Simone Lawson
Money laundering is a serious global issue, with far-reaching implications for national security and individual rights. In response, countries have implemented various laws and strategies to combat money laundering and related financial crimes. In the United States, the Bank Secrecy Act (BSA), established in 1970, serves as one of the most important tools in the fight against money laundering. The BSA has been enhanced and amended over the years to provide law enforcement with effective tools to identify and combat money laundering. Additionally, the USA PATRIOT Act of 2001 criminalized the financing of terrorism and strengthened customer identification procedures. Similarly, India introduced the Prevention of Money Laundering Act (PMLA) in 2002, which seeks to prevent and control money laundering and prescribes strict punishments for those found guilty. The PMLA has faced scrutiny for potentially infringing on citizens' constitutional rights, leading to ongoing debates about balancing national security interests and individual liberties.
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What You'll Learn
- The Prevention of Money Laundering Act, 2002 (PMLA) in India prescribes rigorous imprisonment for those found guilty of money laundering
- The PMLA gives the director or officer above the deputy director the authority to attach property believed to be proceeds of crime for 180 days
- Section 45 of the PMLA Act, 2002, makes it difficult for a person convicted to more than three years in jail to get bail
- The Supreme Court of India upheld the provisions of the PMLA in July 2022, retaining the powers of the Enforcement Directorate
- The PMLA has a low conviction rate, with only 23 people convicted in 5,422 cases in 17 years
The Prevention of Money Laundering Act, 2002 (PMLA) in India prescribes rigorous imprisonment for those found guilty of money laundering
The Prevention of Money Laundering Act, 2002 (PMLA) in India is a comprehensive piece of legislation aimed at combating money laundering and its associated illicit activities. The Act outlines various provisions and penalties for those found guilty of money laundering, with a particular focus on the concealment, possession, acquisition, and use of proceeds obtained from criminal activities.
Under the PMLA, money laundering is defined as any conduct or activity connected with the proceeds of crime, including its concealment, possession, acquisition, or use, and projecting or claiming it as untainted property. The Act specifies that an individual or entity will be guilty of money laundering if they are found to have directly or indirectly attempted, assisted, or been involved in any process connected with the proceeds of criminal activity.
The PMLA prescribes rigorous imprisonment for those convicted of money laundering. The Act takes into account both domestic and international money laundering transactions, as well as transactions that occur outside of India but have implications within the country. It is important to note that the PMLA also addresses attempts to transfer proceeds of criminal activities outside of India.
Additionally, the PMLA outlines the roles and responsibilities of various entities, including banking companies and reporting entities, in preventing and addressing money laundering. It empowers the Central Government to permit certain entities to perform authentication, provided they comply with specific privacy and security standards. The Act also establishes the requirement for reporting entities to verify the identity of their clients or beneficial owners through multiple modes of identification.
The PMLA plays a crucial role in India's efforts to combat money laundering and ensure the integrity of its financial system. By imposing stringent penalties, including rigorous imprisonment, the Act serves as a deterrent against money laundering activities and contributes to the country's legal framework for addressing financial crimes.
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The PMLA gives the director or officer above the deputy director the authority to attach property believed to be proceeds of crime for 180 days
The Prevention of Money Laundering Act, 2002 (PMLA) is a piece of Indian legislation that seeks to combat money laundering in the country. It outlines three main objectives: to prevent and control money laundering, enforce rigorous imprisonment for those found guilty, and allow for the attachment of property believed to be "proceeds of crime".
For this action to be taken, the director or officer must have a reasonable belief that the property in question is connected to criminal activity. This belief should be based on evidence and information obtained through investigations or intelligence. The PMLA requires that the order for such an attachment be confirmed by an independent Adjudicating Authority. This authority, appointed by the central government, exercises jurisdiction and powers conferred under the PMLA to decide whether the attached property is indeed involved in money laundering.
The process of attaching property believed to be proceeds of crime is a precautionary measure to ensure that the assets are not liquidated or transferred before a thorough investigation can be conducted. It is a temporary action, as indicated by the 180-day time limit, and further extensions or permanent seizure would require additional legal proceedings and strong evidentiary support.
The PMLA has been a subject of debate in India, with critics arguing that it infringes on citizens' personal liberties and that its application can be politically motivated due to the low conviction rate. However, supporters of the PMLA emphasize the importance of combating money laundering and the need for strong enforcement measures to address this complex financial crime.
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Section 45 of the PMLA Act, 2002, makes it difficult for a person convicted to more than three years in jail to get bail
In India, Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA) lays down stringent conditions for the grant of bail to an accused person charged with money laundering. The section states that no person accused of an offence under the PMLA shall be released on bail unless two conditions are met. Firstly, the Public Prosecutor must be given the opportunity to oppose the application for release. Secondly, if the Public Prosecutor opposes the application, the court must be satisfied that there are reasonable grounds for believing that the accused is not guilty of the offence and is unlikely to commit any crime while out on bail.
