Context: Recently, Supreme Court is looking into allegations of the metamorphosis of the Prevention of Money Laundering Act (PMLA), brought to sniff out drug money, into a potent weapon to raid rivals and deny rights.

Key Issues with PMLA

• Misuse of central agencies: PMLA is being pulled into the investigation of even ordinary crimes by the Enforcement Directorate.
• Seizing of assets: Assets of genuine victims have been attached. The ED could just walk into anybody’s house.
• Politically motivated raids: In all this, the fundamental purpose of PMLA to investigate the conversion of “illegitimate money into legitimate money” was lost.
• Opacity of charges: Petitioners pointed out that even the Enforcement Case Information Report (ECIR) – an equivalent of the FIR – is considered an “internal document” and not given to the accused.
• Vagueness over evidences: The accused is called upon to make statements which are treated as admissible in evidence.
• Harassment: The ED begins to summon accused persons and seeks details of all their financial transactions and of their family members.
• Against individual liberty: The initiation of an investigation by the ED has consequences which have the potential of curtailing the liberty of an individual.

About Prevention of Money Laundering Act (PMLA)

• PMLA, 2002 is an Act of the Parliament of India enacted by the NDA government to prevent money-laundering and to provide for confiscation of property derived from money-laundering.
• It was enacted in response to India’s global commitment (including the Vienna Convention) to combat the menace of money laundering.
• PMLA and the Rules notified there under came into force with effect from July 1, 2005.
• The act was amended in the year 2005, 2009 and 2012.

Objectives of PMLA
The PMLA seeks to combat money laundering in India and has three main objectives:

• To prevent and control money laundering.
• To confiscate and seize the property obtained from the laundered money; and
• To deal with any other issue connected with money laundering in India.

Key definitions

• Payment System: A system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them. It includes the systems enabling credit card, debit card, smart card, money transfer or similar operations.
• Money-laundering: Whosoever directly or indirectly attempts to indulge or assist other person or actually involved in any activity connected with the proceeds of crime and projecting it as untainted property.
• Attachment: Prohibition of transfer, conversion, disposition or movement of property by an appropriate legal order.
• Proceeds of crime: Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence.

Key Salient features

• Punishment and Jail term: The Act prescribes that any person found guilty of money-laundering shall be punishable with rigorous imprisonment from three years to seven years. The maximum punishment may extend to 10 years instead of 7 years.
• Powers of attachment of tainted property: The Director or officer above the rank of Deputy Director with the authority of the Director, can provisionally attach property believed to be “proceeds of crime”.
• Adjudicating Authority: It is the authority appointed by the central government which decides whether any of the property attached or seized is involved in money laundering.
• Presumption in inter-connected transactions: Where money laundering involves two or more inter-connected transactions. It is presumed that the remaining transactions form part of such inter-connected transactions.
• Burden of proof: A person, who is accused of having committed the offence of money laundering, has to prove that alleged proceeds of crime are in fact lawful property.
• Appellate Tribunal: It is given the power to hear appeals against the orders of the Adjudicating Authority and any other authority under the Act. Its orders are not final and can be challenged.
• Establishment of Special Court: To ensure speedy trial.

Road Ahead

• It is unlikely that corruption can be substantially reduced without modifying the way government agencies operate. The fight against corruption is intimately linked with the reform of the investigations.
• Therefore the adjudicating authorities must work in cooperation and ensure the highest standards of transparency and fairness. 

By: Shubham Tiwari