Money Laundering : A Process Or A Punishment

The Supreme Court’s ruling upholding all the contentious provisions of the Prevention of Money Laundering Act (PMLA) tumbles short of judicial standards of reviewing legislative action. Undergirding every aspect of its analysis is a belief that India’s commitment to the international community to strengthening the domestic legal framework for combating money laundering is so inviolable that possible violations of fundamental rights can be downplayed. The judgment repeatedly invokes the “international commitment” behind Parliament’s enactment of the law to curb the menace of laundering of proceeds of crime which, it underscores, has transnational consequences such as adversely impacting financial systems and even the sovereignty of countries. There is, no doubt, widespread international concern over the malefic effects of organised crime fuelling international narcotics trade and terrorism. Much of these activities are funded by illicit money generated from crime, laundered to look legitimate and funnelled into the financial bloodstream of global and domestic economies. A stringent framework, with apposite departures from the routine standards of criminal procedure, may be justified in some circumstances. However, experience suggests that money-laundering in the Indian context is linked or is seen as a by-product of a host of both grave and routine offences that are appended to the Act as a schedule. These ‘scheduled’ or ‘predicate’ offences ought to be ideally limited to grave offences such as terrorism, narcotics smuggling, corruption and serious forms of evasion of taxes and duties. However, in practice, the list contains offences such as fraud, forgery, cheating, kidnapping and even copyright and trademark infringements. The Enforcement Directorate has also been manifestly selective in opening money-laundering probes, rendering any citizen vulnerable to search, seizure, and arrest at the whim of the executive. PMLA act is not a strict liability offence, as your lordships have held in case of drugs etc. where possession itself.

• An ECIR cannot be linked to an FIR under CrPC in view of the special mechanism envisaged by the Prevention of Money Laundering Act, 2002.
• Section-45 of PMLA deals with cognizable and non-bailable offenses and is just and not arbitrary.
• The challenge to the constitutional validity of Section 19 of the 2002 Act is also dismissed. Stringent safeguards have been given in Section 19. Nothing in the provision comes under the ambit of arbitrariness.
• Under Section 5 of the Act, attachment of property of people involved in money laundering is constitutionally valid.
• Section 24 of the PMLA has due regard to the objectives to be achieved by the Act and cannot be held to be unconstitutional.
• Section 162 of CrPC states that every person is bound to answer truthfully all questions asked by a police officer.
• The statements recorded by officers under the 2002 Act are not affected by Article 20(3) or Article 21 of the Constitution.
• According to Article 20(3) a person accused of any offense shall not be compelled to be a witness against himself, Article 21 deals with the protection of life and personal liberty.
• The executive needs to take corrective measures in respect of vacancies in the Appellate Tribunal under PMLA, 2002.
• Section 63 of the Act, which deals with punishment in respect of false information or failure to give information, is not in any way arbitrary.
• There appears to be no ground in challenging Section 44, which deals with offenses triable by special courts, which is arbitrary or unconstitutional.

The provisions of the PMLA must stand the test of due process under Article 21;Section 50 of the PMLA entrenches upon the right to liberty of persons summoned under the act and violates the right against self-incrimination; Section 44(1)(d) of the PMLA creates irreversible prejudice in the accused as to the trial which is adjudicating the predicate offense; PMLA creates an overbroad offense with no fetters on investigatory Powers; The Schedule of offenses renders several bailable offenses as non-bailable; Provisions of the PMLA regarding attachment run contrary to the provisions in statutes containing the predicate offense; Adjudicatory paralysis of the appellate tribunal.

There has been a Complete misconstruing of PMLA section 50. There is a contrast between a proceeding and an investigation. Section 50(4) lays on only to proceeding and not to an exploration. This issue has not been dealt with by the other side, it has not been answered by the other side. Under section 63(2)(b) of the PMLA, if he refuses to sign any statement made by him in the course of any proceedings under this Act, he will be liable to fine. This applies to proceedings under 5 (attachment) and 8 (adjudication) and 13 (power of director to impose fine). Investigation cannot be a judicial procedure The person is not bound to sign that statement under 50(2). The scheme of the PMLA has enabled the seizure of assets, examination of the petitioner under the special procedure and search under section 50, a six-year long pre-trial procedure both in the predicate offence and in the laundering offense, limited right of participation as accused and the infamous reversal of the burden of proof that PMLA imposes", (Vijay Madanlal Choudhury and others vs Union of India and Ors) Section 50 of the PMLA deprives an accused person of their only ‘two friends’ during an investigation—the Constitution and the Code of Criminal Procedure, 1973. The CrPC sets out procedures to protect the accused persons constitutional right against self-incrimination. Section 50 enables the ED to compel accused persons to give evidence against themselves while in custody under fear of fine and imprisonment if they lie. Evidence obtained in this manner can be used against the accused in court.

