The Prevention of Money Laundering Act, 2002 (‘PMLA’) is a pivotal legislation in India aimed at preventing money laundering activities and combating the financing of terrorism. Enacted to curb the illicit flow of funds and protect the integrity of the financial system, the PMLA imposes stringent measures on various entities, including corporations, to prevent, detect, and report instances of money laundering. Among the key professionals entrusted with ensuring compliance with the PMLA are Company Secretaries (CS), who play a critical role in upholding the legal framework and maintaining transparency within organizations.

Understanding the PMLA:

The PMLA comprehensively outlines provisions for the prevention of money laundering and the establishment of the Financial Intelligence Unit-India (‘FIU-IND’) to gather, analyse, and disseminate information related to suspicious financial activities. FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and related crimes. FIU-IND is an independent body reporting directly to the Economic Intelligence Council headed by the finance minister. A person, who is accused of having committed the offence of money laundering, has to prove that alleged proceeds of crime are in fact lawful property. It places obligations on 'Reporting Entities,' encompassing banks, financial institutions, intermediaries, other designated entities and professionals, to implement robust Know Your Customer norms, maintain transaction records, and report suspicious transactions to the authorities.