Black Money – Domestic and International Efforts

Prevention of Money Laundering Act will need more changes


Mains Paper 2: Governance | Government policies & interventions for development in various sectors & issues arising out of their design & implementation

From UPSC perspective, the following things are important:

Prelims level: Financial Action Task Force (FATF), Enforcement Directorate

Mains level: Measures taken by India to prevent money laundering

PMLA needs to be more robust

  1. India will have to make money laundering an explicitly standalone offense
  2. This has to be done in order to upgrade its compliance ahead of the on-site mutual evaluation by the Financial Action Task Force (FATF), which is due in November-December 2020

What is the issue?

  1. Despite several amendments, the Prevention of Money Laundering Act (PMLA) remains a predicate-offense-oriented law
  2. This means a case under the Act depends on the fate of cases pursued by primary agencies such as the CBI, the Income Tax Department or the police
  3. The predicate offense conviction condition creates fundamental difficulties when trying to confiscate the proceeds of crime in the absence of a conviction of a predicate offense
  4. Among the key recommendations of the FATF is that money laundering be made a standalone offense

Authority to probe money laundering

  1. The Enforcement Directorate is empowered to investigate the financial aspects of those crimes, as defined under the other penal laws, which are listed in the PMLA schedule


Financial Action Task Force (FATF)

  1. FATF is an inter-governmental body established in 1989 on the initiative of the G7 to develop policies to combat money laundering
  2. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system
  3. The FATF is, therefore, a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas
  4. The FATF has developed a series of Recommendations that are recognized as the international standard for combating of money laundering and the financing of terrorism and proliferation of weapons of mass destruction
  5. The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally
  6. The FATF’s decision-making body, the FATF Plenary, meets three times per year
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