The Prevention of Money Laundering Act, 2002 WIP

Date: 7th September 2021
VIRTUAL COACHING CLASSES

ORGANISED BY BOS (ACADEMIC), ICAI
FINAL LEVEL
PAPER 4: CORPORATE AND
ECONOMIC LAWS
Faculty: CA S SRIKANTH
23 September
2021
© The Institute of Chartered Accountants of India 1
4
THE PREVENTION OF
MONEY LAUNDERING
ACT, 2002
23 September 2021
© THE INSTITUTE OF CHARTERED
2
ACCOUNTANTS OF INDIA
WHAT IS MONEY LAUNDERING
It is a highly sophisticated act of covering up or camouflaging the

identity/origin of illegally obtained earnings so that they appear to have
been derived from lawful sources.
It is the process by which illegal funds and assets are converted into
legitimate funds and assets.
In other words it is basically the process of converting illegal/ black
money of a person in a legal or white money. It is the process used by
criminals’ to wash their “tainted” money to make it “clean.”
ILLEGAL / BLACK MONEY CONVERSION

LEGAL / WHITE
MONEY
23 September 2021
3
INTRODUCTION
OBJECTIVE OF THE ACT

PURPOSE
TO PREVENT AND PROVIDE FOR

CONTROL MONEY- CONFISCATION AND
LAUNDERING SEIZURE OF PROPERTY
MAIN INCIDENTAL
23 September 2021
4
DEFINITIONS
PROCEEDS OF CRIME (SEC. 2 (1) (u))
Any property derived or obtained, directly or indirectly, by any
person as a result of criminal activity relating to a scheduled
offence or the value of any such property or where such
property is taken or held outside the country, then the property
equivalent in value held within the country or abroad;
"proceeds of crime" include property not only derived or

obtained from the scheduled offence but also any property which
may directly or indirectly be derived or obtained as a result of any
criminal activity relatable to the scheduled offence;
23 September © THE INSTITUTE OF CHARTERED
2
2021
DEFINITIONS
PROPERTY ( SEC. 2 (1) (v))
Any property or assets of every description, whether
corporeal or incorporeal, movable or immovable,
tangible or intangible and includes deeds and
instruments evidencing title to, or interest in, such
property or assets, wherever located;
It includes property of any kind used in the commission
of an offence under this Act or any of the scheduled
offences

2
2021
DEFINITIONS
TRANSFER (SEC. 2 (1) (za)
Transfer includes sale, purchase, mortgage,

pledge, gift, loan or any other form of transfer of
right, title, possession or lien;

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2021
DEFINITIONS
SCHEDULED OFFENCE (SEC. 2 (1) (y)
(a) the offences specified under Part A of the Schedule;

or
(b) the offences specified under Part B of the Schedule if
the total value involved in such offences is one crore
rupees or more; or
(c) the offences specified under Part C of the Schedule.

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2021
SOURCES FROM WHERE ILLEGAL MONEY IS
GENERATED (PROCEEDS OF CRIME)
Drug Trafficking
Extortion Smuggling
Criminal
Activities Terrorist
Counterfeiting
& Forgery Acts
Gambling, Bribery &

Robbery, Corruption
Cheating
23 September 2021 © The Institute of Chartered 9
DEFINITIONS
PAYMENT SYSTEM (SEC. 2 (1) (rb) & (rc)
Payment system means a system that enables payment to be
effected between a payer and a beneficiary, involving clearing,
payment or settlement service or all of them.
Payment system includes the systems enabling credit card

operations, debit card operations, smart card operations, money
transfer operations or similar operations;
Payment system operator means a person who operates a
payment system and such person includes his overseas principal.

