The Full Form of ‘PMLA’ in Banking is ‘Prevention of Money Laundering Act’.
Full Form of PMLA
When it comes to financial transactions, the Prevention of Money Laundering Act (PMLA) is a crucial piece of legislation in India. The PMLA was first introduced in 2002 as an Act to prevent money laundering and provide for confiscation of property derived from money laundering activities. The Act applies to all banking entities, including banks, financial institutions, non-banking finance companies (NBFCs), and insurance companies.
Money laundering refers to processing or transferring illegally obtained funds through legitimate financial channels so that the illicit origin of the money is obscured. This illegal activity is often used by criminals to fund their operations or hide profits from criminal activities such as drug trafficking and terrorism.
The PMLA provides for stringent measures against money laundering by introducing preventive measures such as requiring customer identification for banking transactions, monitoring suspicious transactions, and imposing reporting obligations on banks and other financial institutions. It also allows for the investigation and prosecution of persons involved in money laundering activities. The government has set up the Financial Intelligence Unit (FIU) as a central agency responsible for receiving, processing, analyzing, and disseminating information relating to suspicious transactions reported by banks and other financial institutions.
Under the PMLA, banks are required to establish internal systems and controls to ensure compliance with anti-money laundering regulations. They must identify customers who conduct transactions involving large sums of money by verifying their identity documents and obtaining details about the source of funds used for such transactions. Banks must also report any suspicious activity that may indicate potential money laundering activities to FIU-IND within 7 days of detecting it. Furthermore, banks must maintain records about their customers’ accounts for at least 5 years after closing them.
The PMLA also establishes penalties for those who are found guilty of engaging in money laundering activities or failing to comply with its provisions. Penalties can range from monetary fines to imprisonment depending on the severity of the offence committed.
Overall, the PMLA is an important piece of legislation which helps protect the Indian economy by deterring individuals from engaging in illegal activities such as money laundering which could have serious repercussions on our society’s economic stability if left unchecked. By ensuring compliance with anti-money laundering regulations among banking entities and providing stringent penalties against offenders who violate its provisions, PMLA serves as an effective tool against criminals trying to use our banking system for illicit purposes
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