- Money Laundering is a heinous crime that not only affects the social and economic fabric of the country, but also encourages other serious crimes like terrorism and drug trafficking. This is a growing problem that needs to be addressed.
- In the Prevention of Money Laundering Act (PMLA) prepared in the year 2002, many important changes have been made from time to time to make it more powerful to deal with the crime of money laundering.
- A number of petitions have been filed across the country questioning the unfettered powers vested under the PMLA on the Enforcement Directorate (ED) to search, confiscate, investigate and attach properties deemed to be criminally acquired income.
Prevention of Money Laundering Act (PMLA), 2002
- Money laundering refers to the conversion of money that is illegally obtained through illegal sources and methods.
- It is a criminal act in India and the charges in this case refer to the statutory provisions of the Prevention of Money Laundering Act, 2002.
- PMLA was enacted in response to India’s global commitment (Vienna Convention) to combat the problem of money laundering. This includes:
- United Nations Convention against Illegal Trafficking in Narcotic Drugs and Psychotropic Substances, 1988
- Basel Statement of Principles, 1989
- Forty Recommendations of the Financial Action Task Force on Money Laundering, 1990
- Political Declaration and Global Action Program adopted by the United Nations General Assembly in 1990
- PMLA applies to all including individuals, companies, firms, partnership firms, associations or incorporations of persons and any agency, office or branch owned or controlled by any of the above.
Recent Amendments in PMLA
Clarification as to the status of income earned from offence:
- Proceeds of crime shall not only include property derived from a scheduled offence, but shall also include any other property obtained in connection with any criminal activity or by indulging in any criminal activity similar to that of a scheduled offence.
Changes in the definition of money laundering:
- Prior to this, money laundering was not an independent offence, but relied on other offences, known as predicate offenses or scheduled offences.
- The amendment seeks to treat money laundering as a specific offense in itself.
- Under Section 3 of the PMLA, that person will be charged with money laundering if that person is in any way directly or indirectly involved in the proceeds of the crime.
- Hiding Income
- To be used or offered as immaculate property
- Claiming as immaculate property
Continuing nature of the offence:
- This amendment further provides that a person shall be deemed to be involved in an offense of money laundering to the extent that the person is reaping the fruits of the activities relating to money laundering as the offense is of a continuing nature.
Concerns expressed about amendments to PMLA
Potential abuse of powers:
- There is a strong possibility that the PMLA may be used against a political opponent or adversary, as its action is in itself a punishment.
ECIR related issues:
- ECIR (Enforcement Case Information Report), which is similar to FIR, is considered an ‘internal document’ and is not handed over to the accused.
- During the whole process the accused is not even aware of the facts of the charge leveled against him, as the only document in which the charge is recorded is the ECIR which is not handed over to the accused persons.
Contrary to ordinary criminal law:
- PMLA is different from ordinary criminal law.
- In common criminal law each accused is presumed innocent until proven guilty.
- But in PMLA this burden is shifted on the accused persons to prove their innocence.
Forcing the accused to be a witness:
- Section 63 of the PMLA states that information has to be provided by the accused; false information or concealment of information shall be treated as another criminal act.
- Forcing the accused to be a witness against himself is a violation of the Right against Self-Incrimination.
- Enforcement Directorate’s conviction rate under this law is very low; while thousands of cases were registered, people were arrested and their lives were widely affected.
- According to the data quoted by the government in the Parliament of India, zero convictions were found between 2005 and 2013-14. From 2014-15 to 2021-22, out of 888 cases investigated by the ED, only 23 cases were convicted.
- The Enforcement Directorate is a specialized financial investigation agency functioning under the Department of Revenue, Ministry of Finance.
- In the year 1956, an ‘Enforcement Unit’ was formed in the Department of Economic Affairs to deal with the violation of the Exchange Control Act in the Department of Economic Affairs.
- In the year 1957, the name of this unit was changed to ‘Enforcement Directorate’.
The ED enforces the following laws:
- Foreign Exchange Management Act (FEMA), 1999
- Prevention of Money Laundering Act (PMLA), 2002
Supreme Court’s stand regarding amendment in PMLA
- A three-judge bench of the Supreme Court upheld the constitutional validity of the provisions of the PMLA and called it a ‘unique and special law’. It also outlined the ED’s powers to conduct inquiries, arrest people and attach properties.
- The Supreme Court in its judgment held that no comparison can be made between the PMLA and the Criminal Procedure Code (1973).
- The Court also said that it cannot be compared with the mechanism of the Code of Criminal Procedure with respect to prevention, investigation or trial in respect of a scheduled offence.
- The Court has also held that ECIR cannot be compared with FIR.
- Accepted internal document of ER to ECIR and held that it is not mandatory to hand over the copy of ECIR to the accused and it is sufficient to disclose the reasons only during arrest where he can only be informed of the grounds of arrest.