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2021
DEFINITION OF MONEY LAUNDERING
Money Laundering (Sec. 2 (1) (p)
MONEY-LAUNDERING HAS THE MEANING

ASSIGNED TO IT IN SECTION 3;

2
2021
DEFINITION OF MONEY LAUNDERING (SEC. 3)
with the proceeds of crime
ATTEMPTS TO
DIRECTLY
o INDULGE OR
• KNOWINGLY ASSISTS INCLUDING ITS
OR  concealment,
WHOSO • possession,
EVER
•KNOWINGLY IS A • acquisition or use
PARTY OR • and projecting or claiming it as
untainted property
•IS ACTUALLY INVOLVED
IN ANY
INDIRECTLY
PROCESS/ACTIVITY
CONNECTED
SHALL BE GUILTY OF THE
OFFENCE OF MONEY
LAUNDERING
23 September 2021
12
For the removal of doubts……
A PERSON SHALL BE GUILTY OF OFFENCE OF MONEY-
LAUNDERING IF SUCH PERSON IS FOUND TO HAVE
DIRECTLY OR INDIRECTLY
ATTEMPTS TO
INDULGE OR
• KNOWINGLY ASSISTS OR
•KNOWINGLY IS A PARTY OR
•IS ACTUALLY INVOLVED IN ANY PROCESS/ACTIVITY
CONNECTED
INCLUDING ITS
CONCEALMENT,
• POSSESSION,
• ACQUISITION OR USE
WITH THE PROCEEDS OF CRIME
• AND PROJECTING OR
CLAIMING IT AS UNTAINTED
PROPERTY
23 September 2021
13
For the removal of doubts……
THE PROCESS OR ACTIVITY CONNECTED WITH PROCEEDS

OF CRIME
IS A CONTINUING ACTIVITY
AND CONTINUES TILL SUCH TIME
A PERSON IS DIRECTLY OR INDIRECTLY
ENJOYING THE PROCEEDS OF CRIME
BY ITS CONCEALMENT OR POSSESSION OR ACQUISITION
OR USE OR PROJECTING IT AS UNTAINTED PROPERTY OR
CLAIMING IT AS UNTAINTED PROPERTY IN ANY MANNER
WHATSOEVER.
23 September 2021
14
SOME OF THE POPULAR WAYS THROUGH
WHICH MONEY IS LAUNDERED
False Export- Stock Markets
Import Invoices Agricultural
Products
Showing Popular
Loans Activities
Creating Bogus Property

23 September 2021
Companies © The Institute of Chartered Markets15
Stages in Money Laundering
• Illegal funds or assets are bought into the financial

Placement system.
• Use of multiple accounts, banks, intermediaries,

Layering corporations, countries etc. to disguise the origin.
• Funds are made available asapparently legitimate.

Integration

PLACEMENT
 Placement refers to the physical disposal of bulk cash proceeds
derived from illegal activity.
 This is the first step in the Money-Laundering process and the
ultimate aim of this phase is to remove the cash from the location
of acquisition soasto avoid detection from the authorities.
 This is achieved by investing criminal money into the legal
financial system by opening up a bank account in the name of
unknown individuals or organizations and depositing the money
in that account.
 It may involve use of smurfing techniques through which the
launderers make numerous deposits of amounts of money that are
small enough to avoid raising suspicion.

LAYERING
Layering is the movement of funds from

institution to institution to hide their origin.
It consists of putting funds, which have entered
the financial system, through series of financial
operations to mislead potential investigators and
to give the funds the appearance of having legal
origins.

INTEGRATION
It refers to the reinsertion of the laundered

proceeds back into the economy in such a way
that they re-enter the financial system as normal
business funds.
The funds may be reintroduced in the economy
through, for instance, the purchase of luxury
items or through investment in assets such as
shares in acompany or real estate.
PUNISHMENT FOR MONEY LAUNDERING (SEC. 4)
PUNISHMENT PUNISHMENT
OFFENCE (MINIMUM) (MAXIMUM)
OFFENCE OF THREE YEARS SEVEN YEARS

MONEY-LAUNDERING & &
FINE FINE
WHERE THE PROCEEDS OF CRIME

INVOLVED IN MONEY-LAUNDERING
RELATE TO ANY OFFENCE SPECIFIED THREE YEARS TEN YEARS
UNDER PARAGRAPH 2 OF PART A OF & &
THE SCHEDULE (I.E. OFFENCES FINE FINE
UNDER THE NARCOTIC DRUGS AND
PSYCHOTROPIC SUBSTANCES ACT,
1985)

2
2021
PRACTICAL PROBLEM
May 2018 [Q1(c)](4 Marks)
Mr. Honest, a notorious, was caught in possession of

Counterfeit Currency Notes, an offence specified under Part
A - Paragraph 1 of the Schedule of the Prevention of Money
Laundering Act, 2002. State the Punishment that can be
awarded to him under the above Act. Also identify the
punishment for the offence specified under Part A -
paragraph 2 of the Schedule of the Prevention of Money
Laundering Act, 2002.

