Section 1 - Short title, extent and commencement

(a) the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, to which India is a party, calls for prevention of laundering of proceeds of drug crimes and other connected activities and confiscation of proceeds derived from such offence.

(b) the Basle Statement of Principles, enunciated in 1989, outlined basic policies and procedures that banks should follow in order to assist the law enforcement agencies in tackling the problem of money-laundering.

(c) the Financial Action Task Force established at the summit of seven major industrial nations, held in Paris from 14th to 16th July, 1989, to examine the problem of money-laundering has made forty recommendations, which provide the foundation material for comprehensive legislation to combat the problem of money-laundering. The recommendations were classified under various heads. Some of the important heads are-

(i) declaration of laundering of monies carried through serious crimes a criminal offence;

(ii) to work out modalities of disclosure by financial institutions regarding reportable transactions;

(iii) confiscation of the proceeds of crime;

(iv) declaring money-laundering to be an extraditable offence; and

(v) promoting international co-operation in investigation of money-laundering.

(d) the Political Declaration and Global Programme of Action adopted by United Nations General Assembly by its Resolution No. S-17/2 of 23rd February, 1990, inter alia, calls upon the member States to develop mechanism to prevent financial institutions from being used for laundering of drug related money and enactment of legislation to prevent such laundering.

(e) the United Nations in the Special Session on countering World Drug Problem Together concluded on the 8th to the 10th June, 1998 has made another declaration regarding the need to combat money-laundering. India is a signatory to this declaration.

2. In view of an urgent need for the enactment of a comprehensive legislation inter alia for preventing money-laundering and connected activities, confiscation of proceeds of crime, setting up of agencies and mechanisms for co-ordinating measures for combating money-laundering, etc., the Prevention of Money-Laundering Bill, 1998 was introduced in the Lok Sabha on the 4th August, 1998. The Bill was referred to the Standing Committee on Finance, which presented its report on the 4th March, 1999 to the Lok Sabha. The recommendations of the Standing Committee accepted by the Central Government are that (a) the expressions “banking company” and “person” may be defined; (b) in Part I of the Schedule under Indian Penal Code the word offence under section 477-A relating to falsification of accounts should be omitted; (c) “knowingly” be inserted in clause 3(b) relating to the definition of money-laundering; (d) the banking companies financial institutions and intermediaries should be required to furnish information of transactions to the Director instead of Commissioner of Income-tax; (e) the banking companies should also be brought within the ambit of clause II relating to obligations of financial institutions and intermediaries; (f) a definite time-limit of 24 hours should be provided for producing a person about to be searched or arrested person before the Gazetted Officer or Magistrate; (g) the words “unless otherwise proved to the satisfaction of the authority concerned” may be inserted in clause 22 relating to presumption on inter-connected transactions; (h) vacancy in the office of the Chairperson of an Appellate Tribunal, by reason of his death, resignation or otherwise, the senior-most member shall act as the Chairperson till the date on which a new Chairperson appointed in accordance with the provisions of this Act to fill the vacancy, enters upon his office; (i) the appellant before the Appellate Tribunal may be authorised to engage any authorised representative as defined under section 288 of the Income-tax Act, 1961; (j) the punishment for vexatious search and for false information may be enhanced from three months imprisonment to two years imprisonment, or fine of rupees ten thousand to fine of rupees fifty thousand or both; (k) the word “good faith” may be incorporated in the clause relating to bar of legal proceedings. The Central Government have broadly accepted the above recommendations and made provisions of the said recommendations in the Bill.

3. In addition to above recommendations of the Standing Committee the Central Government proposes to (a) relax the conditions prescribed for grant of bail so that the Court may grant bail to a person who is below sixteen years of age, or woman, or sick or infirm, (b) levy of penalty for default of non-compliance of the issue of summons, etc., (c) make provisions for having reciprocal arrangement for assistance in certain matters and procedure for attachment and confiscation of property so as to facilitate the transfer of funds involved in money-laundering kept outside the country and extradition of the accused persons from abroad.

