Benami Transaction (Prohibition) Act 1988

The Supreme Court of India recently declared Section 3(2) of the Benami Transactions (Prohibition) Act 1988 unconstitutional, citing its manifestly arbitrary nature.

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Recent Context

The Supreme Court of India recently declared Section 3(2) of the Benami Transactions (Prohibition) Act 1988 unconstitutional, citing its manifestly arbitrary nature.

About the act

Definition of Benami Transaction: The Act defines a benami transaction as a transaction where a property is held by or transferred to one person, but the consideration for the property is provided by another person, and the property owner denies knowledge of ownership or the transaction involves a fictitious name.

Concern Related to Benami Property act

Misuse for political or personal vendettas.
Lack of clear guidelines leading to ambiguity and potential misuse.
Possibility of harassment and wrongful property confiscation.
Need for stringent evidence and due process.
Balancing benami transaction prevention with rights protection.
Importance of safeguards, transparency, and accountability.

Way forward

Establish clear guidelines and regulations.
Strengthen investigation mechanisms and resources.
Conduct awareness campaigns to educate the public.
Ensure robust legal safeguards for rights protection.
Foster collaboration and information sharing.
Establish dedicated courts for efficient adjudication.
Foster international cooperation against cross-border transactions

Conclusion

Money laundering has been a major worldwide issue and it will continue to become even a bigger threat if the right regulations are not followed strictly. The annual losses by money laundering are equal to 2-5% of the global economy. Banks and financial institutions need to follow AML regulations set up by international financial associations.