PMLA 2002: Section 3: The Offence of Money Laundering

 

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 ¹[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.

 ²[Explanation.--For the removal of doubts, it is hereby clarified that,--

 

(i) 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 one or more of the following processes or activities connected with proceeds of crime, namely:--

 

(a) Concealment; or

 

(b) Ppossession; or

 

(c) Acquisition; or

 

(d) Use; or

 

(e) Projecting as untainted property; or

 

(f) Claiming as untainted property,

 

in any manner whatsoever;

 

(ii) 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.]

 

[1. Subs. by Act 2 of 2013, s. 3, for "proceeds of crime and projecting" (w.e.f. 15-2-2013).

2.      Ins. by Act 23 of 2019, s. 193 (w.e.f. 1-8-2019).]

Interpreting the Schedule: Mapping Predicate Offences

The PMLA designates certain offences as predicate offences through the Schedule, consisting of three parts: Part A, Part B, and Part C. The Schedule has undergone amendments through various acts, expanding its scope and incorporating new offences. The intricate web of scheduled offences touches upon a wide spectrum of criminal activities, each carrying its significance.

a.       Part A enlists offences under various pieces of legislation, including the: Indian Penal Code, 1860 (“IPC”); Narcotics Drugs and Psychotropic Substances Act, 1985 (“NDPSA”); Explosive Substances Act, 1908; Unlawful Activities (Prevention) Act, 1967; Prevention of Corruption Act, 1988 (“PCA”); SEBI Act, 1992; Customs Act, 1962; Foreigners Act, 1946; Arms Act, 1959; Antiquities and Art Treasures Act, 1972; Copyright Act, 1957; Trademark Act, 1999; Information Technology Act, 2000; Companies Act, 2013 (“CA 2013”); Wild Life (Protection) Act, 1972; Immoral Traffic (Prevention) Act, 1956; Explosives Act, 1884; Customs Act, 1962; Bonded Labour System (Abolition) Act, 1976; Child Labour (Prohibition and Regulation) Act, 1986; Transplantation of Human Organs Act, 1994; Juvenile Justice (Care and Protection of Children) Act, 2000; Emigration Act, 1983; Passports Act, 1967; Foreigners Act, 1946; Biological Diversity Act, 2002; Protection of Plant Varieties and Farmers’ Rights Act, 2001; Environment Protection Act, 1986; Water (Prevention and Control of Pollution) Act, 1974; Air (Prevention and Control of Pollution) Act, 1981; and Suppression of Unlawful Acts against Safety of Maritime Navigation and Fixed Platforms on Continental Shelf Act, 2002.

b.      Part B offence (offence under Section 132 of the Customs Act, 1962), where the total value involved in such offence is INR 1 crore or more.

c.       Part C deals with transborder crimes and reflects the commitment to tackle money laundering across international boundaries.

Part A: This section enumerates offences under the Indian Penal Code (IPC) that are deemed as predicate offences. Ranging from criminal conspiracy, waging war against the government, counterfeiting, to offences related to extortion, robbery, forgery, cheating, and more, Part A delves into the core fabric of criminal activities.

Part B: Under this section, offences under the Customs Act become predicate offences if their value exceeds 1 crore rupees. This section focuses on violations related to customs duties and regulations.

Part C: This segment encompasses offences of cross-border implications, encompassing not only Part A's offences but also those against property under Chapter XVII of the Indian Penal Code. Additionally, the wilful attempt to evade taxes, penalties, or interest under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 also finds a place here.

 

With the removal of Rs5 laks limit on fines [2012],the difference between  Part A and Part B  has become insignificant.

Offence of false declaration, false documents, etc., under section 132 of the Customs Act, 1962 was included as Part B in the schedule to the Money-laundering Act[2015-16]

Significance and Implications of Predicate Offences

The essence of predicate offences in the context of PMLA lies in their pivotal role in the larger framework of money laundering. A predicate offence essentially serves as the foundation upon which money laundering is built. In essence, the illegal gains generated by a predicate offence become the "dirty money" that is subsequently laundered to make it appear legitimate. This complex interplay emphasizes the inseparable link between predicate offences and money laundering.

 

The precedent set in the legal landscape by the Kavitha G. Pillai vs. The Joint Director, Director of Enforcement, Government of India case emphasizes the significance of predicate offences. This case highlighted that a predicate offence is the underlying criminal activity that generates proceeds, which, when laundered, gives rise to the offence of money laundering. This alignment between predicate offences and money laundering emerges as an integral aspect in maintaining international standards and coherence within the legal framework.

 

Happy Reading

Those who read this, also read:

1. Obligations by RE under PMLA 2002

2. Objectives & Applicability: PMLA 2002

3. Reports by RE under PMLA 2002

4. Progress of Criminalisation: AML/CFT - India