Money laundering is the process of converting illegally obtained
profits into legitimate money for the purpose of pushing it into the economy
and spending it, disguising its illegal origin. Illegal means include criminal
activities like arms sale, smuggling, organized crime, etc. the PMLA defines
Money Laundering as “any process or activity connected with proceeds of crime
including its concealment, possession, acquisition or use and projecting or
claiming it as untainted property”. Since such money is used for illegal arms
trade or organized crimes, in turn having effects on global peace, the international
community also attempts to tackle this menace. India is a signatory to UN
Conventions like International Convention for the Suppression of the Financing
of Terrorism (1999), UN Convention against Transnational Organized Crime (2000),
and UN Convention against Corruption (2003). PMLA was enacted to achieve the
purpose of the Conventions, and prevent money laundering and financing of cross
border terrorism.
KEY FEATURES OF THE ACT:
Ø Offence includes attempting, indulging or assisting any activity connected
with proceeds of crime like its possession, acquisition, concealment, or use.
Ø “Proceeds of Crime” include any property derived or obtained as a
result of any criminal activity, whether directly or indirectly.
Ø Offences are added as Schedules A and C to the Act, where Part A
enumerates offences under the IPC, Narcotic Drugs and Psychotropic Substances Act, Explosive
Substances Act, etc. Part C deals with trans-border crimes and money laundering
across international boundaries.
Ø The occurrence of any of the Scheduled Offence (called the Predicate
Offence) is a pre-requisite for initiating an investigation under the Act.
Ø Predicate Offences are investigated by agencies like the Police,
Customs, SEBI, CBI, NCB, etc. Officers of the Directorate of Enforcement have
been given powers to investigate cases of Money Laundering.
Ø Actions that may be taken against a person or property involved in
money laundering are attachment/seizure/freezing of property; imprisonment of
3-7 years with fine; imprisonment up to 10 years if the offence committed is
under NDPS Act;
and the prosecution/conviction of any juridical person is not contingent on
that of any individual.
Ø The Investigating Officers have powers like provisional attachment
of property directly/indirectly procured through criminal activities; survey;
search and seizure; personal search; arrest; and summoning persons and records.
Ø The persons being searched under the Act, or arrested under the Act
have certain rights like he may ask to be taken to a Gazetted officer superior
in Rank to the Officer requiring the search, within 24 hours; and in case of
arrest, he must be informed of the reasons for arrest and be produced before
the Judicial Magistrate in 24 hours.
Ø There is a presumption of interconnected transactions, whereby if
the activity in question involves two or more interconnected transactions, and
one or more of these is proved to be involved in money laundering, then for
adjudication/confiscation/trial, the rest can also be presumed to be so; unless
proved otherwise.
Ø The burden of proof rests on the accused to establish his innocence
when he is accused of having committed an offence under section 3.
Ø The specified Authorities under the Act have the power to attach or
freeze suspected property under circumstances given under the Act; the
attachment of property can be done only on the basis of reasons to believe
(stated in writing), that the person is in possession of proceeds of any crime,
and it is likely to be concealed or transferred in a manner that might
frustrate the proceedings against the person.
Ø The maximum period up to which such a provisional attachment could
stand is 180 days, unless the Adjudicating Authority finds and passes Order
within the time frame, that the property is involved in Money Laundering.
Ø The property may be confiscated if the Authority finds out that the
property was indeed involved in money laundering.
Ø The Act provides for an Appellate Tribunal, to which an appeal may be filed
within 45 days by an aggrieved party, after an Order is passed against him by
the Adjudicating Body. High Court is the higher appellate authority above the
Tribunal.
Ø Offence of Cross-Border implication, where a person outside the
territory of India commits a crime there (also a crime under Schedules A or C),
and transfers the proceeds to India; or vice versa.
Ø Banking Companies, Financial Institutions, intermediaries, or
persons carrying out specified businesses are “reporting Entities” under the
Act, and they are under a duty to record and maintain information regarding
transactions, and furnish it to the Authorities as stipulated under the Act.
Ø Monetary penalty may be imposed on the reporting Authorities for
default.
Ø Certain Sessions Courts have been designated as Special Courts under
the Act for the purpose of trying offences under S.4.
Ø The Central Govt can enter into Agreements with other countries for
the purpose of enforcing provisions of the Act, or exchange of information for
preventing offences, or for investigation.
Ø The mechanism of providing assistance or collecting evidence under
such arrangement is given in the Act
Ø The Act provides for punishment of vexatious search, giving false
information, etc.
Ø PMLA has overriding effect over other legislations in force, in case
of a conflict.
MAJOR CASE LAWS
·
Pareena Swaroop v Union of
India
·
Gautam Kundu v Manoj Kumar
(Asst Director of Enforcement, Eastern Region)
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