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Money Laundering - Origin ; Stages & Important PMLA Provisions.

Money Laundering refers to the conversion of money which has been illegally obtained, in such a way that it appears to have originated from a justified source. It is originated from the Mafia group in the United States of America but In India, "money laundering" is popularly known as Hawala transactions. The person who manipulates this money is called "launderer".

Money Laundering involves with three stage process which are explained as follows -

  1. Placement - The first stage is the physical disposal of cash. The launderer introduces his illegal profits into the financial system.

  2. Layering - Money injected into the system is layered and spread over various transactions with a view unclear the undesirable quality origin of the money.

  3. Integration - This is the final stage in the process.The launderer makes it appear to have been legally earned and accomplishes integration of the “cleaned” money into the economy.

Prosecution Of Money Laundering In India

The Prevention of Money Laundering Act, 2002 enables the Government or the public authority to confiscate the property earned from the illegally gained proceeds.

It Objectives are -

  • To control and prevent money laundering

  • To confiscate the property obtained from the laundered money; and

  • To deal with any other issue linked with money laundering in India.

The offence of 'Money Laundering' is defined under Section 3 of the The Prevention of Money Laundering Act, 2002, which, for ease of understanding, can be deconstructed as Whosoever directly or indirectly,attempts to indulge, or knowingly assists, or knowingly is 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.

The act prescribes that any person found guilty of money-laundering shall be punishable with rigorous imprisonment from three years to seven years and where the proceeds of crime involved relate to any offence under paragraph 2 of Part A of the Schedule (Offences under the Narcotic Drugs and Psychotropic Substance Act, 1985), the maximum punishment may extend to 10 years instead of 7 years.

As per section 45 of the The Prevention of Money Laundering Act, 2002, money laundering is a non-bailable offence, which means that an arrested person is not entitled to bail as a matter of right. Further under The Prevention of Money Laundering Act, 2002, an arrest can be made without a warrant.