2
2021
PRACTICAL PROBLEM
May 2019 [Q3(b)](2 Marks)
Mr. Dawood Moosa, a known smuggler was caught in

transfer of funds illegally exporting narcotic drugs from
India to some countries in Africa. State the maximum
punishment that can be awarded to him under Prevention
of Money Laundering Act, 2002.

2
2021
ATTACHMENT, ADJUDICATION AND CONFISCATION
ATTACHMENT (SEC. 2 (1) (d)
Attachment means
prohibition
of transfer, conversion, disposition or movement
of property
by an order issued under Chapter III;

2
2021
PROVISIONAL ATTACHMENT (SEC. 5)
The Director/ or other officer not below the rank of Deputy Director has reason
to believe (the reason for such belief to be recorded in writing), on the basis of
material in his possession, that—
(a) any person is in possession of any proceeds of crime; and
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in
any manner which may result in frustrating any proceedings relating to
confiscation of such proceeds of crime under this Chapter,
Such director/ any other officer may, by order in writing,

provisionally attach such property
for A PERIOD NOT EXCEEDING ONE HUNDRED AND EIGHTY DAYS from the date
of the order , in such manner as may be prescribed.

2
2021
REMEMBER!
POSSESION IS A CRUCIAL INGREDIENT IN ATTACHMENT.
IF THE PROCEEDS OF CRIME ARE NOT IN THE POSSESION OF THE
PERSON THEN ATTACHMENT IS NOT POSSIBLE!

2
2021
FOR COMPUTING 180 DAYS

EXCLUDE
PERIOD DURING WHICH PROCEEDINGS ARE STAYED BY A HIGH
COURT.
ADD
A FURTHER PERIOD NOT EXCEEDING THIRTY DAYS FROM THE
DATE OF ORDER OF VACATION OF SUCH STAY

2
2021
CONDITION FOR ATTACHMENT
• a report has been forwarded to a Magistrate

under section 173 of the Code of Criminal Procedure,
1973, or
• a complaint has been filed by a person
authorised to investigate the offence mentioned in that
Schedule, before a Magistrate or court for taking
cognizance of the scheduled offence, as the case may
be, or
• a similar report or complaint has been made or
filed under the corresponding law of any other country.

2
2021
ATTACHMENT OF ANY PROPERTY OF ANY PERSON
If the Director or any other officer not below the rank of Deputy
Director has reason to believe (the reasons for such belief to be
recorded in writing), on the basis of material in his possession,
that if such property involved in money-laundering is not
attached immediately under this Chapter, the non-attachment of
the property is likely to frustrate any proceeding under this Act.

2
2021
POST ATTACHMENT A COIPY OF THE ATTACHMENT ORDER SHALL BE
FORWARDED TO THE ADJUDICATING AUTHORITY BY THE DIRECTOR ETC.,
The Director or any other officer who provisionally attaches any property shall,
within A PERIOD OF THIRTY DAYS from such attachment, file a complaint stating
the facts of such attachment before the Adjudicating Authority (AA)
This section shall not prevent the person interested in the enjoyment of the
immovable property attached from such enjoyment.
“person interested”, in relation to any immovable property, includes all persons
claiming or entitled to claim any interest in the property.

2
2021
PRACTICAL PROBLEM
Nov 2019 [Q3(b)] (6 Marks)

Mr. 'B' purchased a flat out of the proceeds earned by Drug
Trafficking. The flat was attached by the Director, Director of
Enforcement after complying the procedures under Section 5 of
the Prevention of Money Laundering Act, 2002 (PMLA, 2002). Mr
‘B' got a stay from the High Court for any proceedings under the
said Act. The stay was subsequently vacated.
State the relevant provisions of the PMLA, 2002 for computing
the period of provisional attachment including extension, if any.
Whether Mr. 'C', son of Mr. 'B' can occupy the flat during the
period of provisional attachment?

