The History, Need And Impact Of Prevention Of Money Laundering Act, 2002

Anurag Singh & Diya Sharma, Manav Rachna University

ABSTRACT

Money laundering, the clandestine process of concealing the illicit origins of criminal wealth by integrating it into a respectable stream of finances. It is a serious crime of the modern era and can severely cripple the stability and integrity of global financial setup. This article gives an extensive insight into the history, need and importance of Prevention of Money Laundering Act (PMLA) of 2002, a revolutionary legislation framed and enforced by Government of India to counter this malevolent financial crime.

The article begins by tracing the historical roots of money laundering, which emerged alongside the rise of organized crime and the need to obscure the illicit sources of funds. It then delves into the complex three-stage process used in money laundering, which is placement, layering, and integration and shedding light on the more complex and difficult-to-detect methods that criminals are using every day to carry out their activities.

The study explores the negative role of money laundering in economic sectors and focuses on the multifaceted effects that include misalignment of monetary policies, undermining economic growth and eroding public trust while at the same time contributing to organized crime. In response to this global challenge, the article outlines the key international initiatives and the steps taken by the Government of India, including the enactment of the PMLA in 2002.

India's Prevention of Money Laundering Act emerges as a crucial legal instrument combating financial crimes. It clearly defines money laundering offenses and stipulates severe penalties. Additionally, it empowers law e- nforcement agencies with robust investigative powers. The Act has led to significant achievements, such as seizing substantial illegal proceeds and securing high-profile convictions. However, ongoing challenges persist, including the need to strengthen prosecution mechanisms and address conce- rns about potential misuse.