Company Found Guilty of Money Laundering, Faces Severe Penalties
A prominent company has been found guilty of violating the Prevention of Money Laundering Act (PMLA), a federal law aimed at preventing and combating money laundering.
Background
The Directorate of Enforcement in the Department of Revenue, Ministry of Finance launched an investigation into the company’s conduct and deemed it liable for punishment. The PMLA requires every banking company, financial institution, intermediary or person carrying on a designated business or profession (known as Reporting Entities) to:
- Verify the identity of their clients and beneficial owners
- Maintain records of all transactions and documents evidencing identity
- Periodically furnish information related to certain transactions
Investigation Findings
The investigation revealed that the company failed to conduct an enhanced client due diligence, as required under PMLA, and also failed to maintain adequate records of its transactions and clients. The Financial Intelligence Unit - India (FIU-IND) received information that the company was involved in suspicious financial activities, which led to the investigation.
Penalties
The Director of FIU-IND may impose penalties on the company, including:
- Issuing a warning
- Directing the company to comply with specific instructions
- Imposing a monetary penalty of up to INR 100,000 Additionally, the company’s officers and employees may also face punishment for their role in the contravention.
Appeal Process
The company has the right to appeal against any order made by the Director of FIU-IND before the appellate tribunal constituted under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976. If the company is dissatisfied with the decision of the appellate tribunal, it may file an appeal to the High Court within 60 days.
Special Court
The special court designated by the central government has been authorized to try and levy punishment for the offence of money laundering. The company’s guilty verdict serves as a warning to other businesses operating in India that failure to comply with PMLA regulations can result in severe consequences.