2
2021
ADJUDICATION [SECTION 8]
AUTHORITIES UNDER THE ACT. -
There shall be the following classes of authorities for the

purposes of this Act, namely:
a) Director or Additional Director or Joint Director,
b) Deputy Director,
c) Assistant Director, and
d) Such other classesof officers asmay be appointed for the
purposesof thisAct.
23 September 2021
32
COMPLAINT UNDER S. 5 IN APPLICATION UNDER S. 17(4) AND 18(10) IN RESPECT
RESPECT OF PROV. ATTACHMENT OF SEIZED PROPERTY
if the Adjudicating Authority has reason to believe that any person has committed an
offence under section 3 or is in possession of proceeds of crime, it may serve a notice of not
less than 30 days on such person calling
• upon him to indicate THE FOLLOWING:
the sources of his income, earning or assets, out of which or by means of which he has
acquired the property attached under section 5(1), or, seized or frozen under section 17
or section 18,
• the evidence on which he relies, and
• other relevant information and particulars, and
• to show cause why all or any of such properties should not be declared to be the
properties involved in money-laundering and confiscated by the Central Government.

33
2021 ACCOUNTANTS OF INDIA
Beneficial Owner is entitled to notice from AA in respect of properties

held in the name of a Benami.
Every Joint holder of a property is entitled to notice from AA.
Beneficial Owner shall also be given an opportunity of being heard to
prove that the property is not involved in money-laundering.
23 September 2021
34
FINDING BY AA
The AA shall
(a) considering the reply, if any, to the notice issued;
(b) hearing the aggrieved person and the Director or any other
officer authorised by him in this behalf; and
(c) taking into account all relevant materials placed on record
before him,
THEREAFTER
It shall, by an order, record a finding whether all or any of the
properties referred to in the notice issued, are involved in
money-laundering.

2
2021
CONSEQUENCE OF FINDING BY AA
Such attachment, retention, or freezing of the seized or
frozen property or record, —
(a) continue during investigation, for a period not exceeding
THREE HUNDRED AND SIXTY-FIVE DAYS
or the pendency of the proceedings relating to any offence
under this Act before a court or under the corresponding
law of any other country, before the competent Foreign
court; and
(b) become final after an order of confiscation is passed
by the Special Court.
2
2021
CONSEQUENCE OF FINDING BY AA
The Director or any other officer authorized by him in this

behalf shall forthwith take possession of the property
attached under section 5 or frozen under section 17(1A).
If it is not practicable to take possession of a property

frozen, the order of confiscation shall have the same effect
as if the property had been taken possession of.

2
2021
CONFISCATION [SECTION 8 (5) & (6)]
FINDING BY SPECIAL COURT ON CONCLUSION OF TRIAL THAT
OFFENCE OF MONEY LAUNDERING OFFENCE OF MONEY LAUNDERING HAS

HAS BEEN COMMITTED NOT BEEN COMMITTED
ORDER THAT SUCH PROPERTY SHALL ORDER RELEASE OF SUCH PROPERTY TO

STAND CONFISCATED TO THE THE PERSON ENTITLED TO RECEIVE IT
CENTRAL GOVERNMENT.

2
2021
RESTORATION OF PROPERTY
Where a property stands confiscated to the Central Government under

