India: All You Need To Know About The Law Relating To Money-Laundering In India

Last Updated: 2 May 2017
Article by Anirban Bhattacharya and Bharat Chugh

The Indian Government's crackdown on black money continues unabated and a spate of prosecutions have been launched in the recent times under the Prevention of Money Laundering Act, 2002. This article is an attempt to demystify the law relating to money laundering in India and provide a brief overview of its scheme and operation.

1. WHAT IS MONEY LAUNDERING ?

Investopedia1 defines money laundering as "The process of creating the appearance that large amounts of money obtained from serious crimes has originated from a legitimate source."

Illegal arms sales, smuggling, and other organized crime, including drug trafficking and prostitution rings, can generate huge amounts of money. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to "legitimize" the ill-gotten gains through money laundering. The money so generated is tainted and is in the nature of 'dirty money'. Money Laundering is the process of conversion of such proceeds of crime, that is to say the 'dirty money', to make it appear as 'legitimate' money.2

1.1 The USUAL modus operandi

A case of Money laundering ostensibly appears to be an above-board financial transaction, however, the criminality underneath is hidden by a three stage process :

  1. The first stage is when the crime money is injected into the formal financial System. This is called 'placement';
  2. In the second stage, money injected into the system is layered and spread over various transactions with a view obfuscate the tainted origin of the money. This process is called 'layering';
  3. In the third and the final stage, money enters the financial system in such a way that original association with the crime is sought to be obliterated so that the money can then be used by the offender or person receiving as clean money. This is called 'Integration'.

1.2 Common forms/METHOD of money laundering

Structuring, Bulk Cash Smuggling, Cash Intensive Businesses, Trade-based laundering, Shell companies and trusts, Round-tripping, Bank Capture, Gambling, Real Estate, Black Salaries, Fictional Loans, Hawala, False invoicing are some of the common methods of money laundering.

2. WHAT IS THE INDIAN LAW ON THE SUBJECT ?

In India, the specific legislation dealing with money laundering is the Prevention of Money-Laundering Act, 2002 (for short 'PMLA'). The law was enacted to combat money laundering in India and has three main objectives :

  • To prevent and control money laundering;
  • To provide for confiscation and seizure of property obtained from laundered money; and
  • To deal with any other issue connected with money-laundering in India.

Apart from the provisions of PMLA, there are other specialised provisions such as RBI/SEBI/IRDA anti money laundering regulations. Many of these authorities are bound to provide suspicious transaction reports, which are in-turn analysed by Financial Intelligence Units established by the Central Government.

3. WHAT IS THE LEGAL DEFINITION OF MONEY LAUNDERING ?

3.1 Money Laundering

The offence of 'Money Laundering' is defined under Section 3 of the PMLA, which, for ease of understanding, can be deconstructed as :

Whosoever :

  • directly or indirectly,
  • attempts to indulge, or
  • knowingly assists, or
  • knowingly is party, or
  • is actually involved in any process, or
  • activity connected,

with the Proceeds of Crime, including its :

  • Concealment,
  • Possession,
  • Acquisition or use; and
  • Projecting or Claiming it as Untainted Property

shall be guilty of offence of Money-Laundering.

It is clear that the section is most widely worded and almost any kind of dealing with the proceeds/fruits of crime, is brought within the purview of the section and made culpable.

3.2 'Proceeds of Crime'

An understanding of the phrase 'Proceeds of Crime' is crucial to the understanding of the crime of Money Laundering. The offence of money laundering (defined u/s 3 and punished u/s 4 PMLA) is attracted only when the laundered property falls within the definition of 'proceeds of crime'

To understand what is meant by 'Proceeds of Crime', one has to turn to Section 2(u) of PMLA, which provides that - 'proceeds of crime' means and includes :

  • Any property derived or obtained
  • Directly or indirectly
  • By any person
  • as a result of criminal activity
  • relating to a 'scheduled offense'; or
  • the value of any such property

To further add teeth to this provision, the Finance Act of 2015 has further widened the definition of proceeds of crime and included within its ambit not only the specific property (which is the subject matter of money laundering) or its value, but also the property-equivalent in value held within the country (in a situation where property which is the 'proceed of crime' is taken or held outside the country). Such properties are also included within the definition of 'proceeds of crime'. This principle of equivalence has been introduced by the Finance Act, 2015 for the first time.

