INTRODUCTION

The Prevention of Money Laundering Act, 2002 (PMLA) is a key legislation enacted by the Government of India to combat the menace of money laundering and to safeguard the integrity of the financial system. It came into force on 1st July 2005 with the primary objective of preventing criminals from disguising the origins of illicit money and ensuring that such proceeds of crime are traced, confiscated, and penalized.

·      Section 2(d): Attachment

“Attachment” means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III.

Illustration :

Think of a flat purchased with drug money. If the Enforcement Directorate (ED) issues an attachment order, the owner cannot sell it, gift it, mortgage it, or even move its ownership papers. It’s legally frozen until the case is decided.

·      Section 2(fa): Beneficial Owner

            “Beneficial owner” means an individual who ultimately owns or controls a client of a reporting entity or the person on whose behalf a 
           transaction is being conducted and includes a person who exercises ultimate effective control over a juridical person.

            Illustration:
           Suppose Company X has five shareholders. On paper, the biggest    shareholder holds only 20%. But behind the scenes, one person                 controls all decisions and secretly enjoys the profits. That hidden controller is the beneficial owner, even if his name isn’t directly on the
           records.

·      Section 2(p): Money Laundering

            “Money laundering” has the meaning assigned to it in Section 3 of PMLA.

·      Section 3: Charging Section

            Anyone who directly or indirectly attempts to indulge or knowingly assists or is a party or is actually involved in any process or activity             connected with the proceeds of crime—including its concealment, possession, acquisition,use, or projecting/claiming it as untainted                  property—shall be guilty of money laundering.

            Explanation:

            A person is guilty if involved in any of the following processes connected with proceeds of crime:

a)     Concealment

b)    Possession

c)     Acquisition

d)    Use

e)     Projecting as untainted property

f)      Claiming as untainted property in any manner whatsoever.

            Illustration:

            If someone buys a luxury car using bribe money, keeps it hidden in another person’s name (concealment), drives it regularly (use), and
            later claims it was bought from “honest income” (projecting as untainted)—every step is covered under money laundering.

·      Section 2(u): Proceeds of Crime

            “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. If the property is held abroad, then equivalent value held within 
            India or abroad will be considered.

            Illustration:

            A person smuggles gold worth ₹10 crore and sells it abroad. He uses that money to buy land in India. That land is “proceeds of crime.”
            Even if the gold    itself is outside India, the Indian land purchased is treated as equivalent proceeds.

            Other examples for better understanding of the Definition of Proceeds    of Crime :

            Example 1: Interest on Bank Fixed Deposit

            Scenario:

            Mr. Z laundered ₹200 million and deposited it in a bank fixed deposit. The   fixed deposit earns interest income.

            Analysis:

o   The original ₹200 million is proceeds of crime because it was obtained through illegal means.

o   The interest earned on the fixed deposit is not derived from criminal activity; it comes from legitimate banking operations.

                     The principal amount is confiscable under PMLA, but the interest income remains lawful and cannot be treated as proceeds of
                     crime.

          Example 2: Purchase of Property with Laundered Money

            Scenario:

            Mr. P launders ₹20 million and purchases a house with that amount.

            Analysis:

o   The house is purchased directly with laundered funds.

o   PMLA uses the terms “directly or indirectly”, meaning any property acquired through proceeds of crime is liable for confiscation.

o   Any rental income from the house is not derived from criminal activity, as it is earned legitimately.

            Hence, the house itself is considered property derived from proceeds of crime and can be confiscated. However, legitimate income
            generated from it, like rent, cannot be seized.

·       Section 2(v): Property

            “Property” means any property or assets of every description—corporeal or incorporeal, movable or immovable, tangible or intangible
             —and includes deeds and instruments evidencing title or interest.

         Explanation: Property also includes property of any kind used in the commission of an offense under this Act or any scheduled offense.

          Illustration:

o   Movable: Cars, gold, cash.

o   Immovable: Land, house, building.

o   Intangible: Patents, trademarks, digital assets.

                   If a truck is used to smuggle narcotics, the truck itself becomes “property” under PMLA, even if it was originally purchased legally.

·       Section 2(za): Transfer

            “Transfer” includes sale, purchase, mortgage, pledge, gift, loan, or any other form of transfer of right, title, possession, or lien.

            Illustration:

            If a criminal gifts a flat to his cousin, mortgages land with a bank, or even pledges jewelry for a loan, each act counts as a “transfer.” It
           doesn’t matter if the mode is selling, gifting, or mortgaging—the law covers all.