4. The Bill seeks to achieve the above objects.

Amendment Act 20 of 2005-Statement of Objects and Reasons.-The Prevention of Money-Laundering Act, 2002 was enacted to prevent money-laundering and to provide for confiscation of property derived from, or involved in money-laundering, and for matters connected therewith or incidental thereto. The Act had become necessary to implement the Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8th to 10th June, 1999 which called upon the Member States to adopt national money-laundering legislation and programme. The said Act had been enacted, broadly incorporating, the recommendations of the Standing Committee on Finance in its report presented to the Lok Sabha on the 4th March, 1999, and laid on the Table of the Rajya Sabha on the 8th March, 1999 and the recommendations of the Select Committee of Rajya Sabha given in its report presented to the Rajya Sabha on the 24th July, 2000.

2. Steps are being taken by the Central Government to implement the provisions of the Prevention of Money-Laundering Act, 2002 which, inter alia, includes the entrusting the enforcement of the said Act to the Directorate of Enforcement in the Ministry of Finance, setting up of four Benches of Adjudicating Authorities, setting up of the Appellate Tribunal, etc. However, certain difficulties were envisaged while planning the implementation of the Act. In order to ensure effective implementation and to remove certain difficulties in the implementation of the aforesaid Act, it is proposed to amend the aforesaid Act, inter alia, so as to-

(a) provide that the Chairperson or a Member of any other Tribunal may be appointed (in addition to their holding the post as such) the Chairperson or a Member of the Appellate Tribunal, as the case maybe, under the Prevention of Money-Laundering Act, 2002;

(b) provide that a police officer shall investigate an offence, under the Prevention of Money-Laundering Act, 2002 only after he has been specifically authorised by the Central Government, subject to such conditions as may be specified by the rules;

(c) omit clause (a) of sub-section (1) of section 45 of the Prevention of Money-Laundering Act, 2002, which provides that every offence punishable under that Act shall be cognisable;

(d) make other amendments which are consequential in nature.

Amendment Act 21 of 2009-Statement of Objects and Reasons.-The Prevention of Money-Laundering Act, 2002 was brought into force in 2005 to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto. The Act also addressed the international obligations under the Political Declaration and Global Programme of Action adopted by the General Assembly of the United Nations to prevent money-laundering. The Act was amended in 2005 to remove the difficulties in implementation of the Act.

2. The Prevention of Money-Laundering (Amendment) Bill, 2008 seeks to bring certain financial institutions like Full Fledged Money Changers, Money Transfer Service Providers such as Western Union and International Payment Gateways including VISA and Master Card within the reporting regime of the Act. The Bill incorporates provisions to combat financing of terrorism and it introduces a new category of offences which have cross-border implications. The Bill seeks to amend the Act, to provide, inter alia, to-

(a) include institutions like Full Fledged Money Changers and Money Transfer Service Providers and to bring the business activities such as casinos under the reporting regime of the Act;

(b) make provisions for the “offences with cross border implications” and to add new Part C in the Schedule to the Act for such offences;

(c) ensure that the investigating agency can attach any property and search a person only after completing investigation and also to enhance the period of provisional attachment of property from 90 days to 150 days;

(d) empower the Enforcement Directorate to search the premises immediately after the offence is committed and the police has filed a report under section 157 of Code of Criminal Procedure, 1973;

(e) increase the age of retirement of Chairperson and Members of the Adjudicating Authority from 62 years to 65 years;

(f) provide mandatory consultation with the Chief Justice of India before removal of the Chairperson or a Member of the Appellate Tribunal;

(g) enable the Central Government to return the confiscated property to the requesting country in order to implement the provisions of the United Nations Convention Against Corruption; and

(h) expand the scope of the Act by adding certain offences in Part A and Part B of the Schedule to the Act.