Prevention of Money Laundering Act, 2002 [As amended by the prevention of money laundering (amendment) act, 2005]

An Act 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.

Whereas the Political Declaration and Global Programme of Action, annexed to the resolution S-17/2 was adopted by the General Assembly of the United Nations at its seventeenth special session on the twenty-third day of February, 1990;

And whereas the Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8th to 10th June, 1998 calls upon the Member States to adopt national money-laundering legislation and programme;

And whereas it is considered necessary to implement the aforesaid resolution and the Declaration.

Be it enacted by Parliament in the Fifty-third Year of the Repub­lic of India as follows :—

Chapter I

Preliminary

1. Short title, extent and commencement.

(1) This Act may be called the Prevention of Money Laundering Act, 2002.

(2) It extends to the whole of India.

(3) It shall come into force on such date¹ as the Central Govern­ment may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

2. Definitions.

(1) In this Act, unless the context otherwise requires,—

  (a)  “Adjudicating Authority” means an Adjudicating Authori­ty  appointed under sub-section (1) of section 6;

  (b)  “Appellate Tribunal” means the Appellate Tribunal established  under section 25;

  (c)  “Assistant Director” means an Assistant Director ap­pointed under sub-section (1) of section 49;

  (d)  “attachment” means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III;

  (e)  “banking company” means a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949)  applies and includes any bank or banking institution referred to in sec­tion 51 of that Act;

  (f)  “Bench” means a Bench of the Appellate Tribunal;

  (g)  “Chairperson” means the Chairperson of the Appellate Tribunal;

  (h)  “chit fund company” means a company managing, conduct­ing or supervising, as foreman, agent or in any other capacity, chits as defined in section 2 of the Chit Funds Act, 1982 (40 of 1982);

   (i)  “co-operative bank” shall have the same meaning as assigned to it in clause (dd) of section 2 of the Deposit Insur­ance and Credit Guarantee Corporation Act, 1961 (47 of 1961);

  (j)  “Deputy Director” means a Deputy Director appointed under sub-section (1) of section 49;

  (k)  “Director” or “Additional Director” or “Joint Director” means a  Director or Additional Director or Joint Director as the case may be, appointed under sub-section (1) of section 49;

   (l)  “financial institution” means a financial institution as defined in clause (c) of section 45-I of the Reserve Bank of India Act, 1934  (2 of 1934) and includes a chit fund company, a co-operative bank, a housing finance institution and a non-banking financial company;

  (m)  “housing finance institution” shall have the meaning as assigned to it in clause (d) of section 2 of the National Housing Bank Act, 1987 (53 of 1987);

  (n)  “intermediary” means a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary associated with securities market and registered under section 12 of the Securities and  Exchange Board of India Act, 1992 (15 of 1992);

(na)    “investigation”  includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence;

  (o)  “Member” means a Member of the Appellate Tribunal and includes the Chairperson;

  (p)  “Money-laundering” has the meaning assigned to it in section 3;

  (q)  “non-banking financial company” shall have the same meaning as assigned to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934);

  (r)  “notification” means a notification published in the Official Gazette;

  (s)  “person” includes—

   (i)   an individual,

  (ii)   a Hindu undivided family,

  (iii)  a company,

  (iv)  a firm,

  (v)   an association of persons or a body of individuals, whether incorporated or not,

  (vi)  every artificial juridical person not falling within any of the preceding sub-clauses, and

 (vii)  any agency, office or branch owned or controlled by any of the above persons mentioned in the preceding sub-clauses;

  (t)  “prescribed” means prescribed by rules made under this Act;

  (u)  “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;

  (v)  “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;

(w)  “records” include the records maintained in the form of books or stored in a computer or such other form as may be pre­scribed;

  (x)  “Schedule” means the Schedule to this Act;

  (y)  “scheduled offence” means—

   (i)  the offences specified under Part A of the Schedule; or

  (ii)  the offences specified under Part B of the Schedule if the  total value involved in such offence is thirty lakh rupees or more.