To illustrate, if a person X has been accused of having proceeds of crime in country X, in that situation, his assets in India of the same value will qualify as 'proceeds of crime', even though these assets per se are not the 'proceeds of crime' or in no way connected to it. This has been done with a view to enable action in those cases where 'proceeds of crime' are taken or held outside the country and to allow action to be taken for attachment of equivalent asset located within the country. This step appears to have been taken in view of the increasing internationalisation of crime. However, this gives rather wide and unguided powers of attachment to the authorities under the Act, which may be exercised arbitrarily.

The Interconnectedness of PMLA and 'scheduled offence'

A reading of the above definition of 'proceeds of crime' also makes one more thing clear, which is extremely crucial to an understanding of the offence of Money Laundering, which is that the offence of Money Laundering is not an independent crime; it depends upon another crime, which is known as the 'predicate offence' or 'scheduled offence', the proceeds of which are made the subject matter of crime of money laundering. The world over, countries include almost all serious crimes as predicate crimes for the purpose of money laundering offence, with a view to widen the ambit of prosecution.

In the next section we deal with the Schedule and the list of predicate offences.

4. WHAT ARE THE SCHEDULED/PREDICATE OFFENCES WHICH ENTAIL PROCEEDINGS UNDER PMLA ?

4.1 List of Offences

Under PMLA, commission of any offence, as specified in the Part A and Part C of the Schedule of PMLA will attract the provisions of PMLA. Some of the Acts and offences, which may attract PMLA, are enumerated herein below:

  • Part A enlists offences under various acts such as : Indian Penal Code, 1860 (including but not limited to offences against Property such Cheating, Forgery, Counterfeiting, Fraud, murder etc) Narcotics Drugs and Psychotropic Substances Act, 1985, Prevention of Corruption Act, 1988 SEBI, Customs Act, 1955, Foreigners Act, Arms Act, Antiquities and Art Treasures Act, Copyright Act, 1957, Trademark Act,1999, Wildlife Protection Act, 1872, Information Technology Act, 2000, amongst others.
  • Part B offences (offence under the Customs Act), provided the value of property involved is more than one crore rupees or more;
  • Part C deals with trans-border crimes, and reflects the commitment to tackle Money Laundering across International Boundaries.

5. AUTHORITIES ENTRUSTED TO INVESTIGATE/PROSECUTE UNDER THE PMLA?

Though the Code of Criminal Procedure governs the procedural aspects of prosecution, there are marked deviations from the standard procedure considering the special nature of the offence (including its cross border character) and slightly different process is envisaged. The offence is cognizable which means arrest can be made without a warrant.3 There is a specialised investigative body for investigation of these offences. The Directorate of Enforcement in the Department of Revenue, Ministry of Finance is responsible for investigating the offences of money laundering under the PMLA. Investigation usually begins with the registration of an Enforcement Case Information Report (also known was ECIR) which sets the investigation into motion.

This authority is empowered to carry out interim measures such as survey, search, seizure and arrest of the accused. Similarly, if an asset is found to be the proceeds of crime, the same can be confiscated and appropriated by the Government.

Financial Intelligence Unit - India (FIU-IND) under the Department of Revenue, Ministry of Finance is the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions to enforcement agencies and foreign FIUs.

The predicate/scheduled offences are separately investigated by agencies mentioned under those acts, for example - the local police, CBI, customs departments, SEBI or any other investigative agency, as the case may be.

After investigation is complete for the offence of money laundering, a complaint is filed by the investigating authority before the Special Court, where the trial for the offence actually takes place.

