India’s Anti-Money Laundering Laws: A Comprehensive Overview of Key Definitions and Provisions
The Prevention of Money-laundering Act, 2002, which came into effect on a date appointed by the Central Government, is an extensive legislation that aims to prevent money laundering throughout India. In this article, we provide a comprehensive overview of the key definitions and provisions of the Act.
Key Terms Defined in the Act
- Adjudicating Authority
- Appellate Tribunal
- Assistant Director
- attachment
- Authorised person
- Beneficial owner
- Chairperson
- Chit fund company
- Client
- Co-operative bank
- Corresponding law
- Dealer
- Deputy Director
- Director
- Financial institution
- Housing finance institution
- Intermediary
- Investigation
- Member
- Money-laundering
- Non-banking financial company
- Notification
- Offence of cross border implications
- Payment system
- Payment system operator
- Person
- Person carrying on designated business or profession
- Precious metal
- Precious stone
- Proceeds of crime
- Property
- Real estate agent
- Records
- Reporting entity
- Schedule
- Scheduled offence
- Special Court
- Transfer
- Value
Money-laundering Offence
The Act establishes the offence of money-laundering, which includes attempting to indulge, knowingly assisting, or being involved in any process or activity connected with the proceeds of crime, such as concealment, possession, acquisition, use, or projecting them as untainted property.
Obligations on Reporting Entities
To prevent money laundering, the Act imposes certain obligations on reporting entities, including:
- Verifying the identity of their clients and beneficial owners
- Maintaining records of transactions
- Furnishing information to the Director as required
- Reporting on measures taken to address instances of suspicious activity
Reporting entities include banking companies, financial institutions, intermediaries, and those carrying on designated businesses or professions.
Record Keeping and Reporting Requirements
Every reporting entity is required to maintain records of transactions, including information that can be used to reconstruct individual transactions. These records must be furnished to the Director as required. Additionally, reports on measures taken to address instances of suspicious activity must be maintained for a specific period.
Powers of the Director
The Act grants the Director wide-ranging powers, including the authority to:
- Make inquiries
- Summon records
- Impose penalties on reporting entities and their employees
Penalties for non-compliance can range from written warnings to monetary fines, not exceeding one lakh rupees for each failure.