section 8(5), the Special Court, in such manner as may be prescribed,
may also direct the Central Government to restore such confiscated
property or part thereof of a claimant with a legitimate interest in the
property, who may have suffered a quantifiable loss as a result of the
offence of money laundering:
Provided that the Special Court shall not consider such claim unless it is
satisfied that the claimant has acted in good faith and has suffered the
loss despite having taken all reasonable precautions and is not involved
in the offence of money laundering.
23 September 2021
39
Vesting of Property
VESTING OF PROPERTYinINCentral
CG
Government
[SECTION 9]
 Where an order of confiscation has been made in respect of any property of a
person, all the rights and title in such property shall vest absolutely in the
Central Government free from all encumbrances.
 The Special Court or the Adjudicating Authority shall attach or seize the
property only after giving an opportunity of being heard to the person
interested in the property attached or seizedor frozen.
 If any encumbrance on the property or lease-hold interest has been created
with a view to defeat the provisions of chapter-V , then it may, by order
declare such encumbrance or lease-hold interest to be void and thereupon the
aforesaid property shall vest in the Central Government free from such
encumbranceor lease-hold interest.
 Proviso given under this sec. says that any liability in respect of such
encumbranceswhich may beenforcedagainstany personshall not bedischarged
from suchperson.
PRACTICAL PROBLEM
Nov 2019 [Q6(C)](3 Marks)
7. Mr. 'K' used his car for smuggling cash and the Special
Court found on conclusion of trial that an offence of money
laundering was committed by Mr. 'K' under the provisions of
the Prevention of Money Laundering Act, 2002 (PMLA,
2002). The car was under hypothecation to a Nationalized
Bank for the car loan obtained. Referring to provisions of
the PMLA, 2002, examine whether the car can be
confiscated despite the existence of encumbrance?

2
2021
Management of properties confiscated under this Chapter
[Section 10]
The Central Government may, by order published in the official

gazette, appoint as many of its officers ( not below the rank of a joint
secretary to the government of India) as it thinks fit, to perform the
functions of Administrator.
The Administrator appointed shall receive and manage the property
in relation to which an order has been made in such manner and
subject to such conditions as may be prescribed.
The Administrator shall also take such measures, as the Central
Government may direct, to dispose of the property which is vested in
the Central Government u/s 9.
23 September 2021
42
Power regarding summons, production of documents and
evidence, etc. [Section 11]
The Adjudicating Authority shall have the same powers as are vested in a civil
court while trying a suit in respect of the following matters, namely:--
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a banking
company or a financial institution or a company, and examining him on oath;
(c) compelling the production of records;
(d) receiving evidence on affidavits;
(e) issuing commissions for examination of witnesses and documents; and
(f) any other matter which may be prescribed.
All the persons so summoned shall be bound to attend in person or through
authorised agents, and shall be bound to state the truth upon any subject
respecting which they are examined or make statements, and produce such
documents as may be required.
23 September 2021
43
OBLIGATION OF BANKING COMPANIES,
FINANCIAL INSTITUTIONS AND INTERMEDIARIES
AND OTHER
REPORTING ENTITIES
23 September 2021
44
DEFINITIONS
“Reporting Entity" means a banking company, financial institution, intermediary or a
person carrying on a designated business or profession; (Sec. 2 (1) (wa))
"person carrying on designated business or profession" means,
(i) a person carrying on activities for playing games of chance for cash or kind, and
includes such activities associated with casino;
[(ii) Inspector-General of Registration appointed under section 3 of the Registration
Act, 1908 (16 of 1908) as may be notified by the Central Government;]
(iii) real estate agent, as may be notified by the Central Government;
(iv) dealer in precious metals, precious stones and other high value goods, as may be
notified by the Central Government;
(v) person engaged in safekeeping and administration of cash and liquid securities on
behalf of other persons, as may be notified by the Central Government; or
(vi) person carrying on such other activities as the Central Government may, by
notification, so designate, from time to time;
23 September 2021
45
DUTIES OF REPORTING ENTITIES (SEC. 12)
(a) maintain a record of all transactions, including
information relating to transactions covered under
clause (b), in such manner as to enable it to
reconstruct individual transactions;
(b) furnish to the Director within such time as

may be prescribed, information relating to such
transactions, whether attempted or executed, the
nature and value of which may be prescribed;
(e) maintain record of documents evidencing

identity of its clients and beneficial owners as
well as account files and business correspondence
relating to its clients.
23 September 2021
46
DUTIES OF REPORTING ENTITIES (SEC. 12)
Every information maintained, furnished or verified, save as otherwise

provided under any law for the time being in force shall be kept
confidential.
23 September 2021
47
PERIOD OF MAINTENA NCE OF RECORDS
PARTICULARS PERIOD
Records maintained under Clause Five years from the date of

(a) and (b) with respect to transaction between a client and
transactions the reporting entity.
Records maintained under Clause Five years after the business

