The Prevention of Money Laundering Act (PMLA) was enacted by the Indian Parliament in 2002 which came into force in 2005 to prevent money laundering in India.
What is Money Laundering.?
Cash and corruption have been two close entities. People do crimes for money, and the money created by crimes gets converted into white money, this whole process is called as money laundering. Thus it is a process of showing that illegally earned money from criminal activity has came from a legal source. Criminal or illegal earned money can be through terrorism, smuggling, prostitution etc.
Purpose/Objectives of the Act:
Prevention and controlling money laundering.
Confiscation and seizing of property involved in or derived from money laundering.
Providing punishment to offenders.
Appointment of adjudicating authority and appellate tribunal concerning money laundering matters.
Dealing with every issue related to money laundering.
How Money Laundering works.?
There are three stages in process of money laundering:
Placement: This stage represents the initial entry of illegal money being inserted in legal financial system.
Layering: The illegal money is separated from its source by moving them through series of financial transactions.
Integration: The final stage creates a legitimate explanation for their sources of funds, allowing them to be retained, invested or used to acquire goods or assets.
Penalties under PMLA:
Various actions can be initiated against persons found to be guilty of money laundering, such as:
Freezing or seizing of property and records, and/or attachment of property obtained through crime proceeds.
Money laundering is punishable with:
Rigorous imprisonment for a minimum of 3 years and a maximum of 7 years.
Fine.
If the crime of money laundering is involved with the Narcotic Drugs and Psychotropic Substances Act, 1985, the punishment can go up to 10 years, along with fine.
Arrest under PMLA:
Under Section 19 of PMLA, the Director, Deputy Director, Assistant Director or any other officer authorized in this behalf by the Central Government by general or special order, has the power to arrest a person.
After Arrest Procedures:
After arresting such person, the authority is bound to
inform the arrested person about the grounds for his arrest.
forward a copy of the arrest order along with the material in his possession to the Adjudicating Authority.
Produce such person, within twenty-four hours, before the Special Court or Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction.
From the bare perusal of Section 19 of PMLA, it is apparent that there is no requirement under the section to obtain an arrest warrant from the Court before arresting a person.
Nature of offence:
Section 45 of the Prevention of Money Laundering Act (PMLA) made offences to be cognizable and non-bailable and no person accused of an offence shall be released on bail or on his own bond unless;
the Public Prosecutor is given the opportunity to oppose the application for such release,
and where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that the accused is not likely to commit any offence.
Bail under PMLA:
Bail for an offence under PMLA cannot be given as of right but only after the accused has been presented before a judge in this case, before the relevant Special Court. It may be noted that the provisions of PMLA do not provide for any right of seeking anticipatory bail. The privilege of the pre-arrest bail is not a matter of right, and is generally granted only in exceptional cases under section 438 of Cr.P.C.
Authorities that can investigate under PMLA:
The Enforcement Directorate {ED} is responsible for investigating offences under the PMLA. Also, the Financial Intelligence Unit – India (FIU-IND) is the national agency that receives, processes, analysis and disseminates information related to suspect financial transactions.
How ED Functions under PMLA?
The ED carries out search (property) and seizure (money/documents) after it has decided that the money has been laundered, under Section 16 (power of survey) and Section 17 (search and seizure) of the PMLA.
On the basis of that, the authorities decide if arrest is needed as per Section 19 (power of arrest).
Under Section 50 of the PMLA, the ED can also directly carry out search and seizure without calling the person for questioning.
It is not necessary to summon the person first and then start with the search and seizure.
If the person is arrested, the ED gets 60 days to file the prosecution complaint (chargesheet) as the punishment under PMLA doesn't go beyond seven years.
If no one is arrested and only the property is attached, then the prosecution complaint along with attachment order is to be submitted before the adjudicating authority within 60 days.
What are the Recent Amendments in PMLA?
Clarification about the Position of Proceeds of Crime: Proceeds of the Crime not only includes the property derived from scheduled offence but would also include any other property derived or obtained indulging into any criminal activity relate-able or similar to the scheduled offence.
Money Laundering Redefined: Money Laundering was not an independent crime rather depended on another crime, known as the predicate offence or scheduled offence.
Continuing Nature of Offence: This amendment further mentioned that the person will be considered to be involved in the offence of money laundering till the time that person is getting the fruits of activities related to money laundering as this offence is of a continuing nature.
Punishment: The Act prescribes that any person found guilty of money laundering shall be jailed from 3 years to 7 years; the maximum punishment may extend to 10 years instead of 7 years.
Onus of Proof: A person, who is accused of having committed the offence of money laundering, has to prove that alleged proceeds of crime are lawful property.
Why is the ED being Criticized Lately?
The Supreme Court is examining allegations of rampant misuse of PMLA by the government and the Enforcement Directorate (ED).
Major Allegations include:
PMLA is pulled into the investigation of even “ordinary” crimes and assets of genuine victims have been attached.
Lack of Transparency and Clarity.The Enforcement Case Information Report (ECIR) - an equivalent of the FIR - is considered an “internal document” and not given to the accused.
There is also a lack of clarity about ED’s selection of cases to investigate.
The initiation of an investigation by the ED has consequences which have the potential of curtailing the liberty of an individual.
Say of SC on PMLA?
In a significant verdict, in the Vijay Madanlal Choudhary & Ors v Union of India case, the Supreme Court upheld the Enforcement Directorate's (ED) powers relating to arrest, attachment of property involved in money laundering, search and seizure under the Prevention of Money Laundering Act (PMLA) that were challenged by multiple petitioners.
It gave the agency the go-ahead to arrest people and conduct search and seizure even when no complaint has been filed, making statements made before it admissible in court and also putting the burden on the accused to prove their innocence.
SC ruled that no comparison can be drawn between PMLA and Criminal Procedure Code (1973).
Remark/Observation:
In a system like ours, where the average person approaching the average police station does so without any great hope for justice, it is due process which is the most urgent need to protect life and liberty.
The ED dismissal rate of conviction is public knowledge. Besides, misuse of penal powers is unfortunately by itself not a ground for declaring a law as unconstitutional. The solution to this is not necessarily legal but political, in that Parliament will have to amend the law to make it more rational with its stated objectives.
There must be internal check as the stringent powers are given to the Enforcement Directorate. There must be proper scrutiny over the operations of Enforcement Directorate.
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