The Prevention of Money Laundering Act, 2002 – CA Final Law Study Material

The Prevention of Money Laundering Act, 2002 – CA Final Law Study Material is designed strictly as per the latest syllabus and exam pattern.

The Prevention of Money Laundering Act, 2002 – CA Final Law Study Material

Question 1.
“Money Laundering does not mean just siphoning of fund.” Comment on this statement explaining the significance and aim of the Prevention of Money Laundering Act, 2002. [May 13 (4 Marks)]
Answer:
Significance and Aim of PMLA, 2002:
Money Laundering is a moving of illegally acquired cash through financial systems so that it appears to be legally acquired. Thus, money laundering is not just the siphoning of fund but it is the conversion of money which is illegally obtained.

Prevention of Money Laundering Act, 2002 has been enacted with aim for combating channelising of money into illegal activities.
Significance and Aim of Prevention of Money Laundering Act, 2002: The preamble to the Act
provides that it aims
(a) to prevent money-laundering and
(b) to provide for confiscation of property derived from, or involved in, money-laundering and
(c) for matters connected therewith or incidental thereto.

The goal of a large number of criminal activities is to generate profit for an individual or a group. Money laundering is the processing of these criminal proceeds to disguise their illegal origin.

illegal arms sales, smuggling, and other organized crime, including drug trafficking and prostitution rings, can generate huge amounts of money. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to “legitimize” the ill-gotten gains through money laundering. The money so generated is tainted and is in the nature of ‘dirty money’. Money Laundering is the process of conversion of such proceeds of crime, the ‘dirty money’, to make it appear as ‘legitimate’ money.

In the PMLA, 2002, money laundering has been defined as “any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property”.

Question 2.
Explain the meaning of the term “Property” under the Prevention of Money Laundering Act, 2002. [May 18 – Old Syllabus (2 Marks)]
Answer:
Meaning of the Property:
As per Sec. 2(l)(v) of PMLA, 2002, the term property means 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.

Question 3.
Define the term, “Payment System” under the provisions of the Prevention of Money Laundering Act, 2002. [May 18 – New Syllabus (2 Marks)]
Answer:
Payment System:

As per Sec. 2(1)(rb) of PMLA, 2002, 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.
It includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar operations.

Question 4.
What is a Scheduled Offence under the Prevention of Money Laundering Act, 2002 (PMLA)? An Exporthouse has committed an offence under Section 135 of the Customs Act, 1962 by undervaluing the exported item. The declared value of the export item is Rs. 50 lakhs. Under which part of the Schedule of the PML Act, will this violation be classified as an offence? [Nov. 20 – Old Syllabus (3 Marks)]
Answer:
Scheduled Offence:
As per Sec. 2(1 )(y) of PMLA, 2002, Scheduled offence means:

(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 ₹ 1 Crore or more; or
(c) the offences specified under Part C of the Schedule.

As the total value involved in offence u/s 135 of the Customs Act, 1961 exceeds ₹ 1 Crore, this offence will fall under Part B of Schedule.

Question 5.
Explain the term “Offence of Money Laundering” within the meaning of the Prevention of Money Laundering Act, 2002. State the punishment for the offence of money laundering.
[May 12 (4 Marks)]
Or
Explain the meaning of the term “Money Laundering”. Z, 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. [May 14 (4 Marks), MTP-April 18, May 20, RTP-Nov.18]
Answer:
Meaning of Money Laundering:
As per Sec. 3 of the Prevention of Money Laundering Act, 2002, money laundering has been defined as “any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property”.

Punishment for Money laundering:

Section 4 of the Prevention of Money Laundering Act, 2002 provides for the punishment for Money-Laundering. In accordance with the provisions of Sec. 4, whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 7 years and shall also be liable to fine.

But where the proceeds of crime involved in money-laundering relate to any offence specified under paragraph 2 of Part A of the Schedule, the maximum punishment may extend to 10 years instead of 7 years.

Paragraph 2 of Part A of the Schedule to the Prevention of Money Laundering Act, 2002, covers Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985.

