INTRODUCTION

Money laundering seriously jeopardises nations’ financial systems as well as their integrity and sovereignty. The international community has taken some actions to eliminate these threats. It has been thought that we urgently need comprehensive legislation to stop money laundering and related activities. The Prevention of Money-laundering Bill, 1998 was introduced in Parliament to accomplish this goal. The Standing Committee on Finance received the bill and reported it to the Lok Sabha on March 4, 1999. The Standing Committee’s recommendations were broadly accepted by the Central Government, and they were included in the aforementioned Bill along with some other desired adjustments. The Prevention of Money Laundering Act, 2002 was passed by parliament on January 17, 2003, but it has yet to be implemented in its entirety.

The term “money laundering” refers to the process of cleaning or hiding the source of money that was obtained illegally. Money laundering, according to the law, is the process of processing money obtained illegally through a legitimate business or sending it to a foreign bank so that when it returns, no one will be able to tell that it was obtained illegally. Money earned through illegal activities like extortion, drug trafficking, the supply of firearms, organised crime, etc. is cleaned during the money laundering process. It typically involves three steps. A criminal first enters the formal financial system with the stolen funds (Placement). Second, to prevent the origin or original identity of the crime money from being lost or disappearing, the money that has been injected into the financial system is layered or spread out across several transactions with the financial system (Layering). Thirdly, the money is incorporated into the financial system in such a way that the initial connection to the crime is completely lost, and the criminal and his accomplices can use the money because they receive it as clean money (Integration).

Additionally, the offence of money laundering includes:

● The greater proportion of investment goes back into illegal activity.

● The overall transactional cost of engaging in money laundering is significantly lower

● There is a greater pressing need to use clean liquidity to finance such reinvestment.

● Larger disparities between expected real returns from illegal and legal activity.

● The initial volume of illegal income that needs to be cleaned up is greater.

HIGHLIGHTS OF THE PREVENTION OF MONEY LAUNDERING ACT, 2002

Section 3 of the PMLA says whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with proceeds of crime and projecting it as untainted property shall be guilty of the offence of money laundering. The penalties for the offences listed in Paragraph 2 of Part A of the Act are outlined in Section 4 of the Act. The relevant Act sections have granted the Director of the Financial Intelligence Unit (FIU-IND) and Director (Enforcement) exclusive and concurrent powers to carry out the Act’s provisions.

The creation of a special court with the status of a session court for the prosecution of offenders under Section 4 of the act is discussed in Section 43 (1) of the act. The special courts are authorised by Section 43(2) of the Act to try offences other than those listed in Subsection (1), which the accused may be charged with under the Code of Criminal Procedure, 1973, at the same trial. Section 44 addresses offences that can be tried in specialised courts.

CHALLENGES

The PMLA has undergone numerous amendments (in the years 2015, 2018, and 2019) designed to close the gaps in how it operates. However, the following clarifications of persistent legal ambiguities are provided:

● The 2019 Revision clarified how “proceeds of crime” are defined in section 2 (1)(u). According to the law, “proceeds of crime comprise property not only deducted or acquired from the listed offence but also any property which may directly or laterally be deducted or acquired as a result of any felonious exertion related to the listed 2 offence.” The requirement for an “explanation” to define what is meant by “proceeds of crime” still raises the question of whether or not it will have a retroactive impact.

● From a list of six statutes at the beginning, the PMLA currently includes “scheduled offences’ ‘ from thirty more statutes. There is a growing concern that adding less serious offences could undermine PMLA’s core purpose. The ED filed 1067 cases using the PMLA between 2012 and 2018. Only 13 people had been found guilty under the PMLA in 9 cases as of December 2019. These numbers demonstrate the need to simplify the statute’s implementation and give major offences more attention.

● All actions under Sections 50 (2) and 50 (3) are presumed to be “judicial processes” under Section 50 (4) of the PMLA, as defined by Sections 193 and 228 of the Indian Penal Code. Since ED proceedings are now considered “judicial proceedings,” any statement made prior to ED may be used as support. The general norm stated in Section 25 of the Substantiation Act, which states that confessional remarks made to a police officer are not acceptable as substantiation in a court of law, is not supported by this, nevertheless.

