India

1. Does India have legislation making it a criminal offence to engage in money laundering and/or terrorist financing?

Yes, the Prevention of Money Laundering Act 2002 (“PMLA”) is the primary legislation dealing with money laundering and the confiscation of property derived from or involved in money laundering. The Unlawful Activities (Prevention) Act 1967 (“UAPA”) prohibits persons from making available any funds, financial assets or economic resources for the benefit of any person engaged in or suspected to be engaged in terrorism.

2. To whom does the legislation apply?

The PMLA applies to any person who directly or indirectly attempts to indulge or knowingly assists or knowingly is a 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. The PMLA also imposes specific obligations on banking companies, financial institutions and market intermediaries (defined as ‘Reporting Entities’) to verify its users, maintain records of transactions and provide information to specified governmental authorities.

3. What does the legislation prohibit?

The PMLA, amongst others, seeks to prevent money laundering.

4. How is money laundering defined? Does underlying criminal activity have to be proven?

The PMLA defines money laundering as the direct or indirect attempt to indulge or knowingly assist, knowingly be a party to or be involved in any process or activity connected with the ‘proceeds of crime’ and the projection of such property as untainted. The term ‘proceeds of crime’ has been defined under PMLA to mean any property derived or obtained (directly or indirectly) by any person as a result of any criminal activity relating to a offence specified under the PMLA.

The underlying criminal activity does not have to be proven. The PMLA provides that if a person has been charged with the offence of money laundering, unless proved otherwise, the court or relevant governmental authority will presume that the proceeds of crime are involved in money laundering.

5. What level of intent or knowledge is required to establish a violation?

In order to establish a violation of the PMLA, a person should have knowingly assisted or been party to or actually involved in any deed or activity connected with the proceeds of crime.

6. What are the potential penalties for infringing the legislation?

Any person who commits the offence of money laundering is liable to be punished with rigorous imprisonment (defined as imprisonment with hard labour) of a term ranging from three years to seven years and may also be liable to pay a fine.

7. Does the legislation have extra-territorial reach?

The PMLA applies to the whole territory of India. The PMLA also empowers the Indian Government to enter into reciprocal arrangements with other countries to: (i) enforce the provisions of the PMLA; or (ii) exchange information for the prevention of any offence under PMLA or under the corresponding law in force in the foreign country.

Additionally, under the Fugitive Economic Offenders Act 2018 (“FEO”), where a person against whom a warrant for arrest in relation to a specified offence has been issued by any court in India and such person: (i) has left India to avoid criminal prosecution; or (ii) being abroad, refuses to come to India to face criminal prosecution (defined as an ‘economic offender’), a special tribunal may confiscate the property of such person, whether in India or abroad.

8. Are there additional anti-money laundering or counter terrorist financing regulations or obligations, such as registration or reporting obligations, for businesses or individuals that operate in particular sectors or undertake particular activities?

• Intermediaries associated with the securities market such as stockbrokers, merchant bankers, underwriters are required to undertake client due diligence measures to an extent that is sensitive to the risk of money laundering and terrorist financing, depending on the type of client, business relationship or transaction.
• The Reserve Bank of India Master Directions on Know Your Customer (KYC) Directions, 2016 require financial reporting entities and securities market intermediaries to follow certain customer identification procedures when opening a bank account or undertaking a transaction.
• The Foreign Contribution (Regulation) Act 2010 (“FCRA”), requires any person seeking to obtain foreign contributions (not being gifts, remittances, and securities), to register before accepting such foreign contribution.

9. What are the potential penalties for failing to comply with these obligations?

• Under the Banking Regulation Act 1949, (“Banking Act”) and the Reserve Bank of India Act 1934 if a banking company or a non-banking financial company does not comply with the directions of the Reserve Bank of India (“RBI”), the RBI has the power to revoke the license/registration of such banking company or non-banking financial company respectively. Under the Banking Act, the RBI may also impose a fine on any banking company which fails to comply with its directions and such fine may extend to INR 1,00,00,000 (Indian Rupees One Crore) or twice the amount involved in such contravention or default where the same is quantifiable, whichever is higher.
• Under the Securities and Exchange Board of India Act, 1992, SEBI is authorized to take measures it deems appropriate and/or cancel the license of a market intermediary in the event of non-compliance with its directions. SEBI is also empowered to impose a fine of up to INR 1,00,00,000 (Indian Rupees One Crore) on any person who fails to comply with its directions
• The penalty for contravention of the provisions of the FCRA is a fine of INR 1,00,000 (Indian Rupees One Lakh) or between 2%-10% of the foreign contribution received (whichever is higher) depending on the offence.

10. Who are the relevant enforcement authorities in India and what are their contact details?

The Enforcement Directorate is the governmental agency which has been tasked with the investigation and prosecution of cases under the PMLA.

Directorate of Enforcement (Department of Revenue, Ministry of Finance, Government of India)

Joint Director (Admn)

Enforcement Directorate

6th Floor, Lok Nayak Bhawan

Khan Market

New Delhi – 110003

T: +91 246 119 89, +91 246 920 55

F: +91 246 318 47

ed-del-rev@nic.in

The Financial Intelligence Unit-India (FIU-IND) is responsible for reviewing all information with respect to suspect financial transactions and coordinates with various national/international agencies investigation and enforcement agencies in pursuing global efforts against money laundering and related financial crimes.

Director, FIU-IND

Financial Intelligence Unit-India

6th Floor, Hotel Samrat

Chanakyapuri

New Delhi-110021

http://fiuindia.gov.in