Prevention of Money Laundering Act (PMLA) 2002 and arrest of Chief Minister in India

28 Mar 2024 Prevention of Money Laundering Act (PMLA) 2002 and arrest of Chief Minister in India

Source – The Hindu and PIB.

General Studies Paper 2 – Polity and Governance

Why in the News?

• Recently, on March 22, 2024, a Delhi court sent Chief Minister Arvind Kejriwal to the custody of India’s central agency Enforcement Directorate (ED) till March 28, 2024 in the ‘Delhi Liquor Policy’ case.
• In the history of India’s democratic system, Arvind Kejriwal has become the first Chief Minister of the country to be arrested by India’s central agency Enforcement Directorate while holding the post of Chief Minister.
• India’s central agency Enforcement Directorate told the court that “Aam Aadmi Party (AAP) chief Arvind Kejriwal is the mastermind of the Delhi liquor policy scam and the mastermind and main accused of this scam.
• Prior to this case, Jharkhand Chief Minister Hemant Soren had resigned from the post of Chief Minister of Jharkhand before being arrested by the ED.

Background of Delhi Liquor Policy/ Delhi Excise Policy Scam :

• Two cases related to the Delhi Liquor Policy scam have been registered in India – one by the CBI, and the other by the Enforcement Directorate (ED) in a case of alleged money laundering.
• The Delhi Liquor Policy scam came to light following a report submitted by Delhi Chief Secretary Naresh Kumar to Lieutenant Governor Vinay Kumar Saxena in July 2022, which alleged procedural lapses in the formulation of the Delhi Excise Policy 2021 – 22.
• Delhi Excise Policy Case 2021 – 22 came into force in Delhi in November 2021, but this policy was abolished in July 2022.
• Under the Delhi Excise Policy Case 2021 – 22, it has been alleged that “the leaders of Aam Aadmi Party’s Delhi government have sought exemption from license fee from liquor mafia and operators associated with the liquor business and also to extend its period – – Bribes were taken by the Delhi government in lieu of providing preferential treatment such as relief due to the disruptions caused by the Covid-19 pandemic and the bribe money was used to fund assembly elections in Punjab and Goa in early 2022 and these This was done to influence the elections”.
• India’s central agency Enforcement Directorate also alleged that the scam was dictated by a policy of 12% profit in lieu of 6% kickback to give the wholesale liquor business to private individuals and entities instead of government shops designated by the Delhi government.

Meaning of Money laundering : 

• Money laundering is a process that transforms illegally earned money or black money in such a way that it appears to have been obtained from legitimate sources or it becomes legitimate money.
• Money laundering in India is not only an independent crime but also a process to cover up the crime of hiding black money already committed.
• Money laundering’ The term originated from mafia groups in the United States. Mafia groups earned huge amounts of money from extortion, gambling, etc. and this money was disguised as legitimate sources (e.g. laundromats). Money laundering became a concern in the United States around the 1980s.
• “Money Laundering” Popularly known as hawala transactions in India. It was most popular in India during the 1990s when the names of many leaders were exposed in it.
• Money laundering refers to disguising black money earned illegally as legitimate money. Money laundering is a way of hiding money obtained illegally.
• The money obtained through money laundering is invested in such works or in such investments that even the investigating agencies are not able to trace the main source of the money.
• It is said that a person who misappropriated money in the process of laundering money obtained illegally is a “launderer”.
• In the process of money laundering, black money earned through illegal means turns white and returns to its rightful owner in the form of legal tender.

Money Laundering : An Organized Crime :

• There is a very deep connection between money laundering and organized crime. Money launderers earn huge profits from drug trafficking, international counterfeiting, arms smuggling etc.
• The risk of criminals being caught is eliminated once these profits are converted into illegal assets through money laundering. In such situations, new crimes are committed.