Question 6.
Raghu, a clerical staff in the Power Board, was assigned with the task of inspection of the file with the requisite documents of the applicants who have applied for the new connections. Mr. Rajiv Shah, for his new flat, applied for the power connection as per the required usage with all the supportive documents. Raghu, conveyed Mr. Rajiv Shah, that his file has been rejected due to discrepancies in the compliances.

Indirectly he communicated that, if required, he may clear his file and put into process. Mr. Rajiv Shah give him cash amount of ₹ 2 lacs to clear his file. State in the light of the above situation, the liability of Raghu and Mr. Rajiv Shah in the commission of an offence as per the Prevention of Money Laundering Act, 2002. [MTP-March 18, April 19]
Answer:
Punishment for Money laundering:

As per the section 3 of the Prevention of Money Laundering Act, 2002, offence of money laundering is said to be committed when 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.

In the given case, Mr. Rajiv Shah and Raghu, is knowingly a party to an offence of lending and accepting of a bribe to move the file of applicant, which was prima facie rejected by the authority.

Conclusion: Both Mr. Rajiv Shah and Raghu, are guilty of offence of money laundering. As per Sec. 4, whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 7 years and shall also be liable to fine. Accordingly, Mr. Rajiv Shah and Raghu are punishable in compliance with the above provisions.

Question 7.
Sohan Lai, a farmer, was found involved in embezzlement of opium cultivated by him. State the punishment that can be awarded to him under the Prevention of Money Laundering Act, 2002. [May 17 (4 Marks), RTP-April 18]
Or
Mr. Raja was arrested for Counterfeiting Two Thousand Rupees Notes. State the maximum punishment that can be awarded to him under Prevention of Money Laundering Act, 2002. [May 18 – Old Syllabus (4 Marks)]
Or
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. [May 18 – New Syllabus (4 Marks)]
Answer:
Punishment awarded under the Prevention of Money Laundering Act, 2002:
(a) Sec. 4 of PMLA, 2002 provides that whoever commits the offence of money-laundering shall be punishable with

rigorous imprisonment for a term which shall not be less than,3 years but which may extend to 7 years and
shall also be liable to fine.

(b) However, in case where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the person whoever commits shall be punishable with

rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 10 years and
shall also be liable to fine.

Note: Paragraph 2 of Part A of the Schedule to the Prevention of Money Laundering Act, 2002, covers Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985. Embezzlement of Opium is covered in this category hence imprisonment upto 10 years may be imposed.
Counterfeiting of Currency Notes being covered under Paragraph 1 of PART A of the Schedule, imprisonment from 3 years to 7 years may be imposed.

Question 8.
Ali was assigned by Mr. X to deliver counterfeit currency-notes to one of his close friends to Hongkong for which hefty commission was fixed by the Mr. X. Advise, whether the said act can be considered as money laundering. Who shall be liable for the commission of the money Laundering? [MTP-Aug. 18]
Answer:
Money Laundering:

As per Sec. 3 of the Prevention of Money Laundering Act, 2002, 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 itas untainted property shall be guilty of offence of money laundering.

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 where such property is taken or help outside the country, then the property equivalent in value held within the country or abroad

In the given case, Mr. X assigned All to deliver counterfeit currency notes to be given to his friends in Hongkong, which is an offence falling within the purview of scheduled offence in Part A of the Schedule to the PM LA, 2002.

Conclusion: All, Mr. X and his friends in Hongkong, all are said to be liable under the Prevention of Money Laundering Act.

Question 9.
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. [May 19- New Syllabus (2 Marks)]
Answer:
Punishment awarded under the Prevention of Money Laundering Act, 2002:

(a) Sec. 4 of PMLA, 2002 provides that whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 7 years and shall also be liable to fine.

(b) However, in case where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 Part A of the Schedule (Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985). the person whoever commits shall be punishable with rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 10 years and shall also be liable to fine.
Conclusion: Maximum punishment that can be awarded is rigorous imprisonment upto 10 years and fine.