Since the offence of Money laundering is inextricably connected with the predicate offence, 2013 amendments to the PMLA provide that the trial for the predicate offence as well as offence punishable under Section 4 shall be conducted by the Special Court. If court which has taken cognizance of the scheduled offence is other than the Special Court (which has taken the cognisance of the complaint of the offence of money laundering under sub-clause (b), it shall, on an application by the authority authorised to file a complaint under this Act, commit the case relating to the scheduled offence to the Special Court and the Special Court shall, on receipt of such case proceed to deal with it from the stage at which it was committed. 4

As opposed to this, the process relating to attachment of property (including its confirmation) is dealt with by the Adjudicating Authority established under the Act.

6. ACTIONS THAT MAY BE INITIATED AGAINST PERSON LAUNDERING MONEY?

  • Attachment of property under Section 5, seizure/freezing of property and records under Section 17 or Section 18.
  • Persons (Individuals and/or juristic person such as a Company etc) found guilty of an offence of Money Laundering are punishable with imprisonment for a term which shall not be less than three years but may extend up to seven or even ten years (depending on circumstances) and shall also be liable to fine (no upper limits) [Section 4].5

7. ATTACHMENT OF PROPERTY.

The PMLA gives extremely wide powers to the authorities to attach properties suspected to be involved in Money Laundering. Section 5 of the PMLA authorises the Director or any other officer not below the rank of Dy.Director to attach property. This power is to be exercised if the authority, as specified above, has a reason to believe (and such reasons have to be recorded in writing to prevent arbitrariness), on the basis of material in their possession, that -

Any person is in possession of any Proceeds of Crime; and such Proceeds of crime are likely to be :

  • Concealed,
  • Transferred, or
  • dealt with in any manner

which may result in frustrating any proceedings relating to confiscation of such proceeds of c rime .

If the aforesaid conditions are satisfied, the authority may by order in writing, provisionally attach such property for a period not exceeding 180 days from the date of order.

Under normal circumstances, presence of a complaint/police report against the accused for the predicate/scheduled offence, whether in India or abroad, is a necessary precondition for provisional attachment of property. This is, however, not an absolute pre-condition and in cases where immediate attachment is needed and non-attachment is likely to frustrate the proceedings, the Director or the Dy.Director, for reasons to be recorded in writing, may nevertheless go ahead with provisional attachment even with there being no prosecution qua the scheduled offence against the accused.

It may be noted that there is no provision for a prior notice of a provisional attachment and the same can come like a total bolt from the blue.

What happens post-provisional attachment ?

After provisional attachment, the Director or any other officer, has to file a complaint stating the facts of such attachment before the Adjudicating Authority, within a period of thirty days from such attachment

Remedy

Thereafter, the person aggrieved by the provisional attachment may file his objections before the Adjudicating Authority. This is the remedy under the PMLA, however, an order without jurisdiction or suffering from any jurisdictional error may be challenged directly before the High Court by invoking Article 226 of the Constitution. The Courts have held that a mere mechanical noting that the property in question is likely to be concealed, transferred or dealt-with would not meet the requirements of Section 5(1) of the Act and such a non speaking order by a Director can be set aside in writ proceedings by the High Court if it is devoid of strong and cogent reasons6

8. CAN PROVISIONAL ATTACHMENT BE INVOKED AGAINST A PERSON NOT ACCUSED OF ANY SCHEDULED OFFENCE ?

The answer is Yes. Provisional attachment can be invoked even against a person who is not accused of any 'scheduled-offence'. A conjoint reading of Sections 2(s) and 2(u) reveals that reference made is to 'any person'; this coupled with the purpose and intent of the Act, calls for a wide interpretation.

In fact, Section 5(1) second proviso specifically allows attachment of property in the hands of a third person even without there being a prosecution qua that person under the PMLA. It provides that if the designated officer has reason to believe that the property in possession of such person is involved in Money-Laundering, and non-attachment will frustrate any proceedings under the Act, he can go ahead and attach the same. The essence of the matter being 'freezing of tainted assets' at the earliest.

However, even post attachment, the person may continue in the enjoyment of the property during the period of attachment, but is prohibited from creating any third party interest in the property.