● Section 71 provides an overriding effect to PMLA, nevertheless, it is important to remember that the Supreme Court stated in Tofan Singh’s decision that special legislation must include respectable protection concerning the admissibility of confessional remarks The authority of these specialised investigating organisations that focus on economic crimes has been contested by nearly 200 applicants. Since 2014, the earliest petitions have been pending.

EFFECTIVENESS

Money laundering is regarded as essential to the efficient running of global and organised crime. However, money laundering has an impact on the social, political, and fiscal health of a nation. One of the profitable outcomes of money laundering was the undermining of the legal private sector, another was the undermining of fiscal label integrity, a third was the loss of control over profitable policy, a fourth was profitable deformation and insecurity, a fifth was the loss of profit, a sixth was the traps of privatisation sweats, and a seventh was a threat to one’s reputation.

The PMLA has been made severe enough to address the threat of money laundering that results from contaminated wealth acquired via illegitimate means, notwithstanding some obstacles and legal difficulties. Many organisations, including the RBI, SEBI, banks, and others, have been enlisted to spread information about these illicit practices. The power granted to the police by the PML Act is another matter that needs to be addressed. This Act provides a check on the power of the police, just like numerous other pieces of Indian legislation. Sections 44(b) and 45(1)(A) of the PML Act categorically subordinate the role of police officers by granting the powers to make complaints and to investigate offences under this Act to the authorities designated by the Central Government, much like a confession made to a police officer or while in the custody of a police officer has no value in the eyes of the law and it cannot be proven against the accused (Sections 25 and 26 of the Indian Evidence Act, 1872, respectively).

In a case moving before the top court, the AG stated that 4,850 cases have been filed under the PMLA, 2002 since this act’s introduction. The strong framework for risk-based selection of the cases for investigation in India accounts for the country’s low case registration rate. The Directorate of Enforcement is concentrating its attention on cases involving high-value proceeds of crime and cases involving serious predicate offences involving terror financing, narcotics, corruption, an offence involving national security, etc. It is pertinent to note that the FATF recommendation does not stipulate a threshold for the selection of cases for investigation under the PMLA.

CASE LAWS

● Nikesh Talwar Shah vs. Union of India¹ – The issue of giving bail to persons who were denied bail by the court in accordance with Section 45 of the PMLA, 2002, was addressed in this case. The petitioner in this instance filed a writ petition because his fundamental right had been violated. When someone was arrested and subsequently applies for bail, the court follows a twin-condition policy for granting bail, which is discriminatory in nature. However, when someone has applied for anticipatory bail—bail before a trial has even begun—the court grants them bail. In this case, the Supreme Court overturned the discrimination and asked that the applicant re-apply for bail in the same court.

● ED vs. A. Raja² – The 2G fraud case is the infamous name for this situation. With the opening up of the investment market in 1991, numerous private sectors stepped up to facilitate and make investments in the market. To ensure effective regulation, the government established a number of acts and directives. However, the CBI accused a few employees of using a shortcut when registering their telecommunications-related enterprises. A. Raja, who served as the department’s minister at the time, was also charged with violating the Prevention of Money Laundering Act of 2002 by accepting bribes and distributing a letter of intent to a number of private companies for the purpose of granting these companies licences for unified access services. However, the court did not find them guilty, and it ordered each of the defendants to pay Rs. 5 lacs along with a surety.

CONCLUSION

Therefore, it is evident that efforts to combat money laundering have advanced beyond the early stages of crimes related to drugs or terrorism. Additionally, the fight against money laundering has continually pushed for the broadest possible scope of predicate offences to be included in domestic laws. Money laundering has been defined and understood in a more comprehensive way that no longer only requires the projection of funds and the use of clean assets. According to the international mission, every activity that has anything to do with the proceeds of crime should be made illegal.

CITATIONS

1. W.P. (Cr) 67 of 2017

2. ECIR/31/DZ/2010

This article is written by Sanskar Garg, a last-year student at the School of Law, Devi Ahilya University, Indore.