Question 10.
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? [Nov. 19- New Syllabus (6 Marks), MTP Oct. 20]
Answer:
Attachment of property involved in money laundering:

Sec. 5 of PMLA, 2002 deals with the provisions related to attachment of property involved in money laundering. Accordingly, where the Director or any other officer not below the rank of Deputy Director authorised by the Director, has reason to believe (to be recorded in writing), 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, he may, by order in writing, provisionally attach such property for a period not exceeding 180 days from the date of the order, in prescribed manner.

For the purposes of computing the period of 180 days, 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.

Rights of persons interested in the property:

As per Sec. 5(4) of PMLA, 2002, this section shall not prevent the person interested in the enjoyment of the immovable property attached under this section, from such enjoyment.
Person Interested, in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.
Conclusion: Mr. ‘C’, son of Mr. ‘B’ can occupy the flat during the period of provisional attachment.

Question 11.
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? [Nov. 19 – New Syllabus (3 Marks), RTP-Nov. 20]
Answer:
Confiscation of property:

As per Sec. 8(5) of the PMLA, 2002, where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the money laundering or which has been used for commission of the offence of money laundering shall stand confiscated to the C.G.

As per Sec. 9 of the PMLA, 2002, where an order of confiscation has been made u/s 8 in respect of any property of a person, all the rights and title in such property shall vest absolutely in the C.G. free from all encumbrances.

In the present case, 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.

Conclusion: Applying the provisions of Secs. 8(5) and 9, it can be concluded that car can be confiscated
despite the existence of encumbrance.

Question 12.
Mr. X was found to be guilty of offence of money-laundering by being involved in an activity connected with proceeds of crime. Adjudicating Authority (AA) as per findings confirmed the attachment of the property and ordered for the investigation. The investigation was initiated by the AA on 1st February, 2019. The attachment of the property of Mr. X was still to be continued by 31st January 2020. Enumerate in the given situation the validity of the attachment period. [RTP-May 20]
Answer:
Order for attachment/retention of property etc.:
As per Sec. 8(3) of the PMLA, 2002, where the Adjudicating Authority decides that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property or retention of property or record seized or frozen u/s 17 or 18 and record a finding to that effect.

Period for attachment, retention, or freezing of the seized or frozen property or record:

Whereupon such attachment, retention, or freezing of the seized or frozen property or record, AA shall—

(a) continue during investigation, for a period not exceeding 365 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 court of criminal jurisdiction outside India, as the case may be; and

(b) become final after an order of confiscation is passed.
For the purposes of computing the period of 365 days, the period during which the investigation is stayed by any court under any law for the time being in force shall be excluded.

Conclusion: The attachment of the property of Mr. X to be continued by 31st January 2020 is valid as it is within 365 days from the date of order of the investigation by the Adjudicating Authority.

Question 13.
Mr. Ramesh Kulkarni conducts private tuition classes from his residence. It was alleged by the Enforcement Directorate that Mr. Kulkarni has under reported his income and collected income in tax and used the proceeds to purchase a house property in Marol, Mumbai. The ED officers through written orders provisionally attached the properties on suspicion of it being derived from the proceeds of crime. Comment on the validity of the provisional attachment on the order issued by the ED officers. [RTP-Nov. 20]
Answer:
Provisional Attachment:

As per Sec. 5(5) of the PMLA, 2002, the Director or any other officer who provisionally attaches any property shall, within a period of 30 days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.

As per Sec. 8(4) of the PMLA, 2002, where the provisional order of attachment made u/s 5 has been confirmed, the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached u/s 5, in prescribed manner.

Conclusion : Director is required to file a petition with the Adjudicating Authority within 30 days of attachment. After order of attachment is confirmed; the Director take possession of the attached property.

