Money Laundering

Money laundering is an act of concealing the identity of illegally obtained money in order to make them look as they have been originated from a legal or legitimate source. This money mostly comes from illegal acts such as robbery, drug/human trafficking, dacoity, murder, corruption etc. According to section 3 of Prevention of Money Laundering Act ,2005, money laundering means:
"Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering."

History Of Acts related to Money Laundering

Criminal Law Amendment Ordinance of 1944: This ordinance doesn't covered all the crimes given under the Indian Penal Code but only crimes like cheating, breach of trust and corruption.

The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976: This act covers the penalty mainly for the properties of foreign exchange manipulators and smugglers who used to do the work illegally.

Narcotic Drugs and Psychotropic Substances Act, 1985: It provides for the penalty of property derived from or used in illegal traffic in narcotic drugs.

Prevention of Money-Laundering Act, 2002 (PMLA)

In the year 2002, the government of India enacted the Prevention of Money-Laundering Act which came into force after 4 years in 2005. This act gave power to the government authorities to confiscate any property, money or asset which is derived from any illegal source or through money laundering.

Here, the burden of proof lies on the accused i.e., he(accused) has to prove that the confiscated assets/money is from legitimate source.

According to Section 3 of the Prevention Of Money-Laundering Act, Money laundering means:
"Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering."

Though there are several issues regarding the Prevention Of Money-Laundering Act but the most common is the interpretation of the term proceeds of crime also called as Proceeds Of Crime.
Any kind of dealing related to Proceeds of Crime comes under as an offence in Prevention Of Money-Laundering Act. The offence of money laundering is said to be done only when the confiscated property comes under proceeds of crime.

The Enforcement Directorate (ED) is a primary enforcement officer who is responsible for determining the property that, whether it is POC or not. He can do so if he has "reason to belief" that the property is POC.

Section 2(u) of Prevention Of Money-Laundering Act, 2005 defines Proceeds Of Crime as:

"proceeds of crime, means and property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to the scheduled offence or the value of any such property".

In simple words, when , the property which is acquired by anyone by commenting any schedule offence, such property will be called as "Proceeds of Crime"

When the Finance Act of 2015 was introduced by the Government of India, it elaborated the definition of "proceeds of crime", as earlier offenders used to transfer the "Proceeds Of Crime" to another country and run away.

So after the amendment of 2015, the definition of "Proceeds Of Crime" changed to:

"proceeds of crime, means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to the 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]"

Later, another amendment was made in section 2(1)(u) of the Prevention Of Money-Laundering Act, where the word "or abroad" was added to the definition of "Proceeds Of Crime", hence changes it into:
"proceeds of crime, means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to the 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].

Which means that the property under proceeds of crime is not only that which is confiscated from schedule offences 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

The word or abroad was added after an infamous case of Punjab National Bank (PNB) scam, where the accused left the country.