Efficacy Of Money Laundering Act In Doubt

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: The Prevention of Money-laundering Act 2002 was enacted recently, after more than 3 years when it was originally proposed and much much after the passing of FEMA, the statute that was associated with it and felt to be supplementing it. Before we consider some interesting aspects of this Act, there is a need to comment on the fact that though enacted, it is not yet effective.

Three major amendments to the field of corporate laws have seen almost simultaneous enactment. The Companies (Second Amendment) Act, 2002, the Prevention of Money-Laundering Act, 2002 and the Competition Act, 2002. While all of these have one common element and that being that they are very far reaching in effect, there is another common element. And this is that they, though enacted, are not effective enough. In each of the cases, one provision states that they will come into effect when so notified for this purpose. In other words, the laws or amendments, though enacted, are not yet effective. It may be recollected that even the Foreign Exchange Management Act had also a gestation period of at about 6 months before it was made effective. No one can guarantee that each of these three statutes will assuredly come into effect quickly and in the form that the statutes have been enacted. At the same time, we regularly see Ordinances being made to bring out amendments to the law. All in all, a peculiar and perhaps arbitrary pattern is seen to be developing where the control of Parliament is being diluted in terms of bringing laws into effect.

Let us then review in this uncertain background what the Act attempts to achieve generally. Clearly, as the title states, the object is to acts of money laundering. Before we go into the complicated definition of money laundering, let us consider what this term generally means. Money laundering generally connotes conversion of ill gotten gains into money or gains that have a legitimate source. The classic example can be of monies gained from say dealing in narcotics. The gains so earned are, for example, shown as having earned from running a laundry shop. Thus, the money would appear to have a legitimate source and not a criminal one.