Supreme Court upholds powers of arrest- raid under PMLA

Supreme Court upholds powers of arrest- raid under PMLA

Subject :Polity

Section: Constitution

Context: The SC upheld the core amendments made to the Prevention of Money Laundering Act (PMLA).

What is Money Laundering?

Whosoever directly or indirectly attempts to indulge or assist other person or actually involved in any activity connected with the proceeds of crime and projecting it as untainted property

Prevention of Money Laundering Act, 2002:

• It was enacted to prevent money-laundering and to provide for confiscation of property derived from money-laundering
• PMLA and the Rules notified there under came into force with effect from July 1, 2005.
• The Act and Rules notified there under impose obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information in prescribed form to Financial Intelligence Unit – India
• The PMLA seeks to combat money laundering in India and has three main objectives:
  • To prevent and control money laundering.
  • To confiscate and seize the property obtained from the laundered money; and
  • To deal with any other issue connected with money laundering in India.

• The Act prescribes that any person found guilty of money-laundering shall be punishable with rigorous imprisonment from three years to seven years
• The Adjudicating Authority is the authority appointed by the central government through notification to exercise jurisdiction, powers and authority conferred under PMLA. It decides whether any of the property attached or seized is involved in money laundering
• The Adjudicating Authority shall not be bound by the procedure laid down by the Code of Civil Procedure,1908, but shall be guided by the principles of natural justice and subject to the other provisions of PMLA
• Financial Intelligence Unit – India (FIU-IND) was set by the Government of India on 18 November 2004 as the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions
• FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister

What all sections were under court scrutiny and what all the court has upheld?

1) Section 3: States the offence of money laundering. The court held that generating black money is also money laundering, even without proof of actually laundering it or converting it to white money.

2) Section 5 and 8(4): Under this, the ED has discretionary powers to attach property of the accused. The bench rejected the argument and held that there are enough safeguards to protect the accused.

3) Section 17: This section gives ED powers to enter and search suspected property without judicial permission. The SC rejected this argument and upheld the provision.

4) Section 19: This section gives the ED powers of arrest. The court upheld its constitutionality.

5) Section 24: 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.

6) Section 45: Deals with bail conditions. The court held that this provision is necessary to achieve the purpose of PMLA.

7) Section 50: The bench held that proceedings under Section 50 are an inquiry, not a criminal investigation. ED officers are hence not police. CrPC rules for investigation do not apply to the ED.

Directorate of Enforcement (ED)

• It is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India
• It is part of the Department of Revenue, Ministry of Finance
• The prime objective of the Enforcement Directorate is the enforcement of two key Acts of the Government of India namely, the Foreign Exchange Management Act 1999 (FEMA) and the Prevention of Money Laundering Act 2002 (PMLA)
• The Directorate of Enforcement, with its headquarters at New Delhi, is headed by the Director of Enforcement