
money launderers create false demand. Legitimate small businesses cannot compete with money-
laundering front companies that can afford to sell a product at a lower price because their primary
goal is to clean money rather than make a profit.
The rise of cryptocurrency allows money launderers to conceal their illicit funds. The new rules of
PMLA have brought cryptocurrency under the scope of money laundering laws. Crypto exchanges
that generally deal with virtual digital assets mandatorily require performing the KYC of their clients.
There are a number of black-market channels in India for the purpose of selling goods, with many
imported consumers buying goods such as food, electronics, and so on. Black merchants conduct
cash transactions and avoid customs duties, allowing them to offer lower prices than regular
merchants.
On 7th March 2023, the Ministry of Finance, Department of Revenue, Government of India
introduced the Prevention of Money Laundering (Maintenance of Records) Amendment Rules, 2023.
The government has taken effective steps to amend the money laundering law by comprehending
more disclosures for the banks as well as the financial Institutions. On May 3, 2023, the government
made further revisions to the PMLA, 2002. The provisions of PMLA will now apply to a person acting
as a director or secretary of a company, a partner of a firm or a similar position in relation to other
companies and LLPs. It now requires Practicing CAs, CSs, and also CWAs to report suspicious
transactions.
Amendments to the Prevention of Money Laundering Act, 2002 by the Central Government are the
need of the hour in order to broaden the scope of the Act while imposing additional compliance
obligations on various individuals and entities. These amendments should be designed to address
the challenges of money laundering and terrorist financing by extending the scope of reporting
requirements and strengthening the accountability of entities engaged in financial transactions.