  (z)  “Special Court” means a Court of Session designated as Special Court under sub-section (1) of section 43;

(za)  “transfer” includes sale, purchase, mortgage, pledge, gift, loan or any other form of transfer of right, title, posses­sion or lien;

(zb)  “value” means the fair market value of any property on the date of its acquisition by any person, or if such date cannot be determined, the date on which such property is possessed by such person.

(2) Any reference, in this Act or the Schedule, to any enactment or any provision thereof shall, in relation to an area in which such enactment or such provision is not in force, be construed as a reference to the corresponding law or the relevant provisions of the corresponding law, if any, in force in that area.

Chapter II

Offence of Money-Laundering

3. 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 proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.

4. Punishment for money-laundering.

Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees :

Provided that where the proceeds of crime involved in money-laundering relate to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words “which may extend to seven years”, the words “which may extend to ten years” had been substituted.

Chapter III

Attachment, adjudication and confiscation

5. Attachment of property involved in money-laundering.

(1) Where the Director, or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that—

  (a)  any person is in possession of any proceeds of crime;

  (b)  such person has been charged of having committed a scheduled offence; and

  (c)  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 under this Chapter,

he may, by order in writing, provisionally attach such property for a period not exceeding ninety days from the date of the order, in the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) and the Director or the other officer so authorised by him, as the case may be, shall be deemed to be an officer under sub-rule (e) of rule 1 of that Schedule:

Provided that no such order of attachment shall be made unless, in relation to an offence under—

   (i)  Paragraph 1 of Part A and Part B of the Schedule, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974); or

  (ii)  Paragraph 2 of Part A of the Schedule, a police report or a complaint has been filed for taking cognizance of an offence by the Special Court constituted under sub-section (1) of section 36 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985).

(2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adju­dicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed.

(3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of section 8, whichever is earlier.

(4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.

Explanation:—For the purposes of this sub-section, “person inter­ested”, in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.

(5) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.

6. Adjudicating authorities, composition, powers, etc.

(1) The Central Government shall, by notification, appoint one or more Adjudicating Authorities to exercise jurisdiction, powers and authority conferred by or under this Act.

(2) An Adjudicating Authority shall consist of a Chairperson and two other Members:

Provided that one Member each shall be a person having experience in the field of law, administration, finance or accountancy.

(3) A person shall, however, not be qualified for appointment as Member of an Adjudicating Authority:—

  (a)  in the field of law, unless he—

   (i)  is qualified for appointment as District Judge; or

   (ii)  has been a Member of the Indian Legal Service and has held a post in Grade I of that service;

  (b)  in the field of finance, accountancy or administration unless he possesses such qualifications, as may be prescribed.

(4) The Central Government shall appoint a Member to be the Chair­person of the Adjudicating Authority.

(5) Subject to the provisions of this Act,—

  (a)  the jurisdiction of the Adjudicating Authority may be exercised by Benches thereof;

  (b)  a Bench may be constituted by the Chairperson of the Adjudicating Authority with one or two Members as the Chairperson of the Adjudicating Authority may deem fit;

  (c)  the Benches of the Adjudicating Authority shall ordi­narily sit at New Delhi and at such other places as the Central Government may, in consultation with the Chairperson, by notifi­cation, specify;

  (d)  the Central Government shall, by notification, specify the areas in relation to which each Bench of the Adjudicating Authority may exercise jurisdiction.

(6) Notwithstanding anything contained in sub-section (5), the Chairperson may transfer a Member from one Bench to another Bench.

(7) If at any stage of the hearing of any case or matter it appears to the Chairperson or a Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer, to such Bench as the Chairperson may deem fit.

(8) The Chairperson and every Member shall hold office as such for a term of five years from the date on which he enters upon his office:

Provided that no Chairperson or other Member shall hold office as such after he has attained the age of sixty-two years.

(9) The salary and allowances payable to and the other terms and conditions of service of the Member shall be such as may be pre­scribed:

Provided that neither the salary and allowances nor the other terms and conditions of service of the Members shall be varied to his disadvantage after appointment.