Question 14.
Enumerate the obligations of banking companies under the Prevention of Money Laundering Act, 2002. [Nov. 08 (6 Marks)]
Or
The Banking Companies, Financial Institutions and Intermediaries of securities market are under some obligations under the Prevention of Money Laundering Act, 2002. State, in brief, these obligations. [Nov. 11 (4 Marks)]
Answer:
Obligation of Banking Companies, Financial institutions etc:
Secs. 11A and 12 of the Prevention of Money Laundering Act, 2002 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries of securities market. Such Obligations are:

(i) Verification of identity by reporting entity (Sec. 11A):
Every reporting entity shall verify the identity of its clients and the beneficial owner, by—
(a) authentication under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 if the reporting entity is a banking company; or
(b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016; or
(c) use of passport issued u/s 4 of the Passports Act, 1967; or
(d) use of any other officially valid document or modes of identification as may be notified by the Central Government in this behalf:

(ii) Maintenance of records (Sec. 12): Every reporting entity shall –
(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;
(c) Maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients.

(iii) Confidentiality: Every information maintained, furnished or verified, save as otherwise provided under any law for the time being in force shall be kept confidential.

(iv) Maintenance of records: The records referred to in clause (a) shall be maintained for a period of 5 years from the date of transaction between a client and the reporting entity. The records referred to in clause (e) shall be maintained for a period of 5 years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later.

Question 15.
PTM Limited, a banking company maintained the record of all transactions for a period of 5 years from the date of cessation of the transactions between the clients and the company. Decide whether the Company has fulfilled its obligation under the provisions of the Prevention of Money Laundering Act, 2002. [Nov. 13 (4 Marks)]
Answer:
Obligation of Banking Companies etc.:
Sec. 12 of the Prevention of Money Laundering Act, 2002 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries of securities market. Such Obligations are:

(1) Maintenance of records: Every reporting entity shall –
(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;
(c) maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients.

(2) Maintenance of records: The records referred to in clause (a) shall be maintained for a period of 5 years from the date of transaction between a client and the reporting entity. The records referred to in clause (e) shall be maintained for a period of 5 years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later.

In the given case, PTM Limited, a banking company maintained the record of all transactions for a period of 5 years from the date of cessation of the transactions between the clients and the company.
Conclusion: The company has fulfilled its obligations as records are maintained for 5 years as required by law.

Question 16.
“Manav Kalyan”, a charitable organization, opened a current account with M/s ABZ Bank on 1st July, 2015. This account was closed on 30th June, 2019. Referring to the obligations of banking companies under the Prevention of Money Laundering Act, 2002, specify the period upto which the said bank has to maintain records elating to the account of “Manav Kalyan”. [Nov. 17 (4 Marks), MTP-April 18]
Answer:
Obligation of Banking Companies etc.:
Sec. 12 of the Prevention of Money Laundering Act, 2002 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries of securities market. Such Obligations are:

In the given case, Manav Kalyan, a charitable organization opened current account with ABZ Bank on 1st July, 2015 and closed the account on 30th June 2019.

As per the above provisions, ABZ Bank shall maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients for a period of five years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later.
Conclusion: ABZ Bank has to maintain the records relating to the account of “Manav Kalyan” till 30th June, 2024.

Question 17.
Who is a “Reporting Entity” under the Prevention of Money Laundering Act, 2002 and what are the obligations cast on them under Sec. 12 of the Act? The Bank account of Amar has been attached by the order of an Assistant Director for a period of 180 days. The lawyer of Amar objected to this attachment. Decide the validity of the attachment. [May 19 – New Syllabus (3 Marks)]
Answer:
Reporting Authority:
As per Sec. 2 (1) (wa) of PMLA, 2002, Reporting entity means a banking company, financial institution, intermediary or a person carrying on a designated business or profession.

Obligations cast over Reporting Entity:

Obligation of Banking Companies, Financial institutions etc:
Secs. 11A and 12 of the Prevention of Money Laundering Act, 2002 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries of securities market. Such Obligations are:

(i) Verification of identity by reporting entity (Sec. 11A):
Every reporting entity shall verify the identity of its clients and the beneficial owner, by-

(a) authentication under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 if the reporting entity is a banking company; or
(b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016; or
(c) use of passport issued u/s 4 of the Passports Act, 1967; or
(d) use of any other officially valid document or modes of identification as may be notified by the Central Government in this behalf:

(iii) Confidentiality: Every information maintained, furnished or verified, save as otherwise provided under any law for the time being in force shall be kept confidential.