(e) with respect to clients relationship between a client and
the reporting entity has ended or
the account has been closed,
whichever is later.
23 September 2021
48
Enhanced due diligence [Section 12AA]
Every reporting entity shall,
(a) prior to the commencement of each specified transaction verify
the identity of the clients undertaking such specified transaction by
authentication under the Aadhaar (Targeted Delivery of Financial and
Other Subsidies, Benefits and Services) Act, 2016 in such manner and
subject to such conditions, as may be prescribed:
(b) take additional steps to examine the ownership and financial
position, including sources of funds of the client, in such manner as
may be prescribed;
(c) take additional steps as may be prescribed to record the purpose
behind conducting the specified transaction and the intended nature of
the relationship between the transaction parties.
23 September 2021
49
Enhanced due diligence [Section 12AA]
Where the client fails to fulfill the conditions the reporting
entity shall not allow the specified transaction to be carried
out.
Where any specified transaction or series of specified
transactions undertaken by a client is considered suspicious
or likely to involve proceeds of crime, the reporting entity
shall increase the future monitoring of the business
relationship with the client, including greater scrutiny or
transactions in such manner as may be prescribed.
The information obtained while applying the enhanced due
diligence measures shall be maintained for a period of five
years from the date of transaction between a client and the
reporting entity.
23 September 2021
50
Powers of director [Section 13]
• issue a warning in writing
1.
• direct to comply with specific instructions

2.
• Periodical reports may be asked

3.
• Impose penalty (10,000 to 1 Lakh per failure)

4.
23 September 2021
51
Hierarchy under the Prevention of Money Laundering Act,
2002
HIGH COURT
SPECIAL COURT
APPELLATE TRIBUNAL
ADJUDICATING
AUTHORITY
23 September 2021
52
Appeals to Appellate Tribunal (Sec. 26)
The director or any person aggrieved by an order made by the
Adjudicating Authority may prefer an appeal to the Appellate
Tribunal.
Any reporting entity aggrieved by any order of the Director
may also prefer an appeal to the Appellate Tribunal.
Every appeal shall be filed within a period of Forty five days
from the date on which a copy of the order made by the
Adjudicating Authority or Director is received.
Appellate Tribunal after giving an opportunity of being heard
entertain an appeal after the expiry of the said period of
Forty five days, only if it is satisfied that there was sufficient
cause for not filing it within that period.
23 September 2021
53
Appeals to Appellate Tribunal (Sec. 26)
On receipt of an appeal, the Appellate Tribunal may, after
giving the parties to the appeal an opportunity of being
heard, pass such orders thereon as it thinks fit, confirming,
modifying or setting aside the order appealed against.
The Appellate Tribunal shall send a copy of every order made
by it to the parties to the appeal and to the concerned
Adjudicating Authority or Director, as the case may be.
The Appellate Tribunal shall dispose of the appeal within Six
months from the date of filing of the appeal.
23 September 2021
54
Decision to be by majority [Section 38]
If the Members of a Bench consisting of two Members
differ in opinion on any point, they shall state the point or
points on which they differ, and make a reference to the
Chairman.
The Chairman shall either hear the point or points himself
or refer the case for hearing on such point or points by third
Member of the Appellate Tribunal
Such point or points shall be decided according to the
opinion of the majority of the Members of the Appellate
Tribunal who have heard the case, including those who first
heard it.
23 September 2021
55
Appeal to High Court [Section 42]
Any person aggrieved by any decision/ order of the
Appellate Tribunal
May file an appeal to the High Court within SIXTY days

from the date of communication of the decision / order
on question of law/fact
CONDONATION FOR DELAY IN FILING OF APPEAL

