PMLA and Its Implications

Hope you all have updated your email Ids and mobile nos. as appealed to you in my previous article. Today I would like to share some information on the Prevention of Money Laundering Act (PMLA).

Now how does this regulation affect the common man? It needs to be understood that all transitions in the financial markets are monitored and transactions above a certain value are scrutinized. They are reported to the relevant authorities by the banks, stock brokers, mutual funds and very soon jewellers and property dealers will also be reporting transactions.

Have you ever wondered what the authorities are monitoring? They are monitoring mainly terror money, proceeds of crime money and any other form of black money. Now the question arises, what is terror money? Terror money is- Funding by organisations for unlawful violence and war for a religious, political, or ideological goal; and deliberately to target or to disregard the safety of non-combatant; violent acts that are intended to create fear in the minds of normal public at large. What are proceeds from crime money? Money acquired by acts of crime like drugs, human trafficking, extortion, bribes, etc. What is black money? Black money refers to funds earned, on which income and other taxes have not been paid.

Please understand that money earned by legal transactions on which tax is not paid is tax evasion which is also punishable, this is black money. But money of terror and crime is illegal even if you pay tax on the same and is punishable as a criminal activity.

Handling of money from any of these activities is called money laundering. This money is not only illegal but also criminal.  Therefore there was a need of PMLA regulation to stop illegitimate money to enter the system in any form. There is a need to strictly monitor this illegitimate money so that it is not used to create any form of asset, moveable or immovable.

Friends, for all of the above mentioned activities, money is the consideration for the people involved, and these people try to park this illegitimate money so that the same can be used later. And if all the avenues to use this money are blocked by monitoring the movement of money, this world would be a safer place. There would be no incentive to commit crime or terror or evade taxes as the same would not be financially beneficial to anyone.

Therefore, it is a primary responsibility of every person to ensure that no person can get away by doing acts of terror, crime or tax evasion and should ensure proper reporting to the relevant authorities whenever they find out of the same.

So strengthen the arms of the Government in prevention of money laundering by reporting any kind of illegitimate money. That is the least you can do for your own safety and the safety of your family, friends and the country.

The Prevention of Money Laundering Act, 2002 (PMLA) was brought into force with effect from 1^st July 2005. Necessary Notifications / Rules under the said Act were published in the Gazette of India on July 01, 2005. Subsequently, SEBI issued necessary guidelines vide circular no. ISD/CIR/RR/AML/1/06 dated January 18, 2006 to all securities market intermediaries. These guidelines were issued in the context of the recommendations made by the Financial Action Task Force (FATF), a global body on anti-money laundering standards.  Compliance with these standards by all intermediaries   and   the country   has become imperative   for international   financial relations.

Some important events in the week; The PM had a fruitful trip to Japan with commitment of about 35 billion of USD investments, Australia inking the Uranium supply to India, the EPFO committing to deploy 5% to the equities market and of course, after more than 50 years our PM Modiji addressing the children on teachers day. All this have helped to boost the sentiment which translated into the Sensex crossing 27000. Stay invested.