Attachment of property involved in money laundering: As per Sec. 5 of PMLA, 2002, where the Director or any other officer not below the rank of Deputy Director authorised by the Director, has reason to believe (to be recorded in writing), 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,
he may, by order in writing, provisionally attach such property for a period not exceeding 180 days from the date of the order, in prescribed manner.

Conclusion: Order of Attachment is not valid as order can be made only by Director or any other officer not below the rank of Deputy Director, authorised by Director.

Question 18.
The Adjudicating Authority appointed under the Prevention of Money Laundering Act, 2002 issued an order attaching certain properties of XYZ Limited alleged to be involved in money laundering or a specified period. The company aggrieved by the order of the Adjudicating Authority seeks your advice about the remedy that is available under the Act. Advise explaining the relevant provisions of the Prevention of Money Laundering Act, 2002. [May 16 (4 Marks), MTP-March 18, RTP-April 18, MTP-Oct. 18, RTP – May 19, MTP-Oct. 20]
Or
The Adjudicating Authority appointed the Prevention of Money Laundering Act, 2002 issued an order attaching certain properties of SVG Limited, alleging to be involved in money laundering for a specified period. The Company, aggrieved by the Order of the Adjudicating Authority, seeks your advice about the remedy that is available under the Act. Analyse and apply the relevant provisions of the Act in relation to the above situation and advise. [May 19 – Old Syllabus (4 Marks), MTP-Oct. 19]
Or
The Adjudicating Authority appointed under the Prevention of Money Laundering Act, 2002, issued an order attaching certain properties of Green Resorts Limited alleged to be involved in money laundering for a specified period. Referring to the provisions of Prevention of Money Laundering Act, 2002, advise the Company about the remedy that is available under the Act. Also state further relief available to the company to recover the attached property in case it failed in the first instance. [Nov. 19 – Old Syllabus (6 Marks)]
Answer:
Appeal to Appellate Tribunal:

Sec. 26 of the Prevention of Money Laundering Act, 2002 deals with the rights of a person to make an appeal to the Appellate Tribunal. Accordingly, any person aggrieved by an order made by the Adjudicating Authority may prefer an appeal to the Appellate Tribunal within a period of 45 days from the date on which a copy of the order is received by him.

The appeal shall be in such form and be accompanied by such fee as may be prescribed. The Appellate Tribunal may extend the period if it is satisfied that there was sufficient cause for not filing it within the period of 45 days.
The Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard, pass such order as it thinks fit, confirming, modifying or setting aside the order appealed against.

Appeal to High Court:
As per Sec. 42 any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within 60 days from the date of communication of the order of the Appellate Tribunal.
Conclusion: Company may prefer an appeal to Appellate Tribunal in the first instance.

Question 19.
An Appellate Tribunal consisting of two members was formed to bear the appeal preferred by Mr. Hari, being aggrieved by an order made by the Adjudicating Authority under the Prevention of Money Laundering Act, 2002. Two members of the Bench differ in their opinion on a particular point referred in the appeal.
Explain the next course of action to be followed by the Bench members under the said Act. [Nov. 18-New Syllabus (2 Marks)]
Answer:
Decisions of Appellate Tribunal:
As per Section 38 of the Prevention of Money Laundering Act, 2002, if the Members of a Bench consisting of 2 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 who shall either hear the point or points himself or refer the case for hearing on such point or points by 3rd Member of the Appellate Tribunal and 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.
Hence the next course of action will be to state the points of differences to the chairman, who will act in accordance with the Section 38.

Question 20.
The Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (the Act) made an order under Section 8(3), confirming the provisional attachment of property made under Section 5(1) of the said Act. Mr. Rana, owner of the attached property, aggrieved by the order, wanted to make an appeal to the Appellate Tribunal.

