PMLA law expanded to fight terror financing & corruption UPSC

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ANTI-MONEY LAUNDERING LAW

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Context: The anti-money laundering law expanded over time, granting the Enforcement Directorate police powers, upheld by the Supreme Court, with stringent bail conditions and broadened offences.

Details

The Prevention of Money Laundering Act (PMLA) of 2002 has evolved significantly over the years, granting expansive powers to the Enforcement Directorate (ED) and raising questions about due process and bail provisions, especially for politicians accused of corruption.

Historical Context

Global Pressure: The PMLA emerged in response to international efforts to combat money laundering and terror financing, encouraged by initiatives such as the Financial Action Task Force (FATF).India's enactment of the PMLA aligned with its commitments as a member of FATF.
Legislative Journey: The journey of the PMLA began with the introduction of the Prevention of Money-Laundering Bill, 1998. Despite initial opposition due to concerns about draconian provisions, the bill underwent revisions and was eventually passed in 2002, coming into force in 2005.

The PMLA is designed to achieve three primary objectives

●Prevent and Control Money Laundering: By implementing measures to detect, deter, and disrupt activities associated with money laundering.

●Confiscate and Seize Proceeds of Crime: Empowering authorities to confiscate and seize properties derived from money laundering activities.

●Address Related Issues: Tackling any other concerns connected with money laundering within India.

Expansion of ED's Powers

The PMLA underwent significant amendments, notably in 2009 and 2012, expanding the ED's authority to combat money laundering and associated crimes.
2009 Amendments: The inclusion of 'criminal conspiracy' under Section 120B of the Indian Penal Code (IPC) among other offences broadened the ED's jurisdiction. This allowed the ED to intervene in cases involving conspiracy, even if the primary offence wasn't under the PMLA's purview.
2012 Amendments: Moving the Prevention of Corruption Act, 1988 (PC Act) to Part A of the PMLA's schedule intensified the bail conditions for corruption-related offences. This shift subjected accused individuals to stringent bail provisions, contributing to prolonged incarcerations before trial.

Salient Features of the ACT

●Punishment for Money Laundering: Individuals found guilty of money laundering can face rigorous imprisonment ranging from three to seven years, extendable up to ten years for certain offences.

●Attachment of Tainted Property: Authorities, under specified conditions, can provisionally attach property believed to be proceeds of crime for a designated period, subject to confirmation by an Adjudicating Authority.

●Adjudicating Authority: Responsible for determining whether attached or seized property is involved in money laundering guided by principles of natural justice and empowered to regulate its own procedures.

●Presumption in Inter-connected Transactions: In cases involving multiple inter-connected transactions, the presumption is made that all transactions within the chain are part of the money laundering activity.

●Burden of Proof: Accused individuals bear the burden of proving that alleged proceeds of crime are lawful property.

●Appellate Tribunal and Special Court: Entities designated to hear appeals against orders of the Adjudicating Authority and to try offences under the Act, respectively.

Impact and Controversies

High Bar for Bail: Section 45 of the PMLA sets stringent criteria for granting bail, necessitating the accused to prove their innocence and future non-involvement in offences. Critics argue that this provision leads to prolonged pre-trial detentions, akin to serving a sentence before conviction.
Expanded Definition of Offences: The amendments broadened the definition of money laundering to include various criminal activities, expanding the scope of culpability. This has raised concerns about the presumption of guilt and the burden of proof.

Criticisms and Judicial Interventions

●Low Conviction Rate: The law's effectiveness has been questioned, highlighted by a low conviction rate and concerns about selective targeting.

●Misuse and Targeting of Scholars/Activists: Allegations of misuse against political rivals or dissenters raise concerns about the law's application and potential threats to freedom of speech.

●Judicial Scrutiny and Amendments: Judicial interventions, such as the Supreme Court's rulings and subsequent reviews, aim to address concerns regarding personal liberty, procedural fairness, and the scope of ED's powers.

Upheld by the Supreme Court

Judicial Validation: The Supreme Court upheld the constitutional validity of the PMLA in 2021, upholding its provisions, including bail conditions and ED's powers. Despite criticism and calls for reform, the court's ruling solidified the legal framework established by the PMLA.

Conclusion

The journey of the PMLA reflects a continuous effort to strengthen anti-money laundering measures and combat financial crimes. However, the expansion of ED's powers, stringent bail conditions, and the broadening of offence definitions have sparked debates about due process and individual rights. As political parties promise reforms and critique the weaponization of laws, the balance between effective law enforcement and safeguarding civil liberties remains a central concern in the discourse surrounding the PMLA.

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Prevention of Money Laundering Act

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ENFORCEMENT DIRECTORATE

ED STATES TUSSLE

Source:

Indian Express

PRACTICE QUESTION

Q. The Prevention of Money Laundering Act (PMLA) has been amended several times over the years, with some arguing for stricter measures and others advocating for a more balanced approach. Critically evaluate the impact of these amendments on the effectiveness of the PMLA in achieving its objectives. Consider the potential unintended consequences and suggest alternative approaches for future amendments.