Also, the most egregious cases of terrorism, such as Mohd. Ajmal Amir Kasab v State of Maharashtra (2019), It has been made a case that the SC had maintained that deprivations of liberty in criminal law must only be through due process. By enabling the ED to force signed confessions out of accused persons and making the ECIR containing the evidence against the accused unavailable during crucial stages of the trial, the PMLA disregards due process. ED enables to force of signed confessions out of accused persons and makes the ECIR containing the evidence against the accused unavailable during crucial stages of the trial, the PMLA disregards due process.

It is disappointing that the Court did not find the provision for forcing one summoned by the ED to disclose and submit documents, and then sign it under pain of prosecution, as violating the constitutional bar on testimonial compulsion. Nor was it impressed by the argument that the search and seizure provisions lack judicial oversight and are exclusively driven by ED officers. Provisions that allow prosecution for money-laundering even without the scheduled offense being established and amendments deleting safeguards have passed muster with the Bench, solely on the ground that these were for removing lacunae pointed out by international evaluators of the efficacy of the law. Save for an odd comment that the Special Court could examine the documents to decide on continuing detention, there is nothing in the judgment that will attenuate the law’s rigours. It rejects the plea to treat ED officers who record statements as police officers, thus protecting their evidentiary admissibility. At a time when the ED is selectively targeting regime opponents, the verdict is bound to be remembered for its failure to protect personal liberty from executive frill.

Despite the seemingly proactive approach of the ED in money laundering matters, it has been a mammoth task to establish the money trail in these cases. As of date, 4,700 cases are being investigated by the ED. The number of cases taken up for investigation each year in the last five years vary from 111 cases in 2015-16 to 981 in 2020-21. These numbers become a point of concern as only 313 arrests have been made till date since 2002, the year in which the PMLA Act was enacted. Over the last 20 years more than 200 pleas are pending under PMLA. The statistics become more alarming when we compare it to other jurisdictions where the annual registration of cases under their money laundering legislation is much higher; particularly in UK (7,900), the U.S. (1,532), China (4,691), Austria (1,036), Hong Kong (1,823), Belgium (1,862) and Russia (2,764).

The difficulty in passing sentence on offenders in money laundering cases is primarily due to the remoteness of the perpetrators to the criminal activity and proceeds of crime. Offenders often spin a complex web of connections and transactions to pull off a financial crime like these featured so that the act can go unnoticed in the ordinary course of affairs. Even after the suspicious activity is detected, the sheer complexity of the criminal activity makes it terribly difficult, if not altogether impossible, to trace the crime back to its masterminds. The average time lag between the date of occurrence of frauds and the date of detection was 23 months for the frauds reported in 2020-21. In respect of large frauds of 100 crore and above, the average lag was of 57 months for 2020-2021. Even the Hon'ble Supreme Court has underscored on the need for a fast investigation as "cash travels faster than light". The plight gets aggravated as even the Indian judicial system is plagued with a notoriously slow pace of resolution of cases, and there is an endless backlog that stands in the way of time-efficient adjudication of matters.

Up till 2019, at least 38 economic offenders are figured out to have fled the country to avoid prosecution. Besides the actions abode by law enforcement agencies, it can be futile and publicly ill-received to seek prosecution with administration resource expense if punishment is almost impossible. India, in the contemporary past, has adopted measures to prevent business people from fraudulently obtaining loans and fleeing the country to avoid prosecution, including the implementation of the Fugitive Economic Offenders Act, 2018. This legislation authorises the government to attach all the assets (including the assets acquired from the proceeds of crime) of an individual against whom an arrest warrant has been issued for committing a scheduled offence where the value exceeds INR 100 crores (approx. USD 13 million). In furtherance to this, the 2018 amendment to the Prevention of Corruption Act, 1988 (PCA), has criminalised the act of "giving bribes" in addition to the act of "taking bribes". This amendment has also made provisions regarding attachment and administration of property procured through an offence under the PCA, which was previously absent in this statute. Another example would be the inclusion of corporate fraud (as understood under the Companies Act 2013), as a scheduled offence under the PMLA that tightens the leash over companies and their officers.

Views are personal.