PMLA

1. Context 

2. About PMLA

• The Anti-money laundering legislation was passed by the National Democratic Alliance government in 2002 and came into force on July 1, 2005.
• The PMLA was showcased as India's commitment to the Vienna Convention on combating money, drug trafficking and countering the financing of terror (CFT).
• The law was aimed at curbing the process of converting illegally earned money into legal cash.
• The Act empowered the Enforcement Directorate (ED) to control money laundering, confiscate property and punish offenders.
• ED recorded around 5,422 cases, attached proceeds to the tune of ₹ 1,04,702 crores (approx), filed Prosecution Complaints in 992 cases resulting in the confiscation of ₹ 869. 31 crores and convicted 23 accused persons under PMLA by the end of March 31, 2022.

3. Effect on crypto

• The gazette notification by the Ministry brings cryptocurrency transactions within the ambit of PMLA.
• This means that Indian crypto exchanges will have to report any suspicious activity related to buying or selling of cryptocurrency to the Financial Intelligence Unit-India (FIU-IND).
• This central agency is responsible for receiving, processing, analysing and disseminating information related to suspicious financial transactions to law enforcement agencies and overseas FIUs.
• In its analysis, if the FIU-IND finds wrongdoing, it will alert the ED.
• Under Sections 5 and 8 (4) of the Act, the ED has discretionary powers to search and seize suspected property without any judicial permission.

4. Reasons for tightening the digital trade

• For a little more than a decade, cryptocurrencies, non-fungible tokens (NFT) and other digital assets enjoyed a regulation-free environment.
• But, in the past couple of years, as the use of digital assets has gone mainstream, regulators have turned hawkish.
• The value of all existing cryptocurrencies is about $804 billion as of January 3, 2023.
• It is about twice the GDP of Singapore in 2021.
• In India, over 10 crore Indians have invested in cryptocurrencies.
• The illegal use of cryptocurrencies hit a record $ 20.1 billion last year. 
• Transactions associated with sanctioned entities jumped over 1, 00, 000-fold, making up 44 per cent of last year's illegal activity.

5. Tools used to track money laundering via crypto transactions

• Tracking money trail in cryptocurrency transactions may require new tools and approaches as such transfers differ fundamentally from traditional banking channels.
• FIUs may be familiar with Know Your Customer (KYC) or Customer Due Diligence (CDD) norms.
• But the technological nature of VDAs presents a new challenge in gathering information.
• This requires the intelligence unit to broaden its intelligence framework.

6. Regulations in other Countries

• The Global Crypto Regulations Report 2023 a large proportion of countries are at various stages of drafting regulations around crypto.
• Most countries have already brought digital assets under anti-money laundering laws.
• Singapore, Japan, Switzerland and Malaysia have legislation on the regulatory framework.
• The U.S., U.K., Australia and Canada have initiated plans for regulation.
• So far, China, Qatar and Saudi Arabia have issued a blanket ban on cryptocurrency.
• The EU is also preparing a cross-jurisdictional regulatory and supervisory framework for crypto-assets.
• The framework seeks to provide legal clarity, consumer and investor protection and market integrity while promoting innovation in digital assets.

7. The Changes imply

• The new clause in the rules for PMLA compliance defines "Politically Exposed Persons" as individuals who have been entrusted with prominent public functions by a foreign country, including the heads of State or Governments, Senior politicians, Senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials.
• The amendment is about foreign PEPs and not domestic ones.
• The move to define politically exposed persons under PMLA is to bring uniformity with a 2008 circular of the RBI for KYC norms/Anti-money laundering standards for banks and financial institutions, which had defined PEPs in line with FATF norms.
• PEP has already been in the RBI's master circular, in line with FATF.
• The definition has now been given in the PMLA rules so that the same definition is applicable everywhere.

8. Significance of the FATF-related changes

• The amendments assume significance ahead of India's proposed FATF assessment, which is expected to be undertaken later this year.
• India's assessment is likely to come up for discussion in the plenary discussion in June, while the possible onsite assessment is slated for November.
• Due to the pandemic and the pause in the FATF's assessment process, the fourth round of mutual evaluation of India had been postponed to 2023.
• Before this, the FATF had undertaken an evaluation for India in June 2010.
• The FATF, which is the global money laundering and terrorist financing watchdog, has 40 recommendations.
• In its recommendations, the FATF states that financial institutions should be required to have appropriate risk-management systems to determine whether a customer or beneficial owner is a domestic PEP or a person who is or has been entrusted with a prominent function by an international organisation.
• The broader objective is to bring in legal uniformity and remove ambiguities before the FATF assessment.
• The 40 recommendations cover seven areas and provide a framework of measures.
• This is to help countries tackle illicit financial flows through laws, regulations and operational measures to ensure authorities can take action to detect and disrupt financial flows that fuel crime and terrorism.