Prevention of Money Laundering Act (PMLA) 2002 in India :

• The Prevention of Money Laundering Act (PMLA) was passed in 2002. After that this Act was implemented on 1 July 2005.
• PMLA – 2002 was enacted in response to India’s global commitment (Vienna Convention) to combat money laundering.
• The Money Laundering Act in India was enacted in 2002, but has been amended 3 times (2005, 2009 and 2012). The last amendment made in it in the year 2012 got the assent of the President on January 3, 2013 and this law came into force across India from February 15, 2013.
• The PMLA (Amendment) Act, 2012 has included concealment, acquisition and possession of money and use of proceeds of crime in the list of offenses.
• PMLA, RBI, SEBI and Insurance Regulatory and Development Authority (IRDA) were brought under PMLA in 2002 and hence all the provisions under this Act apply to all financial institutions, banks, mutual funds, insurance companies and their financial intermediaries. Are.
• According to PMLA – 2002 “Any person or entity who, directly or indirectly, attempts to engage or knowingly aids or knowingly is a party or is actually involved in any process or activity involving the proceeds of crime , including concealing, possessing, acquiring or using it and presenting it as untainted property or claiming it to be untainted property, he shall be guilty of the offense of money laundering”.
• The main objective of this Act is to prevent money laundering. Its objective is to prevent the use of black money in economic crimes, to seize property involved in or derived from money laundering and to curb other crimes related to money laundering. The Enforcement Directorate is responsible for investigating crimes under this Act.
• The provision of punishment under PMLA is: Under PMLA, property earned through the crime of money laundering is confiscated. Under this, there is a provision for rigorous imprisonment for at least 3 years to 7 years.

Central Bureau of Investigation (CBI) :

• The Central Bureau of Investigation (CBI) in India was established on 1 April 1963.
• The Central Bureau of Investigation is a major investigating agency of the Government of India.
• It has been established to investigate various types of cases related to criminal and national security in India.
• The Delhi Special Police Establishment (DSPE) is governed by the Act this in India
• its establishment of anti-corruption Santhanam Committee (1962-1964) Was done on the suggestions of.
• Presently CBI works under the Department of Personnel, Ministry of Personnel, Pensions and Public Grievances, Government of India.

Main functions of Central Bureau of Investigation (CBI) :

• The main function of the Central Bureau of Investigation in India is to investigate cases of corruption, bribery and misconduct by Central Government employees under the Prevention of Corruption Act against Indian officials, public sector undertakings, corporations and bodies owned or controlled by the Government of India.
• One of the main functions of the Central Bureau of Investigation in India is to investigate cases related to violation of fiscal and economic laws, i.e., cases related to violation of laws related to export and import controls, customs and central excise, income tax and foreign exchange regulations. To do. For example – bank related fraud. Matters relating to Foreign Exchange Violation, Counterfeit Indian Currency Notes and Import-Export in India.

Enforcement Directorate :

• The Enforcement Directorate was established by the Central Government in 1956 In India. 
• It is a special financial investigation agency under the Department of Revenue, Ministry of Finance, Government of India, whose headquarters is located in New Delhi.
• The major functions of the Enforcement Directorate include; Involves investigating cases related to violations of FEMA, 1999, “Hawala” transactions and violations of foreign exchange rules and other types of violations under FEMA.
• The Enforcement Directorate is a multi-disciplinary organization set up to investigate the crimes of money laundering and violations of foreign exchange laws.
• Money laundering in India was earlier dealt with under the provisions of the Foreign Exchange Regulation Act, 1973 but later FERA was replaced by FEMA.

Main functions of Enforcement Directorate :

The main functions of the Enforcement Directorate are as follows –

The Enforcement Directorate in India investigates cases related to suspected violations under the provisions of FEMA. The following cases have been included in cases relating to suspected cases of violation of laws in India:– 

1. Overestimating the export price and underestimating the import price.
2. Transactions done under Hawala.
3. Buying property abroad outside India.
4. Illegal collection of large amounts of foreign currency.
5. Illegal trading in foreign currency.
6. Matters relating to violation of foreign exchange rules and other types of violations under FEMA.

