Prevention of Money Laundering Act, 2002

The Supreme Court has upheld the constitutional validity of the Prevention of Money Laundering Act, 2002, as amended from time to time.

Background –

• The amendments were introduced to the 2002 Act by way of Finance Acts. 240 petitions were filed against the amendments.
• These petitioners claimed that these amendments would violate personal liberty, procedures of law and the constitutional mandate.
• They claimed that the process itself was the punishment.
• The current judgement of SC came in response to these petitions challenging the constitutional validity of the PMLA.

Judgement by the Supreme Court –

• Money laundering is a heinous offence which is against the sovereignty and integrity of the country. It is no less a heinous offence than the offence of terrorism.
  • Hence, the court upheld the quantum of punishment as mentioned in the act.
    • The court was also of the view that the quantum of sentence is a matter of legislative policy.
• PMLA is a law against the scourge of money laundering —
  • SC held that PMLA has not been enacted as a tool to be wielded against rival politicians and dissenters.
  • It is a law which was enacted as a result of international commitment.
• On the issue of introduction of the amendments through Money Bills — The SC held that this issue would be separately examined by a larger Bench of the apex court.
• SC order upheld ED’s power to seize and attach properties under Section 5 of the Act —
  • The value of assets attached by the ED until March 31, 2022, stood at over Rs 1 lakh crore.
  • An unfavourable verdict would have resulted in the release of the assets in question.
  • Also, the ED would have been stripped of the power to carry out similar seizures as proceeds of crime.
• On not providing ECIR to the accused —
  • SC held that it was not mandatory for the ED to provide a copy of Enforcement Case Information Report (ECIR) to the accused.
    • ECIR is an ED document which is widely seen as similar to the police first information report (FIR).
  • SC was also of the view that it is enough if the agency disclosed the grounds of arrest at the time of arrest.
• SC validates stringent bail conditions under PMLA —
  • The judgment upheld the twin conditions for bail in Section 45 of the Act.
    • Section 45 of the PMLA made offences to be cognizable and non-bailable and no person accused of an offence shall be released on bail or on his own bond unless –
      • Prosecutor is given opportunity to oppose the bail application.
      • There are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail.
  • These twin conditions were struck down by the Supreme Court in 2017 but revived by Parliament by way of an amendment in 2018.
• On the validity of statements recorded during an inquiry —
  • ED, Serious Fraud Investigation Office (SFIO), Directorate of Revenue Intelligence (DRI) officials, and not police, statements’ recorded during an inquiry are valid evidence.
• On the reversal of usual burden of proof in criminal law under the PMLA —
  • Section 24 of PMLA reverses the usual burden of proof in criminal law.
  • In a PMLA case, the judge must assume that the accused person is guilty until he disproves it. The court found this provision valid.

About the Prevention of Money Laundering Act, 2002 –

• PMLA was enacted to curb money laundering and to provide for seizure of property derived from money-laundering.
• The act has undergone various critical changes from time to time in order to give itself more strength and meaning. The latest amendment was done in 2019.
• For example, the definition of Money Laundering under the act was broadened via amendments done in 2012 and again in 2019.

About the Enforcement Directorate –

• It was established in the year 1956 as an ‘Enforcement Unit’ under the Department of Economic Affairs.
• Later, in 1957, this Unit was renamed as ‘Enforcement Directorate’.
• Presently, it is under the administrative control of the Department of Revenue (Ministry of Finance) for operational purposes.
• ED is responsible for enforcement of the Foreign Exchange Management Act, 1999 (FEMA), and certain provisions under the PMLA.
• ED has the power to attach the asset of culprits found guilty of the violation of FEMA.
• It has also been empowered to undertake, search, seizure, arrest, prosecution action, and survey, etc. against the offences committed under PMLA.