1. Policies and coordination;
2. Money laundering and confiscation;
3. Terrorist financing and financing of proliferation;
4. Preventive measures;
5. Transparency and beneficial ownership of legal persons and arrangements
6. Powers and responsibilities of competent authorities and other institutional measures and
7. International cooperation.

9. Other Changes in the PMLA rules

• The Amended rules have also lowered the threshold for identifying beneficial owners by reporting entities, where the client is acting on behalf of its beneficial owner, in line with the Companies Act and Income-tax Act.
• The term "beneficial owner" was defined to mean ownership of or entitlement to more than 25 per cent of shares or capital or profit of the company, which has now been reduced to 10 per cent, thereby bringing more indirect participants within the reporting net.
• Also, reporting entities are now required to register details of the client if it's a non-profit organisation on the DARPAN portal of NITI Aayog.
• Every Banking Company or Financial Institution or intermediary, as the case may be, shall register the details of the client, in case of the client is a non-profit organisation, on the DARPAN portal of NITI Aayog, if not already registered and maintain such registration records for five years after the business relationship between a client and a reporting entity has ended or the account has been closed, whichever is later.
• The definition of a non-profit organisation has also been amended and linked to the definition of charitable purpose provided under Section 2 (15) of the Income-tax Act 1961 to include any entity or organisation, constituted for religious or charitable purposes under I-T Act, that is registered as a trust or society under the Societies Registration Act or any similar state legislation or a company registered under the Companies Act.
• The due diligence documentation requirements, which were until now limited to obtaining the basic KYCs of clients such as registration certificates PAN copies and documents of officers holding an attorney to transact on behalf of the client have now been extended.
• It now includes the submission of details such as names of persons holding senior management positions, names of partners, names of beneficiaries, trustees, settlors and authors, as the case may be, depending upon the legal form of the organisation.
• Also, the details of the registered office address and principal place of business are now required to be submitted by clients to financial institutions, banking companies or intermediaries.

For Prelims & Mains

HARAPPAN CIVILISATION

 

1. Context

Since the discovery of Harappan sites at Lothal, located in the Bhal region of Gujarat, in the 1950s, archaeologists have been divided on whether a dockyard existed at the location during the Indus Valley Civilisation

 

2. Harappan Civilisation

• The Harappan/ Indus Valley civilization was the first urban civilization in South Asia, contemporaneous with the civilizations of Mesopotamia and Egypt.
• It was larger than ancient Egypt and Mesopotamia civilizations. First site excavated: Harappa site by Dayaram Sahni in 1921.
• John Marshall: first scholar to use the term Indus Civilisation. Most accepted timeline: 2500 BC-1750 BC (Carbon-14 Dating).
• Period: India Civilization belongs to the proto-historic period- Chalcolithic Age/Bronze Age. Heartland of Indus Civilization: Harappa-Ghaggar- Mohenjo Daro axis.
• Indus sites found in Afghanistan: Shortughai and Mundigaq.
• Capital cities: Harappa, Mohenjodaro.
• Port cities: Lothal, Sutkagendor, Allahdino, Balakot, Kuntasi.
• Areas covered: Harappan civilizationtion was triangular in shape and was the largest among the three ancient urban civilization the other two being ancient Egypt and Mesopotamia (present-day Iraq). It roughly covers modern day Rajasthan, Punjab, Haryana, Gujarat, and Pakistan.
• Father of Indian archaeology: Alexander Cunningham, the first Director-General of the Archaeological Survey of India (ASI).

Image Source: WEB

3. Four phases of Indus Valley Civilisation (IVC)

3.1 Pre-Harappan Phase from 7000 to 3300 BCE

• This stage is located in eastern Balochistan.
• Excavations at Mehrgarh- northwest of Mohenjodaro reveal the existence of Pre- Harappan culture.
• The earliest evidence of farming and herding is in South Asia.
  This shows the first evidence of cotton cultivation. Nomadic people began to lead settled agricultural life.

