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Key amendments proposed under the Prevention of Money-Laundering Act

February 1, 2018 6542 Views
Rachit Sharma
ACS, LL.B

The Finance Bill -2018 has proposed key changes to the Prevention of Money-Laundering Act, 2002. The amendment includes expanding scope of definition of 'proceeds of crime', Computing of period of 180 days for provisionally attachment of property, Provisions relating to Bail, Inclusion of section 447 - 'Punishment for fraud' under Companies Act, 2013 as scheduled offence.

The amendments proposed under the PMLA are discussed hereunder:

  1. Amendment to the Definition of 'Proceeds of Crime': Under the proposed definition of crime proceeds, if any property is held outside the country as a result of activities relating to scheduled offences, then, the property equivalent in value held within the country or abroad shall be treated as proceeds of crime. Earlier, only the property equivalent in value held within the country was treated as proceeds of crime

Existing definition of 'Proceeds of crime' u/s 2(1)(u) of the Prevention of Money Laundering Act, 2002-

"proceeds of crime" means 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

  2. Computing of period of 180 days for provisionally attachment of property: A new proviso has been inserted in the subsection (1) of the section 5[Attachment of property involved in money-laundering] providing that for the computing the period of 180 days for provisional attachment of the property, the period during which the proceedings under this section is stayed by the High Court shall be excluded and a further period not exceeding 30 days from the date of order of vacation of such stay order shall be counted.

  3. Proposal to tighten provisions relating to Bail: Amendment has been proposed to Section 45 which prescribes offences to be cognizable and non-bailable. Under the proposed amendment, No person accused of an offence under this Act shall be released on bail or on his own bond unless satisfying two conditions:-

   (i) the Public Prosecutor has been given an opportunity to oppose the application for such release;

  (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

Under the extant norms, those offence which are punishable for a term of imprisonment more than 3 years under part A of the Schedule are considered cognizable and non-bailable.

It is interesting to note that recently, in the case of Nikesh Tarachand Shah v Union of India [2017] 87 taxmann.com 257 (SC), The Supreme Court held that "Additional twin conditions provided in section 45(1) for release of accused on bail turn on its head from presumption of innocence of a person accused of offence and, violate articles 14 and 21 of Constitution." However, there has not been any amendment to the section 45 in line with the Apex Court's ruling.

  4. Bail in case of offences involving money laundering less than 1 crore: Fist provision to Section 45(1) has been amended to include a person who is accused on his own or along with other co-accused of money-laundering a sum of less than Rs. 1 Crore may be released on bail, if Special Court so directs. Currently there is no such monetary limit for categorizing offence as bailable or non-bailable.

  5. Disclosure of information by Director or any other authority: New sub section (2) has been proposed to insert in section 66 providing that Director or such other authority shall share the information with the concerned agency for necessary action if such Director or other authority specified is of the opinion [on the basis of information or material in his possession] that the provisions of any other law for the time being in force are contravened.

  6. Punishment for fraud under Companies Act, 2013 to be included in scheduled offence: Section 447 of the Company Act, 2013 which deals with punishment for fraud has been included in the list of Scheduled offence under the Prevention of Money Laundering Act, 2002. The implications of this proposed is that any offence of fraud committed by any person under section 477 Companies Act, 2013 shall also attract PMLA. The term any person can include Company's Director, Company Secretary, Key Managerial Person, or any person who commits fraud.

  7. The Bill also seeks to insert a proviso to sub-section (8) of section 8 of the Prevention of Money-Laundering Act, 2002. The proposed proviso empowers the Central Government to make rules for considering the claim of the claimant for the purposes of restoration of such properties during the trial of the case.

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