9. POST ATTACHMENT PROCEEDINGS.

We have already seen that after provisional attachment u/s 5 of the PMLA, the Director has to file a complaint before the Adjudicating authority. Section 8 of PMLA lays down an elaborate procedure for adjudication of a complaint under Section 5 of PMLA. It calls for a show cause notice to be issued to the offender/person from whom property has been seized, so as to give the person an opportunity to make a case against attachment/confiscation. Such a person, in order to avoid confiscation, can demonstrate the legitimate sources of his income, earning or assets, out of which or by means of which he has acquired the property attached, the evidence on which he relies and other relevant information and particulars, and to basically convince the authority as to why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government. The Authority after giving him a hearing reaches a finding, which needless to state is open to challenge before the Appellate Tribunal.

If the Adjudicating Authority, after the enquiry, comes to the conclusion that any property is involved in money laundering, it can, by an order in writing, confirm the attachment of the property. Such attachment shall :

  1. continue during the pendency of proceedings relating to any scheduled offence before a Court; and
  2. become final after the guilt of the person is proved before the Special Court and order of such Court becomes final;
  3. after the confirmation of provisional order of attachment, the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the attached property.

Essentially, once the provisional attachment is confirmed, the final fate of the property depends on the decision of the Special Court (trying the offence under the PMLA). If the offence under PMLA stands proved, the Special Court shall order confiscation of the property to the Central Government. If the Special Court reaches the conclusion that the offence has not taken place, it shall order release of such property to the person entitled to receive it.

Appeal against confirmation of Attachment

Decisions of the adjudicating authority of first instance can be appealed to the Appellate Tribunal created under the Act.

Adjudicating Authority and Special Court - Relative scope

It is to be noted that the Adjudicating Authority under this section is concerned with questions of continuation of attachment and/or retention of property involved in money laundering and not the trial of offence of money laundering or the scheduled offence, which function falls for a judicial trial by the Special Court.

Procedure before the Adjudicating authority

The Adjudicating Authority has been given vast powers of discovery, inspection, compelling production of records as per S.11 of the Act. Section 11 spells out the powers of the Adjudicating Authority in discovery of facts, Section 50 does so in respect of a Director.

Needless to state, being a quasi judicial authority, both of them have to conform to the principles of Natural Justice.

As per established principles, following duties are imposed on quasi judicial authorities :- (i) A quasi-judicial authority ought not to make any decision adverse to a party without affording an opportunity of meeting the allegations made against him; (ii) The party whose rights are to be affected should be provided with the information upon which the action is raised and the affected party should have reasonable notice of the case which he has to meet/face. Of course, an opportunity is to be provided to the affected party which must be real, reasonable and substantial too; (iii) The affected party should have the opportunity of letting in/adducing evidence which he relies upon.

9A. Whether an accused can be called upon to disclose documents and give statements, or can he exercise the right to silence?

Section 11(2) & S.50(3) of the PMLA makes it mandatory for a person so summoned by the adjudicating authority to attend in person and bound to disclose documents as may be required, and answer such questions as are put and for the purposes of these sections, the adjudicating authority is considered a 'court' and proceedings 'judicial proceedings'.

Moreover, Section 50(1) prescribes taking of affidavits on oath with respect to discovery of facts.

On a plain reading, any person will include an accused person too. Now, whether the accused can be compelled to disclose documents and disclose facts is a serious question as it makes serious inroads into the constitutional right of silence of the accused and protection from self incrimination, as guaranteed under Article 20(3) of the Constitution. However, the law as it stands makes the statement recorded before the Investigating officer under PMLA admissible in evidence before the Court.7 (This, it may be noted, is in stark contrast to any other criminal prosecution where statements given to Police during investigation are not admissible in evidence during trial).

10. POWERS OF THE ENFORCEMENT DIRECTORATE RELATING TO SEARCH, SEIZURE AND ARREST.

10.1 Search of premises

Section 17 gives wide powers of search and seizure to the investigating agency. If the investigating agency has reason to believe (and such belief should be recorded in writing) the commission of offence under the PMLA and possession of proceeds of crime, it can enter and seize property/records etc, make an inventory of the same. The seizure memo is required to be signed by two independent witnesses.

