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  Aug 07, 2022


Q. Why is this in News?


The Directorate of Enforcement (ED) has registered 14,143 cases under FEMA and PMLA between 2019-20 and 2021-22 as compared to 4,913 cases in 2014-15 to 2016-17.

  • Year 2021-22 saw the highest number of money laundering and foreign exchange violation cases.


Q. What is Foreign Exchange Management Act, 1999?

  • The legal framework for the administration of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999.
  • Under the FEMA, which came into force with effect from 1st June 2000, all transactions involving foreign exchange have been classified either as capital or current account transactions.
    • Current Account Transactions:
      • All transactions undertaken by a resident that do not alter his / her assets or liabilities, including contingent liabilities, outside India are current account transactions.
        • Example: payment in connection with foreign trade, expenses in connection with foreign travel, education etc.
    • Capital Account Transactions:
      • It includes those transactions which are undertaken by a resident of India such that his/her assets or liabilities outside India are altered (either increased or decreased).
        • Example: investment in foreign securities, acquisition of immovable property outside India etc.
  • Resident Indians:
    • A 'person resident in India' is defined in Section 2(v) of FEMA, 1999 as:
      • Barring few exceptions, a person residing in India for more than 182 days during the course of the preceding financial year.
      • Any person or body corporate registered or incorporated in India.
      • An office, branch or agency in India owned or controlled by a person resident outside India.
      • An office, branch or agency outside India owned or controlled by a person resident in India.


Q. What is the Prevention of Money Laundering Act, 2002?


  • It forms the core of the legal framework put in place by India to combat Money Laundering.
  • The provisions of this act are applicable to all financial institutions, banks (Including RBI), mutual funds, insurance companies, and their financial intermediaries.
  • PMLA (Amendment) Act, 2012:
    • Adds the concept of ‘reporting entity’ which would include a banking company, financial institution, intermediary etc.
    • 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.