Prevention of Money Laundering Act (PMLA), 2002

22 May 2024 Prevention of Money Laundering Act (PMLA), 2002

THIS ARTICLE COVERS ‘DAILY CURRENT AFFAIRS’ AND THE TOPIC DETAILS OF ”Prevention of Money Laundering Act (PMLA), 2002”. THIS TOPIC IS RELEVANT IN THE “Political Science” SECTION OF THE UPSC CSE EXAM. 

Why in the News?  

The Supreme Court recently ruled that once a special court acknowledges a chargesheet submitted under the Prevention of Money Laundering Act (PMLA), the Enforcement Directorate (ED) no longer has the power to detain the accused. This decision curtails the ED’s arrest capabilities and underscores the importance of safeguarding individual freedom. 

The decision emanated from challenging the Enforcement Directorate by appealing a decision from the Punjab and Haryana High Court, which had refused anticipatory bail. The legal debate centred on whether an accused could seek bail under the standard Code of Criminal Procedure (CrPC) protocols.  

Key Points Of Supreme Court Ruling on PMLA Arrest Norms: 

• The Supreme Court underscored the importance of personal liberty, declaring that when a designated special court summons individuals under the Prevention of Money Laundering Act (PMLA), they are not deemed to be in custody. Consequently, they are not obligated to seek bail under the stringent conditions imposed by the PMLA.
• The Court determined that merely responding to a summons and appearing before a special court does not equate to being in custody. As a result, there is no need to apply for bail.
• The ruling limits the Enforcement Directorate’s (ED) power to detain individuals once a special court has recognised a case. For custody, the ED is required to make a separate application and provide concrete reasons for the necessity of custodial interrogation.
• The Court indicated that the Special Court has the authority to demand that the accused submit bonds by Section 88 of the Code of Criminal Procedure. It was further clarified that providing a bond represents a commitment and should not be confused with granting bail. Consequently, the strict dual requirements outlined in Section 45 of the PMLA are not applicable in the context of bond provision.
• The Supreme Court underscored the strict bail requirements per Section 45 of the PMLA. According to it, the accused must demonstrate their initial innocence and convince the Court of their commitment not to engage in further illegal activities while out on bail, thereby imposing a heavy proof burden on the defendant.

About Section 45 of the PMLA. 

According to Section 45 of the PMLA, bail can be granted to an accused in a money laundering case only if twin conditions are satisfied: 

1. Imposing Stringent Bail Conditions: It imposes rigorous bail conditions, requiring the accused to prove their innocence.
2. Ensuring No Offences While on Bail: The accused must assure the court that they will not engage in criminal activity while released on bail. 

What is the Prevention of Money Laundering Act (PMLA) 2002? 

• • The Prevention of Money Laundering Act, 2002 (PMLA) was established to curb money laundering activities and permit the seizure of assets obtained through such illegal practices. Its primary mission is to tackle the laundering of money associated with illicit undertakings like drug trafficking, smuggling, and financing of terrorism. 
  • According to Section 3 of the Act, an individual commits money laundering if they, directly or indirectly, engage in, support, participate in, or are implicated in any action or procedure associated with crime proceeds while presenting such proceeds as legitimate. Such an individual shall be deemed guilty of the money laundering offence.

• The Act was established with the following objectives: 
• • To prevent money laundering; 
  • To fight against and stop the diversion of funds into illicit endeavours and economic offences; 
  • To enable the seizure of assets obtained from, or implicated in, money laundering; 
  • To impose penalties on those guilty of money laundering infractions; 
  • To designate an adjudicating authority and an appellate tribunal to oversee matters related to money laundering and
  • To address issues related and ancillary to the phenomenon of money laundering. 
• The Prevention of Money Laundering Act underwent several amendments, starting with the Prevention of Money Laundering (Amendment) Act in 2009, followed by another amendment in 2012. It was further updated through amendments introduced by the Finance Acts of 2015, 2018, and, most recently, 2019. 
• The 2019 amendments to the Prevention of Money Laundering Act introduced a new provision, Rule 3A, which allows the Special Court to issue a public notice in newspapers. This notice invites individuals who can prove a legitimate interest in properties that have been attached, seized, or frozen to come forward and present their claims for restoration following the formal accusation of charges. 
• Section 25 of the PMLA establishes an Appellate Tribunal, which is empowered to hear appeals against the decisions made by the Adjudicating Authority. 

Concerning Regarding PMLA:

• Overreach and Misuse of Powers: The PMLA’s broad definitions can cause unwarranted scrutiny of legitimate entities due to vague connections to money laundering. The ED’s significant powers under the PMLA, such as property attachment and arrests, have faced criticism for potential misuse and concerns over personal liberty violations.
• Procedural Concerns: Cases under the PMLA can result in extended legal battles and financial strain for those accused. Proving innocence against money laundering charges, especially in complex transactions, can be difficult, challenging the principle of “innocent until proven guilty.” 
• Impact on Businesses: Financial institutions must adhere to the PMLA’s demanding reporting and record-keeping rules to combat money laundering. Still, these requirements can significantly burden businesses and discourage investment due to their strictness and the fear of unpredictable enforcement. 
• Human Rights Concerns: The practice of authorities temporarily seizing properties without swift judicial review may infringe upon property rights. There are cases where such actions have disrupted the lives and operations of people and enterprises, with slow access to legal redress. Under the PMLA, certain offences warrant arrest without the option for bail, potentially leading to prolonged detention before trial. These issues highlight the potential violation of individual liberty and the principle of fair trial. 

CONCLUSION: 

The Prevention of Money Laundering Act (PMLA) of 2002 is a pivotal law aimed at deterring money laundering activities in India. It is in harmony with international norms and showcases India’s dedication to combating economic offences and maintaining the robustness of its financial architecture. The PMLA is indispensable in the fight against money laundering and upholding the financial system’s integrity. Nevertheless, addressing specific concerns is vital to boost its efficiency and fairness. Striking a balance between strict enforcement and the protection of individual rights and commercial interests is crucial for fulfilling the objectives of the Act without causing adverse side effects. 

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Prelims Practice Question:

Q. Consider the following statements: 

1. Section 25 of PMLA establishes an Appellate Tribunal to hear appeals against the Adjudicating Authority’s orders. 
2. India’s Parliament enacted the PMLA under Article 253, which empowered it to make laws for implementing international conventions. 

Which of the statements given above is/are correct?

A. Only

B. Only

C. Both 1 and 2

D. Neither 1 nor 2

ANSWER: C

Mains Practice Question: 

Q. Discuss the ethical considerations guiding PMLA enforcement to ensure it does not disproportionately impact economically disadvantaged or marginalized groups. What mechanisms should be under the PMLA to ensure transparency and accountability in the surveillance and investigation of financial transactions?

Amit Pradhan

I have the experience to guide and write the content for the  UPSC, and PCS Aspirants in preparing for the Civil Service Exam.  Currently Working as a content developer in Yojna IAS.