Whereas this section provides for search of premises, Section 18 provides for search of an individual.

10.2 Search of person

If the investigating authority has a reason to believe that a person has secreted about his possession, ownership or control, proceeds of crime, in that case the person can be searched. Before the search of a person, as per his wish, the authority shall take the said person before a Gazetted officer superior in rank to the authority or a Magistrate within 24 hours excluding the time of journey. This is the safeguard laid down in S. 18(4) of the PMLA, however, strangely there is no corresponding obligation on the investigating agency to inform the person about to be searched of this valuable right. Something akin to a Miranda warning will be apposite here.

The property seized has to be forwarded to the adjudicating authority for further orders.

10.3 Arrest

The offence is cognizable which means arrest can be made without a warrant.8 Section 19 gives the authority power to arrest. Standard safeguards relating to arrest apply. Every person arrested has to be produced before the Magistrate within 24 hours (excluding time of journey). The provision also mandates that such arresting official has to forward a copy of such arrest memo with the material in his possession to the adjudicating authority in a sealed envelop as per the procedure prescribed.

Apart from these, the investigating officer may summon and record the statements of persons concerned (S.50 of PMLA)

11. RIGHT TO BAIL

Section 45 of the PMLA makes the offence of money laundering non-bailable, which means that a person arrested is not entitled to bail as a matter of right, and bail becomes a matter of discretion for the court. If the predicate offence provides for punishment more than 3 years, then there is an embargo on release on bail, unless either the offence concerns a child, woman, sick or infirm; if not, then bail can only be granted after hearing the Prosecutor and only after the court comes to the conclusion that "there are reasonable grounds for believing that he is not guilty of such an offence and that he is not likely to commit any offence while on bail". Now this is an extremely tall order, especially having regard to the fact that the matter is usually at a preliminary stage when the question of bail is being decided. For a court to record a finding, at that stage, that there are no reasonable grounds for believing commission of the offence is an unnaturally high threshold. Usually the prosecution will prepare the case in such a way so that it contains the basic allegations and there is a very less likelihood of it being thrown out at the very outset. Once that is done, the court, at the stage of bail, will normally not be in a position to return a finding of non-guilt in favour of the accused.

This makes serious inroads into the right & presumption of innocence in favour of the accused. An accused is presumed to be innocent till his guilt is proved beyond reasonable doubts. Pre-trial incarceration is frowned upon by law, as it carries a substantial punitive content and has a stigmatic effect. Such incarceration is not only a denial of 'due process' but prejudices the accused in the preparation of defence of his case.

Secondly, if in a case, the court releases the accused on bail, in view of the above findings and at the same time frames charges against him and takes the matter to trial, would not the two findings be mutually destructive of each other. These are some of the major anomalies with this provision and a serious constitutional challenge can be mounted on this provision on the above grounds.

12. CAN A COMPANY AND ITS DIRECTORS/MANAGERS/SECRETARIES BE ACCUSED OF OFFENCE UNDER PMLA ?

Section 70 of PMLA deals with offences by Companies. It states that where a person committing a contravention of any of the provisions of this Act or of any Rule, Direction or Order made there under is a Company (company" means a body-corporate and includes a firm or other association of individuals), in that case: every person who, at the time the contravention was committed, was in charge of, and was responsible to the company, for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall also be liable to be proceeded against and punished under PMLA. This is an instance of what is known as 'Vicarious Liability' where liability for the acts of the company is also attributed on the individuals heading responsible positions in the company on the premise of them being the alter egos/nerve-centers of the company.

The possible defence and exception to this is for the individual to argue and prove that the contravention took place without his knowledge/despite all due diligence.

S.70(2) further provides that if the contravention has took place with the consent or connivance of, or is attributable to any neglect on the part of any Director, Manager, Secretary or other Officer of any Company, such Director, Manager, Secretary or other Officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.