The twin conditions for the grant of bail under Section 45 of the PMLA have been the subject of much debate and legal challenges. The conditions have been criticised as being arbitrary and draconian, as they reverse the presumption of innocence at the stage of bail. The Supreme Court of India, in the case of Vijay Madanlal Chaudhary vs Union of India, upheld the constitutional validity of the twin conditions in the name of national security-related expediency. The Court's decision overruled a previous judgment by a division bench of the Supreme Court in the Nikesh Shah case, which had found Section 45(1) to be unconstitutional.
The interpretation and applicability of Section 45 have also been a matter of judicial consideration. In Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra, the Supreme Court interpreted Section 44 of the MCOCA, which is similar to Section 45 of the PMLA. The Court held that the wording of the section does not require the court to arrive at a positive finding that the applicant for bail has not committed an offence. Instead, the court must reasonably construe the section to balance the interests of justice.
The PMLA was enacted with the objective of preventing money laundering and provides for a higher threshold for the grant of bail compared to the standard procedure under the Code of Criminal Procedure (CrPC). The Act has been amended over the years, with the most recent amendment in 2018, which expanded the applicability of the twin conditions for bail to all offences under the PMLA. The stringent conditions under Section 45 of the PMLA have made it challenging for accused persons to obtain bail, with jail becoming the rule and bail the exception.
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The Supreme Court of India upheld the provisions of the PMLA in July 2022, retaining the powers of the Enforcement Directorate
In a significant ruling on 27 July 2022, the Supreme Court of India upheld the constitutional validity of the Prevention of Money Laundering Act (PMLA), affirming the powers of the Enforcement Directorate (ED). The verdict addressed several petitions challenging various provisions of the PMLA, including the ED's powers of arrest, search, seizure, and attachment of properties.
The Supreme Court's decision reaffirmed the ED's authority to investigate and prosecute individuals suspected of money laundering. The court rejected arguments that the ED's procedures were opaque, arbitrary, or violated the constitutional rights of the accused. It was held that the ED officials were not police officers, and thus, confessions made to them were admissible as evidence, despite the right against self-incrimination under Article 20 of the Constitution.
The court also upheld the 'twin test' for bail under the PMLA, which had been previously challenged for its procedural arbitrariness. Additionally, the court validated Section 24 of the Act, which places the burden of proving innocence on the accused, deviating from the established criminal law principle of 'innocent until proven guilty'.
The Supreme Court's ruling further extended to Section 45 of the PMLA, which makes offences under the law cognisable and non-bailable. This section outlines the stringent bail conditions, requiring the court to be satisfied that the accused is not guilty and will not commit future crimes.
The judgement attracted mixed reactions, with critics arguing that it granted excessive powers to a centrally controlled investigative agency, potentially infringing on personal liberty and property rights. However, the Bharatiya Janata Party (BJP) welcomed the decision, considering it a befitting response to the Opposition parties.
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The PMLA has a low conviction rate, with only 23 people convicted in 5,422 cases in 17 years
The Prevention of Money Laundering Act (PMLA) was enacted in 2002 to curb money laundering in India. The Act empowers the Enforcement Directorate (ED) and expands the scope of its officers' authority. Despite the ED's enhanced powers, the PMLA has a low conviction rate. Since its enactment, only 23 people have been convicted out of 5,422 cases in 17 years, resulting in a conviction rate of less than 1%.
Several factors may contribute to the low conviction rate under the PMLA. One reason could be the relative novelty of the law, which came into force in 2005. The ED has also faced allegations of initiating probes for political reasons, which may impact the success rate of prosecutions. Additionally, the accused in PMLA cases tend to be resourceful and can employ legal strategies to delay or hinder the prosecution's efforts.
Furthermore, the ED's high rate of searches and inquiries, with over 3,000 searches conducted since 2005, may have resulted in a backlog of cases. The ED's data shows an increase in its activities after Prime Minister Modi took office, with 4,964 enforcement case information reports (similar to FIRs) filed. However, the ED is not solely responsible for the low conviction rate, as the accused have also moved to higher courts, delaying trials.
While the PMLA has resulted in a high number of searches and inquiries, the low conviction rate of less than 1% raises questions about the effectiveness of the ED's investigations and the proper use of the PMLA. The ED has faced criticism for its probing, which some view as a tool of harassment.
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Frequently asked questions
The PMLA is an Act that was passed in 2002 to combat money laundering in India.
The PMLA has three main objectives: to prevent and control money laundering, to impose rigorous imprisonment for those found guilty of money laundering, and to allow for the attachment of property believed to be "proceeds of crime".
The Adjudicating Authority is appointed by the central government to decide whether any property attached or seized is involved in money laundering.
A person accused of money laundering can appeal orders of the Adjudicating Authority to an Appellate Tribunal, which is appointed by the Government of India. Orders of the Appellate Tribunal can be further appealed in the appropriate High Court and finally to the Supreme Court.
The PMLA has been criticised for its low conviction rate and for being invoked against political rivals or dissenters. There are also concerns that the provisions of the PMLA put the personal liberty of citizens at risk.
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