Prevention of Money Laundering Act 2002 (PMLA)

 One of the most important Banking Laws and Practices in India is the Prevention of Money Laundering Act 2002. For a more comprehensive knowledge of banking laws and practices in India, the L.L.B. Colleges in India provide excellent courses and specializations in the field.

Let us take a look at some of the features of this Act.

What is money laundering?

Money laundering refers to owning, acquiring, and transferring money that is obtained through crime and illegal methods or knowingly entering into a transaction involving this kind of money. Money laundering is the conversion of money obtained by illegal means to money that appears to be gained from legitimate sources. Illegal or “dirty” money is put into a cycle of transactions so that it comes out as “clean” at the other end. 

Money laundering is the lifeblood of international drug trafficking and there are hundreds of billions of dollars in dirty money currently circling the globe. 

There are banking laws and regulations all over the world that target money laundering.

Regulations in India

Anyone who is directly or indirectly involved, knowingly or unknowingly is part of any activity connected with money obtained from crime is guilty of the offence of money laundering. The Narcotic Drugs and Psychotropic Substances Act, the Arms Act,  the Immoral Traffic (Prevention) Act, The Wildlife (Protection) Act, and the Prevention of Corruption Act, are all covered under the PMLA Act. 

Punishment is imprisonment for not less than three years and up to seven years, along with fines. Banking institutions are required to maintain records of transactions, the identity of clients, and other details due to this Act. Banks need to comply with the KYC norms without any kind of exceptions. 

Documents like Aadhar card and PAN Card, photo identity, source of income, declaration of multiple bank account details, expected income and banking activities, etc are recorded. Internal checking systems identify unusual banking transactions and if needed, action is taken. Thse steps need to be taken otherwise money launderers find it easy to open an account in a bank under a fake name. These steps prevent a bank from being used as part of a money laundering conspiracy.

Financial institutions, banks, stock brokers, etc have to report cash transactions of 10 lakh a month, and no-cash transactions of more than 1 crore a month to the Financial Intelligence Unit. 

Conclusion

Despite all these provisions, laws, and measures undertaken by financial institutions across the world, criminals come uop with new and ingenious ways to hide in plain sight, and defraud the system. The war on money laundering and drug trafficking can be termed as an “unwinnable” battle, yet the authorities must keep persisting and shutting down these operations. 

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