13. OBLIGATIONS OF BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES

Under Section 12 of PMLA, there is a mandate on all Banking Companies, Financial Institutions and Intermediaries to maintain records of all transactions, including information relating to transactions for a period of 5 years, in such manner as to enable the investigating agency/Court to reconstruct individual transactions and find out criminality. The aforesaid agencies are required furnish to the concerned Authorities under PMLA, all information relating to such transactions, whether attempted or executed; the nature and value of such transactions; verify the identity of its clients and the beneficial owner, if any; and maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients.

14. TRIAL OF PMLA OFFENCE AND SCHEDULED OFFENCE

Since the offence of Money laundering is inextricably connected with the scheduled offence, 2013 amendments to the PMLA provide that the trial for the predicate offence as well as offence punishable under Section 4 shall be conducted by the Special Court. If a Court which has taken cognizance of the scheduled offence is other than the Special Court (which has taken the cognizance of the complaint of the offence of money laundering under sub-clause (b), it shall, on an application by the authority authorised to file a complaint under this Act, commit the case relating to the scheduled offence to the Special Court and the Special Court shall, on receipt of such case proceed to deal with it from the stage at which it was committed. 9 However, this by itself should not be construed to mean a joinder or clubbing of trial. The simultaneous trial in both the cases by the same court is an expedient to reduce delays. Needless to state, both the cases are independently tried and decided on the basis of evidence in each case. The trial of scheduled offence and PMLA offence is to be conducted by the same court - only for the sake of expediency.

The interconnectedness of PMLA and 'scheduled offence'

It would be a truism to say that the offence of Money Laundering is inextricably linked with the scheduled offence and, logically, an exoneration in the latter should, by itself, lead to an acquittal/discharge for the offence of money laundering too. This view seems not only just and legal but also deserves to be adopted for its eminent common-sense, for if there is no scheduled offence, there cannot be any 'proceeds of crime' either, as the 'crime' in the phrase 'proceeds of crime' is nothing but the scheduled offence. In other words, the Special Court trying the PMLA case cannot conclude, without the scheduled offence being proved, that some property associated with that offence is tainted as 'proceeds of 'crime. For something to be 'proceeds of crime' there has to be a crime in the first place. Any other view would make the two judgments mutually inconsistent, absurd and contradictory. Therefore, an acquittal/discharge in the predicate/scheduled offence should ipso facto lead to exoneration in the PMLA offence too. Infact, since it is the same Court which tries both the scheduled offence and the PMLA case (arising out of the scheduled offence), a discharge/acquittal in the scheduled offence itself leads to a discharge/acquittal for the PMLA offence too. A conclusive decision by the Hon'ble Supreme Court is required on the matter so as to settle the issue.

It may be noted that this provision cannot be construed to mean that the Enforcement Directorate (the investigating body under the PMLA) can investigate into the scheduled offences also. Investigation for each of the offences is to be done by agency(agencies) authorised under the respective acts. Investigation by an agency other than ED for an offence under PMLA may open the entire investigation (and its result) to challenge.

15. EVIDENCE, PRESUMPTIONS AND BURDEN OF PROOF

Keeping in view the difficulty of investigation in complex cases like money laundering, PMLA makes a departure from the standard rule of presumption of innocence and raises certain presumptions. This is an application of the 'doctrine of reverse burden'. Such provisions, needless to say, make the defence of a PMLA case quite challenging.

15.1 Presumption of property being tainted property

Section 24 of the PMLA casts the burden of proving that (alleged) proceeds of crime are not involved in Money Laundering on the Accused. This prima facie appears harsh, but on a deeper scrutiny it seems that this section will not relieve the prosecution of its responsibility of making a specific allegation that the monies that are allegedly being laundered are earned by committing a particular schedule offence or offences under the PMLA and are, therefore, proceeds of crime. The section cannot be read so as to obviate the requirement for the prosecution to prove these foundational facts. Any other view shall seriously undermine the fairness of the process, as one has to keep in mind that negative proof (proof of innocence, as opposed to proof of commission), by its very nature, is extremely difficult to be established. It is always easier to prove a positive, than a negative. The language of Section 24 (a) demonstrates that a person should be 'charged' for an offence under Section 3, in order for the presumption to follow. Charge has to be read to mean a specific charge and not a vague and omnibus allegation. However, once that charge is made, the accused will have justify that the property is not tainted with vice. This can be done by making it reasonably probable that the property is legitimately acquired by lawful means. He can disclose his sources of Income, Earnings or Assets, out of which or means by which he has acquired the property attached. As per fairly established principles of standard of proof, the accused does not have to prove all this to the hilt or beyond all reasonable doubt, but on a standard of preponderance of probability, that is to say, that it is more probable that the property is above board, than not.

