Crypto assets to be under PMLA

Why in news?

• The Finance Ministry has notified that crypto or virtual asset businesses will now be in the ambit of the Prevention of Money Laundering Act, 2002 (PMLA).

Notification issued by the Ministry:

• It laid out the nature of transactions to be covered under PMLA. These are as follows:
  • Exchange between virtual digital assets and fiat currencies
  • Exchange between one or more forms of virtual digital assets
  • Transfer of virtual digital assets
  • Safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets
  • Participation in and provision of financial services related to an issuer’s offer and
  • Sale of a virtual digital asset.
• The circular also requires Indian crypto exchanges to report any suspicious activity to the Financial Intelligence Unit-India (FIU-IND).
• It also mandates that crypto exchanges and intermediaries dealing with virtual digital assets (VDAs) must have proper KYC documentation for all customers they onboard.

About PMLA:

•  PMLA is a comprehensive penal statute to counter the threat of money laundering, specifically stemming from trade in narcotics.
• The provisions of this act are applicable to all financial institutions, banks (Including RBI), mutual funds, insurance companies, and their financial intermediaries.
• The Act enables government authorities to confiscate property and/or assets earned from illegal sources and through money laundering.
• The PLMA has been amended three times, that is, in 2009, 2009 and 2012.
• Under the PMLA, the burden of proof lies with the accused, who has to prove that the suspect property/assets have not been obtained through proceeds of crime.
• Penalties under PMLA
  • Freezing or seizing of property and records, and/or attachment of property obtained through crime proceeds.
  • Rigorous imprisonment for a minimum of 3 years and a maximum of 7 years.
  • Fine.
  • If the crime of money laundering is involved with the Narcotic Drugs and Psychotropic Substances Act, 1985, the punishment can go up to 10 years, along with fine.

Authorities that can investigate under PMLA:

• The Enforcement Directorate (ED) is responsible for investigating offences under the PMLA.
• Also, the Financial Intelligence Unit – India (FIU-IND) is the national agency that receives, processes, analyses and disseminates information related to suspect financial transactions.

PRACTICE QUESTION:

Which of the following statements are correct regarding ‘Prevention of Money Laundering Act 2002 (PMLA)’?

1. Enforcement Directorate (ED) is responsible for investigating offences under the PMLA

2. The Act enables government authorities to confiscate property earned through money laundering.

Select the correct answer using the code given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer