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An Ordinary Person’s Guide to PMLA

By Newsd
Updated on :

On the evening of 8th November, when the PM announced demonetization of the currency notes of 500 and 1000 denomenations, amongst several arguments on why of this news, was an intention to shock black money hoarders. I innocently assumed then that for the benefit of poor Jan Dhan Yojna account holders, someone from government will write a quick guide to prevention of money laundering act. The nation witnessed that common man and woman queuing up in order to surrender and exchange the notes at bank branches and post offices. After a week’s time, suddenly we heard the announcement that government suspects that some persons had suddenly found a new employment of standing in queue repeatedly (and some time in front of several bank branches in the same working day) to exchange currency notes on behalf of some big fish. Indelible ink was presented as an answer to prevent this menace.

While one can go on and on discussing ever changing rules around the operations at bank branches; in this article we present an ordinary person’s guide to prevention of money laundering act.

  • When the amendment bill was discussed by parliamentary standing committee, it was recommended that there should be planning and coordination between the enforcement agencies on the generation of black money. Committee had also suggested that there should be a status report based on the existing framework, its efficacy and measures taken by the Department of Revenue to check the generation of unaccounted money.
  • Parliamentary standing committee was also of the view that “department of Revenue should take into account the incidents of trade based money laundering (through the creative accounting trick of under-invoicing of exports and over-invoicing of imports).
  • The law requires reporting authorities (banks and FIs including chit funds, cooperative banks, housing finance companies and non-banking financial entities) to keep records of every transaction that appears to be suspicious (even if such a transaction is not in the form of cash transaction). Usually, these reporting authorities report to Financial Intelligence Unit of India information of cash transactions exceeding Rs 10 lakh.
  • The law prescribes that any person found guilty of money-laundering shall be punishable with rigorous imprisonment from three years to seven years. In addition, such a person could be liable to pay fine upto Rs 5 lakh under the provisions before 2012. An amendment in 2012, has done away with the upper ceiling on the quantum of the fine.

Has the demonetization instilled fear about the provisions of PMLA? In several high rhetoric and emotional melodramatic speeches the PM has been claiming that black money hoarders have lost the sleep, while the honest citizens are participating joyously in the festival of honesty.

For a very ordinary person like me the litmus test of this was to investigate if the demonetized currency was still being transacted in market for ‘purchases other than those that were exempted’? A big retail shop that I often visit had not put the customary “As per Government announcement we are not accepting cash payments in the form of currency notes of 500 and 1000”. I usually pay at this store through debit card, but I asked the person at counter, if I can pay through cash by notes in 500 or 1000. Without blinking an eye, an answer was on offer, “yes, we will take 500 rupee note, if your bill is above 300 rupee”. Mind well, no commission, not hint of whitewashing an unaccounted money, just an emotion to be extra kind to one’s customers.

Few days later, in a swanky mall in a state capital, I walked into shopping mall and a store of a big firm dealing into electronics items. In a casual conversation with the salesman, I asked if demonetization had impacted their sales. A man in his twenties probably surprised me, when he started to unravel the going rate for whitewashing and pumping into the system the unaccounted for money by accepting the demonetized currency note at a ‘discounted value’ rather than at a ‘face value’ that you will get, if you stand in que, give details of your identity and deposit those currency notes. The poor young boy was probably on a high thinking about the post-demonetisation ‘achhe din’ for his business.

There is a lot of talk about the sudden drying up of cash liquidity in the market and probably the ever changing rules and the limits imposed on cash withdrawals, as well as bringing some more commodities under exempted category reflect on the intention of the government to get the economy going. However, we need to ask if it is scoring self-goals and defeating the purpose of wiping out black money. The other day, we were told that now one can also exchange the demonetized currency note of 500 to buy a prepaid talk time. So has the government put in place the mechanism to ensure that all such purchases of prepaid talk-time coupons will be reported by telecom companies?  What are the chances that recharge coupons will not be hoarded in a similar fashion in gunnysacks and show boxes the way, those currency notes were hoarded? Unlike essential commodities like onions and tomatoes, the prepaid talktime is not a perishable commodity and unlike medicines it doesn’t have an expiry date. So what is the guarantee that these will not be hoarded now and come back in market at a later date having white washed the unaccounted money?

Even as I kept postponing the thought of writing on the paradox of PMLA being the least feared law on the nooks and corners of the country in demonetization times, a recent statistics released by Reserve Bank of India says that more than half of the value of demonetized currency has found its way to banks. Close on the heels of this announcement there is a second edition of amnesty scheme that is proposed. So where are we going? Was I too naïve to think that those indulging in black activities will suddenly go ‘out of business’ and PMLA would be the most feared law?

Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NEWSD and NEWSD does not assume any responsibility or liability for the same.