Government Makes Anti Money-Laundering Law Stricter

Government Makes Anti Money-Laundering Law Stricter

Government Makes Anti Money-Laundering Law Stricter

In a move to tighten anti money-laundering law, the government has widened the definition of 'proceeds of crime' and has amended the Finance Bill, 2019. According to the new amendments-

"A person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved" in "concealment, or possession, or acquisition, or use, or projecting as untainted property or claiming as untainted property."

The government introduced eight amendments to the Prevention of Money Laundering Act (PMLA), 2002, out of which six are explanations to the existing clauses. Also, the "proceeds of crime" under PMLA would not only include property obtained from the PMLA offence but also any property which may "directly or indirectly" be obtained as a result of any criminal activity related to the scheduled offence on the basis of which a money laundering case is filed.

Further, entities would be accused of money laundering when they conceal, possess, acquire, use, and project or claim a property as untainted. Finance Minister Sitharaman further added-

"A new proviso is being added to only make sure that where a case exists in one court and the hearings are going on there, and where in a different court there could be proceedings happening, this two cannot be clubbed together and treated as one".

Earlier, the Delhi High Court (HC) has ruled that the money laundering law prevails over the bankruptcy Act and the insolvency code when it comes to attachment of properties obtained as "proceeds of crime".

The court said the Prevention of Money Laundering Act (PMLA), the Recovery of Debt and Bankruptcy Act (RDBA), the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFAESI Act) and the Insolvency and Bankruptcy Code (IBC) must co-exist and be enforced in harmony with the PMLA.

The court passed the verdict on a batch of appeals by the Enforcement Directorate (ED) against the orders of the PMLA appellate tribunal on the pleas of various banks. The ED had challenged the tribunal's orders on the issue of third-party rights over a property attached by the agency.

The tribunal had held that third parties, banks in this case, which have legitimately created rights such as a charge, lien or other encumbrances, have a superior claim over such properties.

The high court set aside the appellate tribunal's order, and held that the objective of the PMLA being distinct from the purpose of the RDBA, the SARFAESI Act and the IBC, the three do not prevail over the former.

The court also said that by virtue of Section 71, the PMLA has the overriding effect over other existing laws in the matter of dealing with "money-laundering" and "proceeds of crime".

The HC said the empowered enforcement officer had the authority to attach not only a "tainted property" which was acquired or obtained directly or indirectly from proceeds of criminal activity but also any other asset or property of an equivalent value that belonged to the offender in a money laundering case. 

The court added that if the offender objected to the attachment on the ground that the property was not acquired or obtained from criminal activity, the burden of proving facts in support of such claim was to be discharged by them.

With inputs from Housing News

Last Updated: Fri Jul 19 2019

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