India’s Anti-Money Laundering Landscape: A Look at Enforcement, Regulations, and Compliance

Published: 20/06/2023

Overview

India’s anti-money laundering (AML) framework is a crucial component of the country’s financial regulatory system. This article provides an in-depth analysis of the enforcement, regulatory requirements, and compliance aspects of India’s AML regime as outlined in the Prevention of Money Laundering Act, 2002 (PMLA).

Enforcement and Agencies

Crime of Money Laundering and Criminal Enforcement

The PMLA and rules framed under it form the backbone of India’s anti-money laundering efforts. The Directorate of Enforcement (ED) spearheads the national-level investigation and prosecution of money laundering crimes, with support from regulatory bodies like the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and Insurance Regulatory and Development Authority of India (IRDAI) (1.1).

Criminal Offenses and Tax Evasion as Predicate Offenses

Under the PMLA, money laundering arises from the proceeds of a criminal offense. Registration of a predicate offense is necessary for initiating most PMLA proceedings, although provisional attachment proceedings do not require one. Criminal offenses, including tax evasion, serve as predicate offenses for money laundering (1.2).

Extraterritorial Jurisdiction and Prosecution of Foreign Crimes

The PMLA grants Indian authorities extraterritorial jurisdiction for money laundering cases with cross-border implications. Authorities can confiscate assets in India or abroad where asset proceeds of crime cannot be forfeited (1.3).

Authorities for Investigating and Prosecuting Money Laundering Crimes

The ED primarily investigates and prosecutes money laundering offenses under the PMLA. The Financial IntelligenceUnit (FIU) is responsible for receiving, processing, analyzing, and disseminating financial transaction information to domestic and foreign enforcement agencies (1.4).

Liability and Penalties

Liability for Corporate Entities and Politically Exposed Persons (PEPs)

Both natural and legal persons can be prosecuted for money laundering offenses (1.5). Corporate entities and their officers or directors face fines for non-compliance.

Penalties for Money Laundering Offenses

Penalties for money laundering offenses consist of imprisonment for a minimum term of three and a maximum term of ten years, along with fines (1.6).

Statute of Limitations and Enforcement

Statute of Limitations

The PMLA does not specify a statute of limitations for money laundering offenses, and the provisions of the Code of Criminal Procedure, 1973 apply in their absence (1.7).

Enforcement and Confiscation

The ED can initiate attachment proceedings for assets directly linked to criminal activities and launch criminal proceedings for money laundering offenses (1.8).

Prosecution of Financial Institutions and Their Employees

Prosecution and Conviction

Despite investigations into their affairs, there have been no successful convictions of financial institutions or their employees for money laundering (1.9).

Regulatory Actions

Regulators like the RBI and SEBI can impose fines and revoke licenses for non-compliance with AML regulations (1.10).

Settlements and Non-Judicial Resolutions

Enforcement Priorities and Areas of Focus

The ED enforces PMLA provisions, investigating money laundering offenses while securing asset attachments and confiscations (1.11). Reporting Entities must ensure AML compliance through PMLA provisions and related guidelines from regulatory bodies. India is an active member of the Financial Action Task Force (FATF).