If The High Court, if satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said period
allow filing within a further period not exceeding sixty days
56
2021 ACCOUNTANTS OF INDIA
Offences to be Cognizable and Non-Bailable (Sec. 45)
 Offences under PMLA shall be cognizable and non-bailable.
As per Code of Criminal Procedure, cognizable offence is an
offence in which police officer may arrest without any
warrants or orders of the court.
Whereas non- cognizable offence is an offence in which a
police officer has no authority to arrest without warrants.
23 September 2021
57
Offences to be Cognizable and Non-Bailable (Sec. 45)
Person accused of an offence under this Act shall not be released on
bail or on his own bond unless-
(i) The Public Prosecutor has been given an opportunity to
oppose the application for such release and
(ii) Where the Public Prosecutor opposes the application,
the court is satisfied that there are reasonable grounds for believing
that he is not guilty of such offence and that he is not likely to
commit any offence while on bail.
Exceptions: In case of any person who is under the age of 16 years or is
a woman or is a sick or infirm or if accused either on his own or along
with other co-accused is accused of money-laundering a sum of less
than one crore rupees, may be released on bail, if the Special Court so
directs.
23 September 2021
58
Offence of cross border implications
“Offence of cross border implications”, means— (i) any conduct by a
person at a place outside India which constitutes an offence at that
place and which would have constituted an offence specified in Part A,
Part B or Part C of the Schedule, had it been committed in India and if
such person transfers in any manner the proceeds of such conduct or
part thereof to India; or
(ii) any offence specified in Part A, Part B or Part C of the Schedule
which has been committed in India and the proceeds of crime, or part
thereof have been transferred to a place outside India or any attempt
has been made to transfer the proceeds of crime, or part thereof from
India to a place outside India.
The Indian Government has Reciprocal Agreements for cooperation in
connection with these offences.
23 September 2021
59
PRACTICAL PROBLEM
Mr. Rohit has been in employment in Germany for past 3 years.

He was involved in a conduct which constituted an offence in
Germany. The conduct would have been considered an
offence in India as well if it had been committed in India. The
proceeds involved in the offence was Rs 60 lakhs. Mr. Rohit
attempted to remit Rs 50,00,000 out of the Rs 60,00,000 to India
but was not successful. The Government of India held this
offence as an Offence of Cross Border implications as per Sec
2(ra) of the Prevention of Money Laundering Act, 2002. State
whether the contention of Government of India is correct?

2
2021

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Date: 7th September 2021

VIRTUAL COACHING CLASSES

It is a highly sophisticated act of covering up or camouflaging the

ILLEGAL / BLACK MONEY CONVERSION

OBJECTIVE OF THE ACT

TO PREVENT AND PROVIDE FOR

"proceeds of crime" include property not only derived or

23 September © THE INSTITUTE OF CHARTERED

Transfer includes sale, purchase, mortgage,

23 September © THE INSTITUTE OF CHARTERED

(a) the offences specified under Part A of the Schedule;

23 September © THE INSTITUTE OF CHARTERED

Gambling, Bribery &

Payment system includes the systems enabling credit card

23 September © THE INSTITUTE OF CHARTERED

Money Laundering (Sec. 2 (1) (p)

MONEY-LAUNDERING HAS THE MEANING

23 September © THE INSTITUTE OF CHARTERED

THE PROCESS OR ACTIVITY CONNECTED WITH PROCEEDS

Creating Bogus Property

• Illegal funds or assets are bought into the financial

• Use of multiple accounts, banks, intermediaries,

• Funds are made available asapparently legitimate.

23 September 2021 © The Institute of Chartered 16

23 September 2021 © The Institute of Chartered 17

Layering is the movement of funds from

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It refers to the reinsertion of the laundered

OFFENCE (MINIMUM) (MAXIMUM)

OFFENCE OF THREE YEARS SEVEN YEARS

WHERE THE PROCEEDS OF CRIME

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May 2018 [Q1(c)](4 Marks)

Mr. Honest, a notorious, was caught in possession of

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May 2019 [Q3(b)](2 Marks)

Mr. Dawood Moosa, a known smuggler was caught in

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ATTACHMENT (SEC. 2 (1) (d)

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(a) any person is in possession of any proceeds of crime; and

Such director/ any other officer may, by order in writing,

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23 September © THE INSTITUTE OF CHARTERED

FOR COMPUTING 180 DAYS

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• a report has been forwarded to a Magistrate

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ATTACHMENT OF ANY PROPERTY OF ANY PERSON

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Nov 2019 [Q3(b)] (6 Marks)

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There shall be the following classes of authorities for the

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Beneficial Owner is entitled to notice from AA in respect of properties

23 September © THE INSTITUTE OF CHARTERED

The Director or any other officer authorized by him in this