3.2 Early Harappan Phase from 3300 to 2600 BCE

• Characterized by rudimentary town planning in the form of muddy structures and elementary treat hearts and craft
• Also related to Hakra Phase, identified with the Ghaggar-Hakra valley.
• Village settlements in plain areas; Gradual growth of towns in Indus Valley.
• The transition from rural to urban life in this period.
• Indus script dates back to 3000 BC (This script is still undeciphered) Sites of Amri and Kot diji remain evidence for this stage.

3.3 Mature Harappan Phase from 2600 to 1900 BCE

• Marked by a well-developed town with a burnt brick structure established foreign trade crafts of various types.
• Excavation at Kalibangan with its elaborate town planning and urban features proves this the phase of evolution.
• Slow southward migration of the South Asian monsoon allowed villages to develop by taming floods of the Indus and tributaries.

3.4 Late Harappan Phase from 1900 to 1300 BCE

• It was the declining phase. During this several cities were abandoned and the trade disappeared.
• A gradual decay of significant urban Traits is noticed. Reduction in rainfall triggered a reorganization into large urban centers.
• Mature Harappan civilization was an ‘a fusion of the Bagor, Hakra, and Kot Diji traditions on Borders of India and Pakistan’- According to D.A. Lichtenstein
• Large urban centers include Harappa, Ganeriwal, Mohenjodaro, Dholavira, Kalibangan, Rakhigarhi, Rupar, and Lothal. Excavation at Lothal revealed this stage of evolution.
• Multiple regional cultures emerged within the area of IVC: Culture was in Punjab, Haryana, Western UP; Jhukar culture in Sindh, Rangpur culture was in Gujarat.
• The latest phases of Harappan culture are Pirak in Balochistan, Pakistan, and Daimabad in Maharashtra.
• The largest late Harappan sites are Kudwala in Cholistan, Bet Dwarka in Gujarat, and Daimabad in Maharashtra

4. Town planning and structure

• The towns were in a rectangular grid pattern with roads at right angles. Used burnt mud bricks joined with gypsum mortar (contemporary Egyptian dried bricks were used).
• The city was divided into two parts, the city on a raised platform, known as Upper Citadel & the lower town known as Lower Citadel (working-class quarters).
• A fortified citadel was found, except in Chanhudaro. Most buildings have private wells and properly ventilated bathrooms.
• Do not have large monumental structures such as temples or palaces for rulers, unlike Egyptian and Mesopotamian Civilization.
• Evidence of an Advanced drainage system. At sites such as Dholavira and Lothal (Gujarat), the entire settlement was fortified, and sections within the town were also separated by walls.
• The Citadel within Lothal was not walled off but was built at a height.

5. Agriculture

• Main crops: Wheat and Barley. Evidence of the cultivation of rice in Lothal and Rangpur (Gujarat) only.
• Other crops: Dates, Mustard, Sesamum, Cotton, Rai, Peas, etc.
• First to produce cotton in the world and used it for textiles, Called Sindon by the Greeks.
  Used animal-drawn wooden plough, and stone sickles.
• Gabarbands or Nalas enclosed by dams were found but channel or canal irrigation was
  probably not practiced.
• Produced sufficient food grains and cereals were received as taxes from peasants and stored in granaries for wages and emergencies same as in Mesopotamia.

6. Domestication of Animals

• Animals: Oxen, buffaloes, goats, sheep, pigs, dogs, cats, asses, and camels domesticated.
• Humped bulls were favored by the Harappans. Neither horse centered nor were they aware of it, but evidence of horses is found in Surkotada, Mohenjo Daro, and Lothal.
• The lion was not known.  Elephants and Rhinoceros (Amari) were well known.

7. Technology and Craft

• This is known as the first urbanization in India. Along with stone, they were well acquainted with copper, silver, gold, and bronze (occasionally mixed arsenic with copper instead of tin).
• Iron was not known to the people.
• Important crafts: spinning (Spindle whorls), bricklaying, boat-making, seal making, terracotta manufacturing (potter’s wheel), goldsmiths, bead making.
• They were aware of the use of the wheel.

