BUDGETARY CHANGES IN PREVENTION OF MONEY LAUNDERING ACT, 2002

[Mr. M. GOVINDARAJAN]

Introduction

The Prevention of Money Laundering Act, 2002 (‘Act’ for short) was enacted and the provisions of the said Act came into force from 01.07.2005.  The objective of the Act is to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and to punish those who commit the offence of money laundering.

The Act was amended by the Prevention of Money Laundering (Amendment) Act 2009 w.e.f. 01.06.2009. The Act was further amended by the Prevention of Money Laundering (Amendment) Act, 2012 w.e.f. 15-02-2013.  The Finance Bill, 2018 also proposes some amendments in this Act which will be discussed in this article.

Part XIV of the Finance Bill, 2018 provides for amendment in respect of certain sections of the Act vide clause 204 and 205.

Effective date of amendment

Clause 204 provides that the provisions of Part XIV shall come into force on such date as the Central Government may by notification in the Official Gazette, appoint.

Proceeds of crime

Section 2 of the Act provides various definitions of terms and expressions of certain words.  Section 2(u) of the Act defines the expression ‘proceeds of crime’ which is proposed to be amended.  The amended definition will provide that any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad.

Attachment of property

Section 5 of the Act provides the procedure for attachment of the property involved in money laundering.  Section 5(1) gives powers gives powers to the Director or any other officer below the rank of Director to attach the property provisionally if he has reason to believe the material in possession of any person by means of proceeds of crime by an order for a period of 180 days from the date of order.  Section 5(1) has two provisos.

Clause 205 (b) proposes to insert a third proviso to this section which provides that for the purposes of computing the period of 180 days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further not exceeding thirty days from the date of order of vacation of such stay order shall be counted.

Section 5(3) of the Act provides that every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of section 8, whichever is earlier i.e., 180 days from the date of order for attachment of property or the date of order passed by the Adjudicating Authority under section 8(2) of the Act, whichever earlier.

Clause 204 (b)(i) of the Bill proposes to bring an amendment to this section 5(3) to substitute the words ‘sub-section (3)’ for ‘sub-section (2)’.

Clause 204(b)(ii) of the Bill also proposes to insert in sub-section (3), in clause (a), after the words ‘continue during’ the words ‘investigation for a period not exceeding ninety days’.  After the amendment section 8(2) will read as follows-

8(3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of section 5 or retention of property or record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property or record shall-

(a) continue during investigation for a period not exceeding ninety days or  the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and

(b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Special Court.

Restoration of confiscated of property

Section 8(8) of the Act provides that where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering.

The proviso to this section provides that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering.

Clause 205 (c) (ii) of the Bill proposes to insert a second proviso after the first proviso to Section 8(8) which provides that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed.

Power to arrest

Section 19 (1) of the Act gives powers to the Director, the Deputy Director, Assistant Director or any other officer authorized in this behalf by the Government  by general or special order  attest such person involving in the offence of money laundering.

Section 19(3) of the Act provides that every person arrested under sub-section (1) shall, within twenty-four hours, be taken to a Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction.   The proviso to this section provides that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the Magistrate's Court.

Clause 205 (d) of the Bill proposes to amend section 19(3).  After the amendment the section 19(3) will provide that every person arrested under sub-section (1) shall, within twenty-four hours, be taken to a Special Court or a Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction.  Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the Special Court or Magistrate's Court.

Offences to be cognizable and non-bailable

Section 45 of the Act provides that the offences under this Act are cognizable and non bailable.  Section 45(1) provides that notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or his own bond subject to some conditions.

Clause 205 (e) (i) of the Bill proposes to bring an amendment to this section by substituting the words ‘under this Act’ for the words ‘punishable for a term of imprisonment of more than three years under Part A of the Schedule’.

The said amendment has been proposed in consequence of the Supreme Court order in ‘Nikesh Tarachand Shah V.  Union of India and another’ – 2017 (11) TMI 1336 – Supreme Court of India in which the Supreme Court held that section 45 of the Act is violative of the Constitutional provisions.

Release on bail on special cases

The proviso to section 45(1) of the Act provides that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs. 

Clause 205(e)(ii) of the Bill proposes to add in addition to the persons above mentioned, accused either on his own or along with other co-accused of money laundering a sum of less than ₹ 1 crore. 

By virtue of this amendment,-

• a person under the age of sixteen years; or
• a woman; or
• a sick or inform; or
• accused either on his own or along with other accused of money laundering a sum of less than ₹ 1 crore

may be released on bail if the Special Court so directs.

Power to Joint Director

Section 50 of the Act gives the powers to the Director for issuing summons to any person for the production of documents and to give evidence etc., 

Clause 205 (f) of the Bill proposes to extend this power to Joint Director also.

Disclosure of information

Section 66(1) of the Act gives powers to the Director or any other authority by general or special order may direct any person to furnish any information to the officer or authority.

Clause 205(g) of the Bill proposes to insert sub-section (2) after sub-section (1).  The proposed section 66(2) provides that if the Director or other authority specified in sub-section (1) is of the opinion, on the basis of information or materials in his possession, that the provisions of any other law for the time being in force are contravened, then the Director or such other authority shall have the information with the concerned agency for necessary action.

Schedule to the Act

A schedule is attached to this section.  This schedule contains Part A and Part B.  Part A of the schedule contains 28 paragraphs indicating the offences under the various laws. 

Clause 205 (h) of the Bill proposes to insert a new paragraph 29 after paragraph 28 of Part A of the Schedule describing the offences under the Companies Act.  This para indicates the offence under Section 447 of the Companies Act, 2013 which provides punishment for fraud.