However, before making an appeal Mr. Rana is adjudicated as an insolvent. Explain, with reference to the relevant provisions of the said Act, whether appeal could be made to Appellate Tribunal in the present case? [Nov. 20 – New Syllabus (3 Marks)]
Answer:
Appeal to Appellate Tribunal:

The appeal shall be in such form and be accompanied by such fee as may be prescribed. The Appellate Tribunal may extend the period if it is satisfied that there was sufficient cause for not filing it within the period of 45 days.

The Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard, pass such order as it thinks fit, confirming, modifying or setting aside the order appealed against.
Conclusion: Appeal can be lodged within 45 days from the date on which a copy of the order made by the Adjudicating Authority.

Question 21.
How a trial under the Prevention of Money Laundering Act, 2002 is conducted in Special Courts? (May 15 (4 Marks))
Answer:
Conduct of a trial in Special Court:
Sec. 44 of the Prevention of Money Laundering Act, 2002 deals with the provisions relating to offences triable by Special Courts. Accordingly, notwithstanding anything contained in the Code of Criminal Procedure, 1973:

(a) an offence punishable u/s 4 and any scheduled offence connected to the offence under that section shall be triable by the Special Court constituted for the area in which the offence has been committed; or

(b) a Special Court may, upon a complaint made by an authority authorised in this behalf under this Act take cognizance of offence u/s 3, without the accused being committed to it for trial;

Provided that after conclusion of investigation, if no offence of money laundering is made out requiring filing of such complaint, the said authority shall submit a closure report before the Special Court; or

(c) if the court which has taken cognizance of the scheduled offence is other than the Special Court which has taken cognizance of the complaint of the offence of money-laundering under subclause (b), it shall, on an application by the authority authorised to file a complaint under this Act, commit the case relating to the scheduled offence to the Special Court and the Special Court shall, on receipt of such case proceed to deal with it from the stage at which it is committed; or

(d) a Special Court while trying the scheduled offence or the offence of money-laundering shall hold trial in accordance with the provisions of the Code of Criminal Procedure, 1973, as it applies to a trial before a Court of Session.

Question 22.
Mr. Gambler, a 16 year old had been arrested for a cognizable and non-bailable offence punishable for a term of imprisonment for more than 3 years under the Prevention of Money Laundering Act, 2002. Advise, as to how can he be released on bad m this case? [Nov. 12, Nov. 15 (4 Marks) MTP-Oct. 18, May 20]
Or
Mr. Robert has been arrested for a cognizable and non-bailable offence under Part A of the Schedule punishable for a term of imprisonment for more than three years under the Prevention of Money Laundering Act, 2002. He seeks your advice as to how can he be released on bail. Advise him. [May 19 – New Syllabus (4 Marks)]
Answer:
Granting Bail in case of cognizable and non-bailable offence:

As per Sec. 45 of the Money Laundering Act, 2 002, the offences under the Act shall be cognizable and non-bailable. It is provided that notwithstanding anything contained in the Code of Criminal Procedure, 1973, no person accused of an offence under this Act shall be released on bail or on his,own bond unless:
(a) The public Prosecutor has been given an opportunity to oppose the application for such release and
(b) 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.

In case of any person who is under the age of 16 years or in case of a woman or in case of a sick or infirm person or is accused either on his own or along with other co-accused of money laundering a sum of less than ₹ 1 cr, the Special Court can direct the release of such person on bail.

In the instant case, Mr. Gambler/Mr. Robert has been arrested for a cognizable and non-bailable offence punishable for a term of imprisonment for more than 3 years under the Prevention of Money Laundering Act, 2002.
Conclusion: Mr. Gambler/Mr. Robert can be released on bail in accordance with the provisions of Sec. 45 as stated above.