• The Enforcement Directorate (ED) in India first collects intelligence regarding a case of violation under FEMA’s 1999 laws, and then shares it with case-related agencies in India. The Enforcement Directorate in India receives intelligence and secret information from complaints etc. through the intelligence agencies of the Center and the state concerned.
• The Enforcement Directorate in India has the power to attach or confiscate the property of those found guilty of violating FEMA.
• “Attachment of property” under Chapter III of the Money Laundering Act [Section 2 (1) (D)] means confiscation of property, includes transfer or conversion of property to another person and prohibition of sale of the said property; Is.
• Against those who violate this rule under the Money Laundering Act; It also includes carrying out search, seizure, arrest, and prosecution actions etc.
• The Money Laundering Act provides for the legal extradition of criminals from the respective states for the transfer of money laundering as well as completion of proceedings related to the transfer of criminals.
• The Enforcement Directorate in India is empowered to adjudicate cases of violation of the erstwhile FERA Act 1973 and subsequent FEMA, 1999 in India and decide the penalty imposed at the conclusion of settlement proceedings.
• Thus, the main objectives of setting up the Enforcement Directorate include taking legal action against those involved in money laundering in the country, which includes confiscating their assets.

Conclusion :

• The arrest of Delhi Chief Minister and Aam Aadmi Party (AAP) leader Arvind Kejriwal by the Enforcement Directorate in India raises questions about Indian democracy and the socialist nature of India.
• The arrest of a prominent opposition leader and a sitting Chief Minister of an Indian state just ahead of the Lok Sabha general elections to be held in 2024 was also seen as an attempt by the ruling government at the central level in India to harass its main opposition political party..
• At present, Kejriwal himself is trapped in the same argument which he had popularized among the general public of India during the Anna movement. But wrong with wrong is never right.
• Various states in India have been accused of misusing central investigative agencies, intimidating opposition political parties or being biased against states ruled by their political opponents by the government in power at the Centre. In such a situation, the Central Investigating Agencies also need to remain impartial, independent and neutral and need to implement the powers conferred by the Constitution of India under their jurisdiction without any bias and impartially so that in the future there is a need for Centre-State conflict in India. There should not be a situation of deadlock in relationships.  

Practice Questions for Preliminary Exam :

Q.1. Consider the following statements regarding Prevention of Money Laundering Act 2002.

1. The first Prevention of Money Laundering Act was passed in India in 2002. Which was implemented all over India from July 1, 2005.
2.  Money laundering refers to disguising black money earned illegally as legitimate money.
3. RBI, SEBI and Insurance Regulatory and Development Authority (IRDA) are also included under PMLA, 2002 in India. Therefore, all the provisions of this Act apply to all financial institutions, banks, mutual funds, insurance companies and their financial intermediaries.
4. Under PMLA 2002, property earned through the offense of money laundering is confiscated and there is a provision for rigorous imprisonment of not less than 3 years to 7 years.

Which of the above statement / statements is/ are correct?

(A). Only 1, 2 and 3

(B). Only 2, 3 and 4.

(C ). None of these.

(D). All of these.

Answer – (D)

Practice Questions for Main Exam :

Q.1.What do you understand about money laundering? Discuss what are the challenges before the Enforcement Directorate under the major provisions of the Prevention of Money Laundering Act 2002 in India and what are its solutions ?

Akhilesh Kumar Shrivastava

Qualified Preliminary and Main Examination ( Written ) and Shortlisted for Personality Test (INTERVIEW)  three times Of UPSC CIVIL SERVICES EXAMINATION in the year of 2017, 2018 and 2020. Shortlisted for Personality Test (INTERVIEW) of 64th and 67th BPSC CIVIL SERVICES EXAMINATION.

M. A  M. Phil and Ph. D From (SLL & CS) JAWAHARLAL NEHRU UNIVERSITY, NEW DELHI.