Measures for Smooth Disbursal of Funds Under PMGKY

• 07 Apr 2020

Why in News

Recently, the Ministry of Finance has tweaked Prevention of Money Laundering (PML) norms with the aim to make all inoperative bank accounts functional.

• This is to ensure that cash transfers by the government under the COVID-19 relief package (Pradhan Mantri Garib Kalyan Yojana (PMGKY) scheme) reach beneficiaries.

Key Points

• As a part of the Pradhan Mantri Garib Kalyan Yojana (PMGKY) scheme, the government has decided to transfer ₹500 per month for three months to the poor and vulnerable sections of the society whose livelihood has been impacted due to the nationwide lockdown.
• The PML norms have been tweaked to ensure that beneficiaries are able to withdraw the money transferred to them by the government without any problems or requirement of additional documentation.
• The Rules have been amended in respect of
  • The Pradhan Mantri Jan Dhan Yojana accounts.
  • Basic savings account and small accounts.
  • Those accounts which have become inoperative due to various reasons including Non-completion of Know Your Customer (KYC) requirements or updation.
• Accounts that may have become dysfunctional due to non-operation in the account for the last two years have also been made functional.
• The Finance Ministry had also requested the Ministry of Home Affairs for adequate security personnel at bank branches and with the business correspondents
  • This is to maintain law and order, and social distancing, in view of the higher customer footfall expected for cash withdrawals after the transfers are made.

Money laundering

• It is the concealing or disguising the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources.

Round Tripping of Funds

• Round tripping refers to money that leaves the country through various channels and makes its way back into the country often as foreign investment.
• This mostly involves black money and is allegedly often used for stock price manipulation.

Prevention of Money-Laundering Act

• Prevention of Money-Laundering Act (PMLA), 2002 deals with money laundering and has three main objectives :
  • To prevent and control money laundering.
  • To provide for confiscation and seizure of property obtained from laundered money.
  • To deal with any other issue connected with money-laundering in India.
• Under the PMLA Act, the Enforcement Directorate is empowered to conduct a Money Laundering investigation.
• PMLA (Amendment) Act, 2012
  • Adds the concept of ‘reporting entity’ which includes a banking company, financial institution, intermediary etc.
  • It prescribes obligation of banking companies, financial institutions and intermediaries for
    • Verification and maintenance of records of the identity of all its clients and also of all transactions.
    • Furnishing information of such transactions in prescribed form to the Financial Intelligence Unit-India (FIU-IND).
      • It empowers the Director of FIU-IND to impose fine on banking company, financial institution or intermediary if they or any of its officers fails to comply with the provisions of the Act as indicated above.
  • PMLA, 2002 levied a fine up to Rs 5 lakh, but the amendment act has removed this upper limit.
  • It has provided for provisional attachment and confiscation of property of any person involved in such activities.

Financial Intelligence Unit-India

• FIU-IND is a central, national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions to enforcement agencies and foreign FIUs.
• It was set up in 2004.
• It is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.

Source: TH