Question 23.
Ms. Farida with an intent to deceive the public, personated herself as a public servant and misused his position and gained monetary benefits. She was arrested for the said cognizable and non-bailable offence for a term of Imprisonment for 2 years and with fine. Discuss in the light of the Prevention of Money Laundering Act, 2002, liability of Ms. Farida in the said situation. [MTP-Aug. 18]
Answer:
Offences under PMLA:

As per Sec. 45 of the Money Laundering Act, 2002, the offences under the Act shall be cognizable and non-bailable. It is provided that notwithstanding anything contained in the Code of Criminal Procedure, 1973, no person accused of an offence punishable for a term of imprisonment of more than 3 years under Part A of the Schedule shall be released on bail or on his own bond except on the conditions stated therein the said section.

In the instant case, offence as stated in the question is out of the purview of the predicate offence as given in the Schedule under the PMLA, 2002.
Conclusion: Ms. Farida shall not be liable for liable for arrest under the PMLA. Ms. Farida shall be liable for personating herself as a public servant in other law.

Question 24.
Mr. Manoranjan, an officer investigating a case of money laundering, is of the view that important evidence relating to the case is available in a foreign country (Contracting State) with which agreement for exchange of information has already been entered into.

Advise Mr. Manoranjan, referring to the provisions of the Prevention of Money Laundering Act,2002, about the procedure to be followed for collecting such evidence. How a trial under the Prevention of Money Laundering Act, 2002 is conducted in Special Courts? [May 19 – Old Syllabus (4 Marks)]
Answer:
Procedure to be followed for collecting such evidence under reciprocal arrangement:

As per Sec. 57 of PMLA, 2002, if, in the course of an investigation into an offence or other proceedings under this Act, an application is made to a Special Court by the Investigating Officer that any evidence is required in connection with investigation and he is of the opinion that such evidence may be available in any place in a contracting State, and the Special Court, on being satisfied that such evidence is required in connection with the investigation into an offence or proceedings under this Act, may issue a letter of request to a court or an authority in the contracting State competent to deal with such request to:

examine facts and circumstances of the case,
‘take such steps as the Special Court may specify in such letter of request, and
forward all the evidence so taken or collected to the Special Court issuing such letter of request.
- The letter of request shall be transmitted in such manner as the C.G. may specify in this behalf.
- Every statement recorded or document of thing received shall be deemed to be the evidence collected during the course of investigation.

Trial in Special Courts: Sec. 44 of PMLA, 2002 provides that notwithstanding anything contained in the Code of Criminal Procedure, 1973:

(b) a Special Court may, upon a complaint made by an authority authorised in this behalf under this Act take cognizance of offence u/s 3, without the accused being committed to it for trial; or

Question 25.
Mr. Narayan wilfully gives false information, refuses to give evidence and to sign statement made by him in the course of proceedings under the provisions of Prevention of Money Laundering Act, 2002. Explain the penal provisions and mode of recovery of fine or penalty enumerated under the said Act. [Nov. 18-New Syllabus (4 Marks)]
Answer:
Penal provisions under the Prevention of Money Laundering Act, 2002:
Sec.63 of the Prevention of Money Laundering Act, 2002 deals with the penalty provisions. Accordingly:

Any person wilfully and maliciously give false information shall on conviction be liable for imprisonment for a term which may extend to 2 or with fine which may extend to ₹ 50,000 or both.
If any person
- refuses to sign any statement made by him in the course of any proceedings under this Act, which an authority may legally require to sign; or
- to whom a summon is issued either to attend to give evidence, omits to attend, he shall pay, by way of penalty, a sum which shall not be less than ₹ 500 but which may extend to ₹ 10,000 for each such default or failure.

Recovery of Fine or Penalty:
Sec. 69 of the Prevention of Money Laundering Act, 2002 deals with the provisions relating to recovery of fine or pen alty.

Accordingly, where any fine or penalty imposed on any person u/s 13 or 63 is not paid within 6 months from the day of imposition of fine or penalty, the Director or any other officer authorised by him in this behalf may proceed to recover the amount from the said person in the same manner as prescribed in Schedule 11 of the Income-tax Act, 1961 for the recovery of arrears and he or any officer authorised by him in this behalf shall have all the powers of the Tax Recovery Officer mentioned in the said Schedule for the said purpose.