15.2 Presumption in inter-connected transactions

Where proceeds of crime are layered through plural transactions, the intent to camouflage the source of the property as a derivative of criminality renders it difficult to identify the succeeding transactions as relatable to the initial proceeds of crime. It is for this reason and to effectuate the purposes of the Act that Section 23 incorporates the presumption that where money-laundering involves two or more connected transactions and one or more such transactions is/are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation under Section 8, it shall, unless otherwise proved to the satisfaction of the adjudicating authority, be presumed that the remaining transactions form part of such interconnected transactions i.e., involved in money-laundering as well. (Section 23 of PMLA).

15.3 Presumption in cases of records/property found in possession of person

A presumption is raised that property/records/documents found, seized from the possession or control of a person actually belong to such person (from whom they are seized) and the contents of such records are true. Further, there is also a presumption as to the records being in the handwriting/signatures of the person from whose possession they are seized. Due to the operation of the presumption, the onus, once again, is on accused to rebut the same. (Section 22 of PMLA)

16. PUNISHMENT UNDER PMLA

Section 4 of PMLA prescribes the punishment for Money-Laundering as under:

  • Rigorous Imprisonment for a term
  • which shall not be less than 3 years, but
  • which may extend to 7 years/10 years, and
  • shall also be liable to fine.

A notable feature is that there is no upper limit on the fine that may be imposed for an offence under the PMLA. The obvious intent is for the fine imposed to be commensurate to the nature and extent of offence committed and the money laundered.

17. CONCLUSION

Money laundering poses a serious threat not only to the financial systems of countries, but also to their integrity and sovereignty. To obviate such threats, certain legislations including PMLA, have been enacted. The above analysis of the PMLA manifests that the Act, although extremely well intentioned, compromises on the fundamental principles of natural justice, fair trial and due-process. In its enthusiasm to fight black money, the Act transgresses upon basic rights and liberties. Some of the provisions under the Act are legally and jurisprudentially unsound and tenuous and may not pass constitutional muster. Since the Act is fairly new, it is expected that the Hon'ble Courts would interpret/strike/read-down these provisions in such a manner, so as to make the Act less prone to arbitrary exercise of power and ensure that its operation is constitutionally compatible.

Footnotes

1. http://www.investopedia.com/terms/m/moneylaundering.asp

2. FAQ on Money Laundering Act, Enforcement Directorate, Government of India

http://www.enforcementdirectorate.gov.in/faqs_on_pmla.pdf

3. Chahagan Chandrakant Bhujbal v. Union of India, 2016 SCC OnLine Bom 938.

4. Section 44 of the PMLA.

5. If the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words "which may extend to seven years", the words "which may extend to ten years" had been substituted. Section 4 - proviso.

6. M/s. Mahanivesh Oils & Foods Pvt. Ltd. v. Directorate of Enforcement - 2016 SCC OnLine Del 475

7. Section 50(2) and 50(3) of the PMLA. The person summoned is bound to attend and state the truth upon any subject respecting which they are examined or make statements and produce such documents as may be required. These proceedings are deemed to be judicial proceeding within the meaning of Section 193 and 228 of the IPC. The proceedings relating to perjury/contempt of court apply with respect to these proceedings.

8. Chahagan Chandrakant Bhujbal v. Union of India, 2016 SCC OnLine Bom 938.

9. Section 44 of the PMLA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Anirban Bhattacharya
Bharat Chugh
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Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions