14 Jul 2023 Prevention of Money Laundering Act (PMLA)
This article covers “Daily Current Affairs” and the topic details “PMLA”. The topic “PMLA” has relevance in the Governance section of the UPSC CSE exam.
For Prelims:
About the Prevention of Money Laundering Act (PMLA)?
For Mains:
GS 2: Governance
Why has GSTN been brought under the PMLA?
What is the Goods and Services Tax Network (GSTN)?
Why in the news?
The Centre’s move to bring the Goods and Services Tax Network (GSTN) under the purview of the Prevention of Money Laundering Act (PMLA) was to empower the relevant investigating agencies to deal with tax fraud and money laundering matters, and not giving outright access to data to any party
What is the Prevention of Money Laundering Act (PMLA), 2002?
- The Prevention of Money Laundering Act (PMLA), 2002 was enacted with the objective of preventing money laundering and enabling the confiscation of property that is derived from or involved in money laundering activities. It serves as a crucial component of India’s legal framework in the fight against money laundering and associated offenses.
- Definition of Money Laundering: The act defines money laundering as any process by which proceeds of crime are involved in any transaction, directly or indirectly, to conceal the illicit origin of the property.
- Criminal Offense: Money laundering is considered a criminal offense under the PMLA, and individuals involved in money laundering activities can face legal action and penalties.
- Confiscation of Property: The PMLA enables authorities to confiscate property derived from money laundering or involved in money laundering activities.
- Attachment of Property: The act provides for the attachment of properties involved in money laundering offenses during the investigation and trial process.
- Prohibition on Dealing with Attached Property: Once a property is attached under the PMLA, any transaction or dealing with that property is prohibited without prior permission from the authorities.
Why has GSTN been brought under the PMLA?
Enhancing the Fight Against Money Laundering and GST Fraud:
- The move aims to strengthen efforts in combating money laundering and combating Goods and Services Tax (GST) fraud.
- It is believed that bringing GSTN under the ambit of the Prevention of Money Laundering Act (PMLA) will help enhance the fight against financial crimes.
Improved Information Sharing:
- The recent notification amends a previous 2006 notification, allowing for improved information sharing between GSTN, Enforcement Directorate (ED), and Financial Intelligence Unit (FIU) under the provisions of the PMLA Act, 2002.
- This amendment facilitates better coordination and collaboration among these entities in identifying and tackling money laundering activities and GST fraud.
Identification of Suspected GST Identification Numbers:
- In a recent drive against fake registrations, field tax officials identified over 69,600 suspected GST identification numbers for physical verification.
- Out of these, more than 59,000 were verified, and it was found that 25% of them were non-existent.
- This highlights the need for robust measures to prevent GST fraud and money laundering through the GST system.
What is the Goods and Services Tax Network (GSTN)?
- GSTN is an organization that has developed an indirect taxation platform for the implementation of the Goods and Services Tax (GST) in India.
- It provides IT infrastructure and services to taxpayers, Central and State Governments, and other stakeholders.
- GSTN helps taxpayers in preparing and filing returns, making payments, and complying with indirect tax regulations.
- It is a government-owned company incorporated in 2013, and the Board of GSTN has approved its conversion into a government company.
Regulating Authorities:
- The Directorate of Enforcement (ED) is responsible for enforcing the provisions of the PMLA and investigating money laundering cases.
- The Financial Intelligence Unit – India (FIU-IND) is a unit of the Indian government’s Department of Revenue and gathers financial intelligence on money laundering offenses.
- FIU-IND operates under the PMLA and collaborates with enforcement agencies and foreign Financial Intelligence Units (FIUs).
- By bringing GSTN under the PMLA ambit, the authorities aim to leverage the provisions of the act to tackle money laundering activities and strengthen efforts against GST fraud. This step emphasizes the importance of combating financial crimes and ensuring the integrity of the GST system.
Q.1 Which of the following statements regarding the Prevention of Money Laundering Act (PMLA), 2002 is/are correct?
- The PMLA was enacted to prevent money laundering and provide for the confiscation of property derived from or involved in money laundering.
- The PMLA forms the core of India’s legal framework to combat money laundering and related crimes.
- The Financial Intelligence Unit – India (FIU-IND) is responsible for enforcing the provisions of the PMLA and investigating money laundering cases.
- Money laundering is defined as the process by which illicit funds are converted into legal assets to conceal their illicit origin.
Choose the correct option:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1, 3, and 4 only
(d) 1, 2, and 4 only
ANSWER: D
Q.2 What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?
- It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
- It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.
- It will enormously increase the growth and size of the economy of India and will enable it to overtake China in the near future.
Select the correct answer using the code given below:
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
ANSWER: A
Q.3 “Discuss the significance of the Prevention of Money Laundering Act (PMLA), 2002 in combating financial crimes in India. Analyze the key provisions of the PMLA and its impact on money laundering prevention and asset confiscation. Also, evaluate the challenges and potential areas of improvement in the implementation and enforcement of the act.”
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