(10) If, for reasons other than temporary absence, any vacancy occurs in the office of the Chairperson or any other Member, then, the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Adjudicating Authority from the stage at which the vacancy is filled.

(11) The Chairperson or any other Member may, by notice in writ­ing under his hand addressed to the Central Government, resign his office:

Provided that the Chairperson or any other Member shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.

(12) The Chairperson or any other Member shall not be removed from his office except by an order made by the Central Government after giving necessary opportunity of hearing.

(13) In the event of the occurrence of any vacancy in the office of the Chairperson by reason of his death, resignation or other­wise, the senior-most Member shall act as the Chairperson of the Adjudicating Authority until the date on which a new Chairperson, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office.

(14) When the Chairperson of the Adjudicating Authority is unable to discharge his functions owing to absence, illness or any other cause, the senior-most Member shall discharge the functions of the Chairperson of the Adjudicating Authority until the date on which the Chairperson of the Adjudicating Authority resumes his duties.

(15) The Adjudicating Authority shall not be bound by the proce­dure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act, the Adjudicating Authority shall have powers to regulate its own procedure.

7. Staff of Adjudicating Authorities.

(1) The Central Government shall provide each Adjudicating Author­ity with such officers and employees as that Government may think fit.

(2) The officers and employees of the Adjudicating Authority shall discharge their functions under the general superintendence of the Chairperson of the Adjudicating Authority.

(3) The salaries and allowances and other conditions of service of the officers and employees of the Adjudicating Authority shall be such as may be prescribed.

8. Adjudication.

(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authori­ty has reason to believe that any person has committed an offence under section 3, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized under section 17 or section 18, the evi­dence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government:

Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other per­son:

Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons hold­ing such property.

(2) The Adjudicating Authority shall, after—

  (a)  considering the reply, if any, to the notice issued under sub-section (1);

  (b)  hearing the aggrieved person and the Director or any other officer authorised by him in this behalf; and

  (c)  taking into account all relevant materials placed on record before him,

by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are in­volved in money-laundering:

Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering.

(3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of section 5 or retention of property or record seized under section 17 or section 18 and record a finding to that effect, such attachment or retention of the seized property or record shall—

  (a)  continue during the pendency of the proceedings relat­ing to any scheduled offence before a court; and

  (b)  become final after the guilt of the person is proved in the trial court and order of such trial court becomes final.

(4) Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the attached property.

(5) Where on conclusion of a trial for any scheduled offence, the person concerned is acquitted, the attachment of the property or retention of the seized property or record under sub-section (3) and net income, if any, shall cease to have effect.

(6) Where the attachment of any property or retention of the seized property or record becomes final under clause (b) of sub-section (3), the Adjudicating Authority shall, after giving an opportunity of being heard to the person concerned, make an order confiscating such property.

9. Vesting of property in Central Government.

Where an order of confiscation has been made under sub-section (6) of section 8 in respect of any property of a person, all the rights and title in such property shall vest absolutely in the Central Government free from all encumbrances:

Provided that where the Adjudicating Authority, after giving an opportunity of being heard to any other person interested in the property attached under this Chapter, or seized under Chapter V, is of the opinion that any encumbrance on the property or lease-hold interest has been created with a view to defeat the provi­sions of this Chapter, it may, by order, declare such encumbrance or lease-hold interest to be void and thereupon the aforesaid property shall vest in the Central Government free from such encumbrances or lease-hold interest:

Provided further that nothing in this section shall operate to discharge any person from any liability in respect of such encum­brances which may be enforced against such person by a suit for damages.

10. Management of properties confiscated under this Chapter.

(1) The Central Government may, by order published in the Official Gazette, appoint as many of its officers (not below the rank of a Joint Secretary to the Government of India) as it thinks fit, to perform the functions of an Administrator.

(2) The Administrator appointed under sub-section (1) shall receive and manage the property in relation to which an order has been made under sub-section (6) of section 8 in such manner and subject to such conditions as may be prescribed.

(3) The Administrator shall also take such measures, as the Central Government may direct, to dispose of the property which is vested in the Central Government under section 9.