Harshness of amendments made to PMLA in 2019 shocking, says Sibal
- November 23, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Harshness of amendments made to PMLA in 2019 shocking, says Sibal
Subject: Polity
Section: Constitutions
Context:
- Mr. Sibal raised concern that the amendments made to the anti-money laundering law in 2019 had armed the Enforcement Directorate (ED) with unbridled powers of summons, arrest, raids and attachment of property and made bail nearly impossible while shifting the burden of proof of innocence onto the accused rather than the prosecution.
What is the Prevention of Money Laundering Act (PMLA), 2002?
Money Laundering Definition:
- Money laundering is the process of making large amounts of money generated by criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source.
About Law:
- It is a criminal law enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money-laundering and related matters.
- It forms the core of the legal framework put in place by India to combat Money Laundering.
- The provisions of this act are applicable to all financial institutions, banks (Including RBI), mutual funds, insurance companies, and their financial intermediaries.
Recent Amendments:
- Clarification about the Position of Proceeds of Crime: Proceeds of the Crime not only includes the property derived from scheduled offense but would also include any other property derived or obtained indulging into any criminal activity relate-able or similar to the scheduled offense.
- Money Laundering Redefined: Money Laundering was not an independent crime rather depended on another crime, known as the predicate offense or scheduled offense.
- The amendment seeks to treat money laundering as a stand-alone crime.
- Under Section 3 of PMLA, the person shall be accused of money laundering if in any manner that person is directly or indirectly involved in the proceeds of the crime.
- Continuing Nature of Offense: This amendment further mentioned that the person will be considered to be involved in the offense of money laundering till the time that person is getting the fruits of activities related to money laundering as this offense is of a continuing nature.
What is the Enforcement Directorate?
- The Directorate of Enforcement or the ED is a multi-disciplinary organization mandated with investigation of economic crimes and violations of foreign exchange laws.
- The origin of this Directorate goes back to 1st May, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947 (FERA ’47).
- With the onset of the process of economic liberalization, FERA, 1973, which was a regulatory law, was repealed and in its place, Foreign Exchange Management Act, 1999 (FEMA) came into operation.
- Recently, with the increase in the number of cases relating to economic offenders taking shelter in foreign countries, the Government has passed the Fugitive Economic Offenders Act, 2018 (FEOA) and ED is entrusted with its enforcement.
Powers of ED:
- The ED carries out search (property) and seizure (money/documents) after it has decided that the money has been laundered, under Section 16 (power of survey) and Section 17 (search and seizure) of the PMLA.
- On the basis of that, the authorities decide if arrest is needed as per Section 19 (power of arrest).
- Under Section 50 of the PMLA, the ED can also directly carry out search and seizure without calling the person for questioning.
- It is not necessary to summon the person first and then start with the search and seizure.
- If the person is arrested, the ED gets 60 days to file the prosecution complaint (chargesheet) as the punishment under PMLA doesn’t go beyond seven years.
- If no one is arrested and only the property is attached, then the prosecution complaint along with attachment order is to be submitted before the adjudicating authority within 60 days.
Contentious Provision:
- Allegations of Violation of Article 20(3): PMLA’s provisions on admissibility of statements made by the accused as evidence, and the stringent bail provisions have been the most contentious.
- It is the only Act in the country in which a statement recorded before an investigating officer is admissible in court as evidence. Other laws that contained such provisions, such as TADA and POTA, have long been repealed.
- Violation of Article 22: ED could summon a person without telling him whether he was being called as a witness or an accused.
- The provision for bail stipulates that a magistrate will not grant bail to an accused unless he is convinced that prima facie no case is made out. This provision was struck down by the Supreme Court on the ground that it presupposed the trial at the stage of bail itself.
What are the Recent Controversies Regarding PMLA and the Powers and Efficiency of ED?
- The PMLA formulated in 2002 has undergone various critical changes from time to time in order to give itself more strength to deal with the offence of money laundering.
- However, on account of these amendments, several petitions have been filed across the country that question the almost blanket powers assigned to the ED under PMLA for searching, seizing, investigating, and attaching assets considered to be proceeds of crimes.
- Moreover, in a recent hearing, the SC upheld the constitutional validity of the PMLA and ED’s power to hold inquiries, arrest people and attach property (under Section 5 of the Act).
- The Court stated that Section 5 provides for a balancing arrangement to secure the interests of the person and also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act.
- Validation of Article 20(3): Judiciary rejected the argument that ED authorities are police officers and, hence, a statement recorded by them (Section 50 of the Act) would be hit by Article 20(3) of the Indian Constitution which says no person accused of an offence shall be compelled to be a witness against himself (self incrimination).
- Additionally, the conviction rate of the ED under PMLA is very low, despite thousands of cases registered and people arrested.