8. Trade and Commerce

• The importance of Trade is established by the presence of Granaries, seals, a uniform script, and regulated weights and measures.
• They engaged in inter-regional as well as foreign trade. Sumerian texts refer to trade relations with Meluha i.e. ancient name given to the Indus region & mentions two intermediate trading stations- Dilmun (Bahrain) & Makan (Makran coast).
• Used boats and bullock carts for transportation. No metallic money was in circulation and trade was conducted by means of barter.
• Import: Gold, Silver, Copper, Tin, Jade, Steatite.
• Exports: Agricultural products, cotton goods, terracotta figurines, beads from Chanhudaro, conch-shell from Lothal, ivory products, copper, etc.

9. Social Organisations

• Hierarchy in urban habitation. Merchants and priests were an important class of this period.
• Harappans were fashion-conscious. Different hairstyles and wearing a beard were popular.
• The use of cosmetics was common (Cinnabar, lipstick, and collyrium) Necklaces, filets, armlets, and finger rings were worn by both men and women but bangles, girdles, anklets, and ear-rings were worn by women only.
• Beads were made from gold, copper, bronze, cornelian, quartz, steatite, lapis lazuli, etc. - naturalistic animal models as pin-heads and beads.

10. Religious Practices

• Seal: Male deity Pashupati Mahadeva (proto- siva), three-horned heads, and is represented in the sitting posture of a yogi, surrounded by an Elephant, Tiger, Rhinoceros, and Buffalo, and two deer at his feet.
• Harrapan was a predominantly secular civilization. Prevalence of the Phallus (Lingam) and Yoni, two deer.
• The chief female deity was the mother Goddess. They worshiped both male and female deities.
• The people of the Indus region also worshiped trees (pipal), fire, and animals (unicorns, humped bulls, etc).
• Harappans believed in ghosts and evil forces. They used amulets against them.
• Burials: At burials in Harappan sites the dead were generally laid in pits. Some graves contain pottery and ornaments, perhaps indicating a belief that these could be used in the afterlife.
• Jewelry has been found in the burials of both men and women.

11. Seals and Sealings

• Most of the seals are square-shaped (2x2 square inches) and made mostly from Steatite.
• Seals had an animal (except cow and horse) or human figure on one side and an inscription on the opposite side or inscriptions on both sides.
• Seals were primarily used for commercial purposes, as an amulet, as a form of identification, and for educational purposes as well.
• Seals with symbols similar to the Swastika design have also been found. The round Persian Gulf seal found in Bahrain sometimes carries Harappan motifs.
• Interestingly, local Dilmun weights followed the Harappan standard. 

Image Source: Web

12. Art

• Bronze Casting: Practiced on a wide scale using the lost wax or Cire Perdue technique. They mainly consist of human and animal figures. Example: Dancing Girl. She stands in a Tribhanga dancing posture.
• Stone Statues: Bearded man: found in Mohenjo- daro and made of Steatite, interpreted as a priest.
• Red sandstone: a figure of a male torso is found in Harappa and made of Red sandstone.
• Terracotta Figures: Found less in number and crude in shape and form. Examples: Mother Goddess, the mask of a horned deity, toys, etc.

13. The Decline of Indus Valley Civilisation

The IVC declined around 1800 BCE but the actual reasons behind its demise are still debated between:

• Aryan Invasion: One theory claims that Indo-European Tribe i.e., Aryans invaded and conquered the IVC.
• Natural Factors: On the other hand, many scholars believe natural factors are behind the
  decline of the IVC.
• The natural factors could be geological and climatic.
• It is believed that the Indus Valley region experienced several tectonic disturbances which
  causes earthquakes. Which also changed the course of rivers or dried them up.
• Another natural reason might be a change in patterns of rainfall or it could have been due to a combination of these natural and anthropogenic causes.

For Prelims: Indus Valley Civilisation, Pre-Harappan Phase from 7000 to 3300 BCE, Early Harappan Phase from 3300 to 2600 BCE, Mature Harappan Phase from 2600 to 1900 BCE, and Late Harappan Phase from 1900 to 1300 BCE, Lothal, Sutkagendor, Allahdino, Balakot, Kuntasi. For Mains: Discuss the phases of the Indus Valley Civilisation and explain the Political and Social life during the Indus Valley civilization. (250 Words).

Previous year Questions

1. Regarding the Indus Valley Civilization, consider the following statements: (UPSC 2011) 1. It was predominantly a secular civilization and the religious element, though present, did not dominate the scene. 2. During this period, cotton was used for manufacturing textiles in India. Which of the statements given above is/are correct? A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2 Answer: C

Source: World History Encyclopedia