What is Money Laundering?
Money Laundering is the process of concealing the source of illicit property. It is the act of decorating illegal money with the veil of legitimate sources. Money laundering is the act of changing the source and nature of black (illegally earned money) into clean or white money. It is serious financial crime which is also know as white-collar crime.
White-collar crime is financial motivated but non-violent activities committed by businessmen and government personalities.
Features of Money Laundering
There are majorly 6 features of Money Laundering, They are –
- It is organized crime – There might be multiple parties involved in the crime.
- It might be cross border crime – Happen in two or more than two countries.
- Present of illicit property – There must be illegal property.
- It is white-collar crime – financial motivated but non-violent activities committed by businessmen and government personalities.
- It is predicated offense – Money laundering occur after other crime committed.
- It follows money laundering cycle –
- Placement – Process of scattering illicit money in different places as much as possible. Placement is usually done in those fields where there is no compulsion of showing income source.
- Layering – Process of creating multiple transaction to cover the illicit property.
- Integration – Process of mixing up money with legal/white/clean property.
Placement, Layering and Integration are also known as money laundering cycle.
What are Money Laundering and Terrorist Financing?
What is Money Laundering Offense?
- Act of converting, transferring property by any means knowing that it is proceed of crime.
- Act of concealing or changing the nature, source, ownership of property knowing that it is proceed of crime.
- Act of acquiring, using, processing illicit property knowing that it is proceed of crime.
- Conspire, abet, assist, facilitation and association in the money laundering activities.
What is Terrorist Financing Offense?
- Act of providing, collecting funds by knowing, willful, illegally, directly or indirectly with the intention of use in terrorist financing.
- Act of supporting, attempting in terrorist financing.
- Conspire, abet, assist, facilitation and association in the terrorist financing activities.
Provision for Money Laundering and Terrorist Financing Offense
For natural person
- Money laundering offense – Fine 2 times the crime amount and 2-10 years of imprisonment.
- Terrorist financing offense – Fine 5 times the crime amount and 3- 20 years of imprisonment.
- If amount is not clear – fine up to 1 crore and 3-20 years of imprisonment.
- For accomplice, half the punishment of main convicted.
- For higher authority, government official and civil servant, 10% more punishment tha general public.
- Confiscation of all the crime amount.
For natural person (organization)
- Fine 5 times the crime amount and temporary restriction in public procurement.
- Restriction to produce and purchase for specific period of time.
- Recovery of all the losses.
- Cancelation of license.
- Deregister the company.
What are Major Provisions of MLPA 2064
- Provision relating to reporting unit and reporting procedure- reporting units are those institution which are assigned to report their financial transactions. Such as financial and non-financial firms, professional and business (eg. BFIs, casinos, audit firms, real estate etc.).
- Act defines money laundering and terrorist financing offenses.
- Restrict to open the account in the name of fictitious person (imaginary person).
- Restrict to make anonymous transaction.
- Restrict to operate shell banking.
- Provision of customer due diligence. All the BFIs and other firm who carry out financial transaction need to use KYC to maintain customer due diligence.
- Institutional provision for the prevention of ML and TF such as of DMLI, Financial information unit, National coordination committee.
- Monitoring and record keeping of cross border corresponding banks.
- Provision of confiscation of suspicious property and visa/travel documents of a suspicious person at the time of investigation.
- Provision of punishment for natural person and artificial person for ML offense and TF offense.
- Free/open time limitation for ML and TF offense to case the file.
- Provision of rewarding information providers as 10 lakhs or 10% of the crime amount whichever is less.
- Provision of punishing the false FIR provider as up to 10000.
- Provision to prepare “National Risk Assessment Report” periodically.
- Provision of reporting suspicious transaction fo FIU promptly by reporting unit.
What are the Major Achievements of MLPA 2064
- Reporting unit.
- Compulsory use of KCY to maintain customer due diligence.
- Compulsory disclosure of source of income.
- Restriction of operate shell banking.
- Establishment and operation of Financial Information Unit.
- Establishment of Department of Money Laundering Investigation.
- Support to control capital flight.
- Compliance with other laws.
- Support to promote financial good governance.
- Support to control ML and TF.
What are the Weaknesses of MLP Act 2064
- Lacks in subject specialization investigation.
- Dilemma in functional juridiction.
- Complex provision.
- Maximum use of India currency.
- Political and crime nexus provisions.
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