Measures for Smooth Disbursal of Funds Under PMGKY

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.

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 (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.

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