India: The Prevention of Money Laundering (Amendment) Bill, 2011

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Salient features of the Amendment Bill
1. Amendments and insertions in the definition : Certain new definitions have been proposed to be incorporated in section 2 of the Act, provisions relating to which have been made in the Bill. They are namely- „beneficial owner‟, „client, dealer‟, „precious metal‟, „precious stone‟, „real estate agent‟ .

2. Changing the definition of offence of money-laundering : During Mutual Evaluation of India, it was pointed out by FATF that concealment, possession, acquisition and use of the proceeds of crime are not criminalized by PMLA. Article 6 of Palermo Convention requires that such activities should also to be criminalized. Hence Section 3 of PMLA has been proposed to include these activities under offence of money-laundering.

3. Punishment for money-laundering : FATF Recommendation requires that “legal persons” also (and not just “natural persons”) should be subject to effective, proportionate and dissuasive criminal, civil or administrative sanctions for money laundering. In PMLA the punishment prescribed in section 4 is rigorous imprisonment not less than 3 years but which may extend to 7 years and also fine which may extend to Rs 5 lakh. This amount appears disproportionately low, given the gravity of the offence of money laundering. It has therefore been proposed to amend Section 4 so as to provide for imposition of fine proportionate  to the gravity of the offence which will be determined by the court. The limit of Rs.5 lakh is therefore proposed to be deleted altogether. Further an explanation has been inserted in Section 70 that the prosecution or conviction of any legal juridical person shall not be contingent on the prosecution or conviction of any individual.

4. Amendment in provisions implemented by FIU :

(i) Sec 12 prescribes obligation of banks, Financial Institutions and intermediaries for verification of identity of clients, maintenance of records of transactions and identity and furnishing STRs, CTRs etc to the Financial Intelligence Unit-India (FIU-IND). The proposed legislation includes the following new reporting entities: Department of Posts, Commodity Exchanges and brokers, Stock Exchanges, Entities registered with PFRDA, entities who can be included when notified by the Government -Real estate agents, subregistrars (registering property), dealers in precious metals/stones, high value goods and safe deposit keepers.
(ii) Director, FIU-IND is proposed to be empowered by insertion of a new Section 12A in the PMLA so that he may call for records of transactions or any additional information that may be required for the purposes of the PMLA and also the power to make inquiries for non-compliance of reporting entities to the obligations cast upon them.

Direct link to the detailed report: here