The Supreme Court is currently hearing a series of petitions which allege that the Prevention of Money Laundering Act, 2002 (PMLA) is being misused for political advantage.
What is the PMLA?
The PMLA is the law for preventing money laundering and dealing with property derived from it. Money laundering means converting money obtained from unlawful means like smuggling weapons and drugs trade, to make it seem like it has been obtained from legitimate sources. Investments in real estate, transactions in foreign banks, etc are some ways of money laundering.
Who can be charged with ‘Money Laundering’ under the PMLA?
Any person, who is directly involved or assists in any of the steps in the process of money laundering, is liable under the Act. The person could be involved in concealing, possessing, purchasing, using, projecting or claiming as untainted property.
Which offences does the PMLA cover?
A number of offences have been brought under the ambit of the PMLA. However, to constitute a crime under PMLA, the alleged offence must be accompanied by a ‘predicate offence’.
A ‘predicate offence’ is an offence that forms a part of a larger crime. Some examples include drug trafficking, human trafficking, tax evasion, corruption, forgery, murder, smuggling, illegal wildlife trafficking etc. The ‘monetary proceeds’ gained from such illegal activities can be used to buy property or make investments. The property or investments so acquired can then be projected as ‘legitimate or untainted property’. This is money laundering.
The schedule to the PMLA mentions the list of offences that can take place in the process of money laundering. It includes tax evasion, IPC offences like criminal conspiracy, waging or attempting to wage war against Government of India, etc as well as offences under specific acts like Narcotic Drugs and Psychotropic substances Act 1985, Explosive Substances Act 1908, Explosive Substances act 1908, etc.
Which are the authorities responsible for investigation of PMLA offences?
The Financial Intelligence Unit is the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions. They coordinate different investigative agencies nationally and internationally to curb economic crimes. It reports to the Economic Intelligence Council headed by the Finance Minister.
The Enforcement Directorate (ED) investigates PMLA offences specifically. They can also take assistance from other agencies like CBI, customs department etc for further inquiry into other scheduled offences.
What happens when someone is accused of money laundering?
The ED files an Enforcement Case Information Report once a case of money laundering is initiated. This is similar to the First Information Report filed at a police station in criminal cases.
Once ED completes its investigation, it submits a report to specifically designated ‘PMLA courts’. They can order seizure of property or freezing of bank accounts of the person/s involved. In addition, they can order the attachment of the ‘tainted property’ obtained in the process of money laundering.
If the court finds the accused guilty of money laundering, it can punish them with rigorous imprisonment for 3 to 7 years and a fine.
What is the controversy right now?
The petitioners contend that there have been increased instances of misuse of PMLA provisions, especially in cases of tax evasion. Other complaints are that the requirement of ‘predicate offence’ is not being followed and that the ED is being used as an intimidation tool. They also contend that by including a broad list of crimes in the schedule, the government is diluting the original objectives of the PMLA.
Also, unlike FIR whose copy is provided to the accused, a copy of the Enforcement Case Information Report is not given to the accused.
The Supreme Court is yet to give a view on this issue.
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