Black Money

Nitesh Shrivastava is a registered valuer of Black money under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Black money is defined as: Earnings / all funds earned through illegal activity and / or income on which tax was not paid is defined as Black Money. Also, the amount hidden by the tax authorities is called as black money. Black money is collected by criminals, traffickers, collectors, tax evaders and other anti-theft people / bodies / organisation. Black money is usually earned from the underground / undisclosed economic activity. There is no official definition of black money in economic theory, with several different terms such as parallel economy, black money, black incomes, unaccounted economy, illegal economy and irregular economy all being used more or less synonymously. The simplest definition of black money could possibly be money that is hidden from tax authorities. That is, black money can come from two broad categories: illegal activity and legal but unreported activity.

What is Money Laundering?

Money laundering is the process of changing large amounts of money obtained from crimes, into origination from a legitimate source. It is a crime in many jurisdictions with varying definitions. It is a key operation of the underground economy. Money laundering is a process that criminals use in an attempt to hide the illegal source of their income. By passing money through complex transfers and transactions, or through a series of businesses, the money is “cleaned” of its illegitimate origin and made to appear as legitimate business profits. It is an illegal practice in which people carry out financial transactions to hide the fraudulent origins of their money. In this process, which is illegal per se, large amounts of money is generated by a criminal activity, such as doing trafficking or terrorist funding, appear to have come from a legitimate source. Nitesh Shrivastav is a registered valuer of Black money under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and a registered valuer under section 34AB of the Wealth Tax Act, 1957.

LAUNDERING OF MONEY MEANS:

Nitesh Shrivastav is a registered valuer of Black money under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and a registered valuer under section 34AB of the Wealth Tax Act, 1957. He says that: to launder means: to wash. Money laundering means: to move money that has been obtained illegally through banks and other businesses to make it seem to have been obtained legally. Or in other words, it means to wash and clear the money obtained from the illegal source / activity.

What is the Need to launder money?

The need arises to launder money in order to legitimise the same, before introducing such money into the financial system as legal currency.

When people make money from crime, it is used for the purposes of:

i) investment in another crime.
ii) to hide it, to use it later.
iii) to spend it now.
iv) to invest in high value real estate or to buy gold & diamonds.
Tax evaders launder money so that they can lie about where money and assets came from in order to evade tax.

Money laundering is essential for criminal organizations / individuals who wish to use illegally obtained money effectively. Dealing in large amounts of illegal cash is inefficient and dangerous.

Modern ways to launder Money:

Modern money launderers are updating their methods to beat detection and avoid getting caught every single minute of the day. Where there is new technology, crypto-currencies and processes, there is a money launderer out there looking for a way to beat the system or find a loophole, in order to potect himself from the clutches of law.

• Online Banking
• Business Email Compromise
• Synthetic Identity
• Anonymous online payment services
• Virtual currencies.

Governing law for Money Laundering:

• It is governed by the Act named: Prevention of Money Laundering Act, 2002 (hereinafter referred to as: PMLA).
• This Act was enacted in the year 2002 to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering and for matters connected therewith.

Main objectives of PMLA:

PMLA, 2002 is an Act of the Parliament of India enacted by the Government of India for the sake of prevention of money laundering in India and to provide for confiscation of property made out of the money laundering. However, the PMLA, 2002 and the rules notified there under came into force with effect from 1st July 2005. The Act and Rules notified there under provide for imposing obligation on entities including financial institutions, banking companies and intermediaries to examine and verify identity of clients, maintain necessary records and furnish required information in predetermined form to Financial Intelligence Unit-India (FIU-IND).

What are the stages in Laundering Money:

There are mainly three stages of money laundering as under:

Placement: This stage of money laundering refers to the movement of cash from its originating source and injecting in circulation;

Layering: It happens when the contravener tries to dissuade the tracks making it tough for the authorities to track the transaction down; and

Integration: At the last stage, when the laundered money actually comes into circulation and becomes the part of economy, primarily through the banking system, it is known as integration.

Statutory Framework:

In order to broaden the ambit of the act and to achieve the predetermined purposes, the act expressly provides for bilateral agreements between countries to cooperate and to curb the hazards of money laundering. The purpose of these agreements shall be either enforcement of the provisions of this act or exchange of information which shall further help in preventing the commission of an offence under this act or the prevailing laws in that foreign State.

Certainly, in some cases the Central Government of India may seek or provide assistance from or to a contracting state for an investigation or advancing evidence collected during the course of such investigation. The act also expressly provides for reciprocal arrangements for processes or assistance with respect to the accused persons.

Salient Features of PMLA:

• Provision of Punishment for money-laundering: The Act expressly states that where a person is found guilty of money-laundering in India he shall be punished with rigorous imprisonment from 3 to 7 years and where the proceeds of guilt involved relate to any offence mentioned under paragraph 2 of Part A of the Schedule (Offences under the Narcotic Drugs and Psychotropic Substance Act, 1985), then the punishment may extend up to 10 years.
• Powers of attachment of tainted property: Appropriate authorities can provisionally attach property believed to be “proceeds of crime” for 180 days subject to their appointment by the Government of India. Also, such an order needs to be confirmed by an independent adjudicating authority.
• Adjudicating Authority: The Adjudicating Authority is the authority whose appointment is made by the central government of India by way of a notification to exercise jurisdiction, powers and authority stated under the PMLA, 2002. It decides whether the property related or seized is involved in money laundering. Further, the adjudicating authority shall not be bound by any of the procedures specified by the Code of Civil Procedure,1908, but shall be instructed by the principles of natural justice and subject to the other provisions of the PMLA, 2002.
• Burden of proof: A person has to prove that alleged proceeds of the offence are in fact lawful property where he is found accused of having committed the offence of money laundering,;
• Appellate Tribunal: It is the body appointed by Government of India empowered to hear appeals against the decisions of the adjudicating authority or any other authority under the act. It is worth to note that decisions of the tribunal can further be appealed to High Court (for that jurisdiction) and finally to the Supreme Court.
• Special Court: Section 43 of the PMLA, 2002 states that the Central Government shall, for the purpose of trial of offence punishable under Section 4, by notification, assign one or more Courts of Session as the special court(s) for such area(s) or for such case(s) as may be specified in the notification. However, such assignment is made in prior consultation with the Chief Justice of the appropriate High Court.
• FIU-IND: Financial Intelligence Unit-India (FIU-IND) was established by the Government of India on 18th November 2004 as the central national agency primarily responsible for obtaining, processing, analyzing and imparting information related to the suspect financial transactions. It is an independent body which directly reports to the Economic Intelligence Council (EIC) governed by the Finance Minister.

Arrangement of sections under PMLA:

CHAPTER I: PRELIMINARY

SECTIONS:

1. Short title, extent and commencement.
2. Definitions.

CHAPTER II: OFFENCE OF MONEY-LAUNDERING

3. Offence of money-laundering.
4. Punishment for money-laundering.

CHAPTER III: ATTACHMENT, ADJUDICATION AND CONFISCATION

5. Attachment of property involved in money-laundering.
6. Adjudicating Authorities, composition, powers, etc.
7. Staff of Adjudicating Authorities.
8. Adjudication.
9. Vesting of property in Central Government.
10. Management of properties confiscated under this Chapter.
11. Power regarding summons, production of documents and evidence, etc.
11A. Verification of identity by reporting entity.

CHAPTER IV: OBLIGATIONS OF BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES

12. Reporting entity to maintain records.

12A. Access to information.

12AA. Enhanced due diligence.

13. Powers of Director to impose fine.

14. No civil or criminal proceedings against reporting entity, its directors and employees in certain cases.

15. Procedure and manner of furnishing information by reporting entities.

CHAPTER V: SUMMONS, SEARCHES AND SEIZURES, ETC.

16. Power of survey.

17. Search and seizure.

18. Search of persons.

19. Power to arrest.

20. Retention of property.

21. Retention of records.

22. Presumption as to records or property in certain cases.

23. Presumption in inter-connected transactions.

24. Burden of proof.

CHAPTER VI: APPELLATE TRIBUNAL

25. Appellate Tribunal.

26. Appeal to Appellate Tribunal.

27. [Omitted.].

28. [Omitted.].

29. [Omitted.].

30. [Omitted.].

31. [Omitted.].

32. [Omitted.].

33. [Omitted.].

34. [Omitted.].

35. Procedure and powers of Appellate Tribunal.

36. Distribution of business amongst Benches.

37. Power of Chairperson to transfer cases.

38. Decision to be by majority.

39. Right of appellant to take assistance of authorised representative and of Government to appoint presenting officers.

40. Members, etc., to be public servants.

41. Civil court not to have jurisdiction.

42. Appeal to High Court.

CHAPTER VII: SPECIAL COURTS

43. Special Courts.

44. Offences triable by Special Courts.

45. Offences to be cognizable and non-bailable.

46. Application of Code of Criminal Procedure, 1973 to proceedings before Special Court.

47. Appeal and revision.

CHAPTER VIII: AUTHORITIES

48. Authorities under Act.

49. Appointment and powers of authorities and other officers.

50. Powers of authorities regarding summons, production of documents and to give evidence, etc.

51. Jurisdiction of authorities.

52. Power of Central Government to issue directions, etc.

53. Empowerment of certain officers.

54. Certain officers to assist in inquiry etc.

CHAPTER IX: RECIPROCAL ARRANGEMENT FOR ASSISTANCE IN CERTAIN MATTERS AND PROCEDURE FOR ATTACHMENT AND CONFISCATION OF PROPERTY

55. Definitions.

56. Agreements with foreign countries.

57. Letter of request to a contracting State in certain cases.

58. Assistance to a contracting State in certain cases.

58A. Special Court to release the property.

58B. Letter of request of a contracting State or authority for confiscation or release the property.

59. Reciprocal arrangements for processes and assistance for transfer of accused persons.

60. Attachment, seizure and confiscation, etc., of property in a contracting State or India.

61. Procedure in respect of letter of request.

CHAPTER X: MISCELLANEOUS

62. Punishment for vexatious search.

63. Punishment for false information or failure to give information, etc.

64. Cognizance of offences.

65. Code of Criminal Procedure, 1973 to apply.

66. Disclosure of information.

67. Bar of suits in civil courts.

68. Notice, etc., not to be invalid on certain grounds.

69. Recovery of fine or penalty.

70. Offences by companies.

71. Act to have overriding effect.

72. Continuation of proceedings in the event of death or insolvency.

72A. Inter-ministerial Co-ordination Committee.

73. Power to make rules.

74. Rules to be laid before Parliament.

75. Power to remove difficulties.

THE SCHEDULE.