Question 26.
Mr. JJ was found guilty by the authorities under Section 13 of the Prevention of Money Laundering Act, 2002 and monetary penalty was levied on Mr.JJ. But Mr.JJ could not pay the penalty amount. What is the mechanism to recover the fine or monetary penalty imposed on any person by the authorities under Section 13 or section 63 of the Prevention of Money Laundering Act, 2002? [Nov. 18-Old Syllabus (4 Marks)]
Answer:
Recovery of Fine or Penalty:
Sec. 69 of the Prevention of Money Laundering Act, 2002 deals with the provisions relating to recovery of fine or penalty.

Accordingly, where any fine or penalty imposed on any person u/s 13 or 63 is not paid within 6 months from the day of imposition of fine or penalty, the Director or any other officer authorised by him in this behalf may proceed to recover the amount from the said person in the same manner as prescribed in Schedule II of the Income-tax Act, 1961 for the recovery of arrears and he or any officer authorised by him in this behalf shall have all the powers of the Tax Recovery Officer mentioned in the said Schedule for the said purpose.

Question 27.
What are the possible actions which can be taken against persons/properties involved in Money Laundering? [MTP-April 19, Oct. 19]
Answer:
Possible actions which can be taken against persons/properties involved in Money Laundering:
(a) As per Sec. 4, persons found guilty of an offence of Money Laundering are punishable with imprisonment for a term which shall not be less than 3 years but may extend up to 7 years and shall also be liable to fine.

(b) As per Sec. 4, when the scheduled offence committed is under the Narcotics and Psychotropic substances Act, 1985 the punishment shall be imprisonment for a term which shall not be less than 3 years but which may extend up to 10 years and shall also be liable to fine.

(c) As per Sec. 5, property of accused may be attached. As per Secs. 17 and 18, property and records may be seized/freezed. Property also includes property of any kind used in the commission of an offence under PMLA, 2002 or any of the scheduled offences.

(d) The prosecution or conviction of any legal juridical person is not contingent on the prosecution or conviction of any individual.

Question 28.
Three Companies belong to Gopal group based out of Bengaluru. Each of the three companies are into businesses as under;

Company A	Chit Funds
Company B	Housing Finance
Company C	Payment System Operator

(i) Who is a “beneficial owner” under the Prevention of Money Laundering Act, 2002?
(ii) Whether each of the above businesses fall within the definition of “Financial Institution”?
(iii) What are the obligations of a financial institution regarding maintenance of records?
(iv) Whether a Civil Court have jurisdiction to entertain any suit or proceeding in respect of any matter which the Appellate Tribunal is empowered by or under this Act?
(v) Can an injunction be granted by any Court or other Authority in respect of any action taken or to be taken in pursuance of any power conferred on the Appellate Tribunal? [Nov. 20 – New Syllabus (6 Marks)
Answer:
Misc. Provisions of PMLA, 2002

(i) Beneficial Owner: Beneficial owner means an individual who ultimately owns or controls a client of a reporting entity or the person on whose behalf a transaction is being conducted and includes a person who exercises ultimate effective control over a juridical person.

(ii) Financial Institution: Financial institution includes a chit fund company, a housing finance institution, an authorised person, a payment system operator, a non-banking financial company and the Department of Posts in the Government of India.
Hence, all business as specified in the questions falls within the definition of financial institution.

(iii) Obligations of financial institution regarding maintenance of records:

(iii) Confidentiality: Every information maintained, furnished or verified, save as otherwise provided under any law for the time being in force shall be kept confidential.

(iv) As per Sec. 41 of PMLA, 2002, no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Director, an Adjudicating Authority or the Appellate Tribunal is empowered by or under this Act to determine.

(v) As per Sec. 41 of PMLA, 2002, no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.

The Prevention of Money Laundering Act, 2002 – CA Final Law Study Material

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