Prevention of Money Laundering Act, 2002

 Introduction:

The Prevention of Money Laundering Act, 2002 (PMLA) is a landmark legislation enacted by the Parliament of India to combat the pervasive menace of money laundering. Enacted by the NDA government, this Act serves as a crucial tool in the nation’s arsenal against financial crimes, aiming to prevent the acquisition and concealment of funds derived from illicit activities and to provide for the confiscation of properties obtained through money laundering.

Background and Legislative History:

The genesis of the PMLA can be traced back to January 17, 2003, when it was passed by the then-NDA government. Following deliberations in the Department-related Standing Committee and incorporating its recommendations, the Act was introduced in the Lok Sabha. Subsequently, it came into effect on July 1, 2005, marking a significant milestone in India’s legal framework to combat financial crimes.

Purpose of the Act:

The primary objective of the Prevention of Money Laundering Act, 2002, is to thwart money laundering activities and facilitate the confiscation of properties derived from or involved in such illicit practices. By establishing robust mechanisms for identification, investigation, and prosecution of individuals or entities engaged in money laundering, the Act seeks to safeguard the integrity of the financial system and protect against the proliferation of black money.

Money Laundering Defined:

• Money laundering represents a sophisticated process through which funds obtained from illegal activities are systematically disguised to appear as legitimate income.
• This intricate process involves various stages of conversion and transfer, strategically designed to integrate illicit funds into the legitimate financial system, thereby obfuscating their illicit origins.

Major Features of PMLA:

1. Provision of Punishment for Money Laundering: The Act prescribes stringent penalties for offenders involved in money laundering activities. Individuals found guilty may face rigorous imprisonment ranging from 3 to 7 years, with the possibility of extension to 10 years for specific offenses listed in the Act.
2. Powers of Attachment of Tainted Property: Competent authorities are empowered to temporarily seize properties suspected to be “proceeds of crime” for a period of 180 days, subject to confirmation by an adjudicating authority.
3. Adjudicating Authority: An Adjudicating Authority, appointed by the central government, is tasked with determining the involvement of seized or related properties in money laundering activities. Guided by principles of natural justice, the adjudicating authority ensures due process in adjudicating cases related to money laundering offenses.
4. Burden of Proof: In cases of alleged money laundering, the burden of proof rests on the defendant to establish the legality of the alleged proceeds of the crime, underscoring the presumption of innocence.
5. Appellate Tribunal: An Appellate Tribunal is established to adjudicate appeals against decisions of the adjudicating authority or any other authority under the Act. The Tribunal serves as a forum for aggrieved parties to seek redressal against adverse decisions.
6. Special Court: Designation of Special Courts for the trial of offenses under the Act ensures expeditious adjudication of money laundering cases, thereby enhancing the efficacy of enforcement measures.
7. FIU-IND: The establishment of the Financial Intelligence Unit-India (FIU-IND) as the central national agency underscores the government’s commitment to combat money laundering effectively. Tasked with obtaining, processing, analyzing, and disseminating information related to suspect financial transactions, FIU-IND plays a pivotal role in facilitating intelligence-led enforcement actions.

Scheduled Offenses under PMLA:

The PMLA categorizes offenses listed in Parts A, B, and C as scheduled offenses, encompassing a wide array of domestic crimes, high-value transactions, and transnational crimes. Offenses under various statutes such as the Indian Penal Code, Narcotics Drugs & Psychotropic Substances Act, Prevention of Corruption Act, among others, fall within the ambit of scheduled offenses under PMLA.

Implementation and Enforcement:

The Act vests certain officers of the Directorate of Enforcement with the authority to conduct investigations into money laundering offenses and seize properties involved therein. In addition, the establishment of an Adjudicating Authority and an Appellate Tribunal ensures the adherence to due process and oversight in the enforcement of the Act.

Penalties under PMLA:

Penalties under the PMLA include asset seizure, rigorous imprisonment for a term not less than three years but up to seven years, extendable to ten years for specific offenses, and fines without any limit. These punitive measures are aimed at deterring individuals from engaging in money laundering activities and ensuring compliance with the law.

Misuse and Criticism:

Despite its overarching objective of combating money laundering, the PMLA has faced criticism for potential misuse and its impact on individual rights. Critics have raised concerns regarding the broad scope of investigations, presumption of guilt, and the potential for arbitrary exercise of powers by investigative agencies. Furthermore, there is ambiguity regarding the selection of cases for investigation by enforcement agencies, raising questions about the fairness and transparency of the process.

Supreme Court Judgements Associated with PMLA

1. Lalit Kumar Sharma vs. Union of India:

• In this case, the Supreme Court addressed the issue of attachment of properties under the Prevention of Money Laundering Act, 2002. The judgment clarified the legal provisions related to attachment, adjudication, and confiscation of properties involved in money laundering

2. State of Maharashtra vs. Rajendra J. Thakkar:

• This Supreme Court judgment focused on the applicability of the Prevention of Money Laundering Act, 2002 in cases involving inter-connected transactions. The ruling provided insights into the presumption of money laundering in such scenarios and clarified the burden of proof in related cases

3. Rajesh Maheshwari vs. Directorate of Enforcement:

• In this case, the Supreme Court deliberated on the powers and procedures of the Adjudicating Authorities under the Prevention of Money Laundering Act, 2002. The judgment outlined the composition, functions, and powers of these authorities in adjudicating cases related to money laundering offenses