Money Laundering Act, 2002
Written by: Ms Nikita Rai
Money laundering is the process of converting illegal money earned through different illegitimate means such as drug trafficking, criminal activity, etc. into legal/legitimate sources. In its literal meaning, it is converting your black money into white money. It is a process that has three steps.
The steps are as followed:
1. Placement: This is the first step in this process. The process includes moving the money into the legitimate source via financial institutions, casinos, financial instruments, etc., and at the same time, hiding its source.
2. Layering: The second process includes breaking the funds into small transactions and makes it difficult to detect and find out about the laundering activity. In this stage, money are going to be traveling the world electronically, trading in overseas markets.
3. Integration: The last process is all about introducing the converted money into the market. Money laundering is withdrawn from the legitimate account to be used, and therefore the money is returned to the criminal from the legitimate source.
The Prevention of cash Laundering Act, 2002 or the PMLA is an Act of the Parliament of India enacted to stop concealment and to supply for confiscation of property derived from money laundering.
The PMLA and the Rules notified there under came into force with effect from July 1, 2005. The Act and Rules notified thereunder impose an obligation on banking companies, financial institutions, and intermediaries to verify the identity of clients, maintain records, and furnish information in a prescribed form to the competent authorities formed and appointed therein regard [e.g., Financial Intelligence Unit – India (FIU-IND)]. The Act was subsequently amended within the years 2005, 2009, and 2012.
The PML Act seeks to combat concealment in India and has three main objects
-To help and control plutocrat laundering
-To expropriate and seize the property attained from the cleaned plutocrat; and
-To affect the other issue connected with concealment in India.
– The Act also proposes discipline under sec. 4.
PMLA, 2002 authorizes certain officers of the Directorate of Enforcement to conduct examinations in cases that involve offenses of plutocrat laundering and also to attach whatever property is involved in plutocrat laundering. PMLA, 2002 envisages the establishment of an Adjudicating Authority to hold governance, power, and authority conferred by it especially to confirm attachment or order confiscation of involved parcels. It also envisages the establishment of an Appellate Tribunal to hear to the prayers against the decision of the Adjudicating Authority and the authorities like Director FIU-IND.
The Central Government of India has established colourful special courts in several States and UTs to carry out the trial of plutocrat laundering offenses. The authorities under the Act like the director, adjudging authority and thus the appellate bench are formed to conduct the proceedings associated with attachment and confiscation of any property deduced out of plutocrat laundering.
The PMLA has experienced multiple emendations (in the times 2015, 2018 and 2019) aimed at plugging the loopholes in its operation. Still, certain legal poverties persist and have been illustrated below-
The 2019 Correction substantiated upon the description of ‘proceeds of crime ’under section 2 (1) (u). It was stated that “proceeds of crime include property not only deduced or attained from the listed offence but also any property which may directly or laterally be deduced or attained as a result of any felonious exertion relatable to the listed offence.” Still, the question of whether the demand of the ‘explanation’ to clarify the station over the term ‘proceeds of crime’ shall have a retrospective effect or not still seems to be undetermined.
From the original list containing 6 bills, the PMLA now involves ‘slated offences’ from 30 other bills. There’s a brewing fear that the objectification of non-serious offences might adulterate the veritably objective of PMLA. Between the times 2012-2018, 1067 cases dealing with PMLA were filed by the ED. As of December 2019, only 13 people have been condemned under PMLA in 9 cases. These statistics reflect the demand to streamline the operation of the enactment and insure further focus on offences of serious nature.
Under section 50 (4) of the PMLA, all proceedings u/ s 50 (2) and 50 (3) are supposed as “judicial proceedings” within the delineations of sections 193 and 228 of the Indian Penal Code. Now, since ED proceedings are “judicial proceedings”, any statement made before ED is permissible as substantiation.
Still, this doesn’t align with the general rule u/ s 25 of the Substantiation Act, which mentions that confessional statements made to a police officer aren’t permissible as substantiation in the court of law. Section 71 states that PMLA shall have an overriding effect, still, it must be noted that in Tofan Singh’s judgement, the Supreme court held that special legislation must contain acceptable safeguards concerning the admissibility of confessional statements.
Money laundering is seen as critical to the effective operation of international and systematized crime. Still, money laundering affects a country’s frugality, government, and social well- being. This composition briefly reviewed both the profitable and social costs of money laundering. The profitable goods of money laundering bandied included (1) undermining the licit private sector; (2) undermining the integrity of fiscal labels (3) loss of control of profitable policy; (4) profitable deformation and insecurity; (5) loss of profit; (6) pitfalls of privatization sweats; and (7) character threat.
The social costs of plutocrat laundering include allowing medicine merchandisers, bootleggers, and other culprits to expand operations and the transfer of profitable power from the request, government, and citizens to culprits. In extreme cases, money laundering can lead to a complete presumption of licit government.
Anti-money laundering sweats are both a critical and effective element of anti-crime programs. Money laundering presents a complex and dynamic challenge across the world. The sheer global nature of money laundering requires global norms and increased transnational cooperation to reduce the capability of culprits to censor their proceeds and carry out felonious conditioning.
The ultra- modern anti-money laundering movement is unnaturally ineffective, with substantiation of policy failure obscured by idiosyncratic “effectiveness” evaluations inadequately connected with policy design principles. In my opinion, the Act in some cases take strict conduct and provides enormous powers to the Authorities under the Act so that the issue of black plutocrat in the country can be combated but natural justice should be kept in mind and the laws should be made in the interest of the public at large and not exploit them.
Also, this Act is fairly new and still, a lot of interpretations have to be done by the court over time. And the Court’s decision to take up the matter and decide all the being difficulties is surely awaited which will give a clear picture of the laws. The Court will act judiciously, keeping all the principles of natural justice and the principles enunciated in the Constitution and therefore will interpret the Act in a way so that there’s no arbitrary exercise of the power and the Act remains naturally compatible.
Keywords: Money Laundering Act, 2002, Money Laundering Act, Money Laundering Act in India