Author- Advocate Vikas Singh
In the wake of modernization, the late 20th Century started to witness the growing menace of white-collar crimes worldwide, in the forms of money laundering, corruption, chit fund scams, fraud, bribery etc., quintessentially the domain of money laundering and its increasing trend. As a result, there was an ignition of a global demand to enforce anti money-laundering international conventions and municipal legislations.
The intent behind enacting the Prevention of Money Laundering Act, 2002 (‘PMLA’) although was to lay down a stringent legislation to act as deterrent towards the perpetrators of money laundering, the enforcement of the Act resulted in portraying an infertile framing, consisting of flaws and ambiguities in itself. With an aim to curb the accelerated graph of money laundering in India, the PMLA is designed to cover each and every stage involved in the offence, and therefore covers the process of identification and confiscation of the properties involved in the money laundering, followed by the stipulating of penalty upon the offenders.
Seventeen years have been passed since the commencement of the said Act, and a revisit to the progress report with regard to complaints and prosecutions processing and initiating under the Act portrays a sheer lack of effectiveness, stringency and potency in terms of providing a desired result in this context. The reason being such inefficiency is solely founded on the loopholes underlying the provisions of this Act and making the anti money-laundering mechanism cumbersome.
However, the recent amendment to PMLA in 2019 reflected the rapid attempts to harmonize the intent of the Act with its effective implementation in terms of encountering the loopholes and bridging the gaps underlying its inefficacy. Hence, throughout this article, a critical analysis has been undertaken – whether the 2019 amendment to PMLA can be regarded as a successful in-vitro fertilization process to an infertile and flawed Parliamentary framing i.e. the PMLA, 2002?
Completing the Half-baked Task
Taking over the unfinished constructions of 2012 PMLA amendment, the 2019 amendment inserted an explanation to Section 3 which explains the elements of money laundering offence. Before 2012 amendment, the offenders of money laundering were only liable to their direct or indirect involvement in any process or activity connected with the proceeds of crime. Due to the conflicts arisen concerning the scope and limitation of the word ‘proceeds of crime’ in terms of assessing the liability of an offender, the 2012 amendment attempted to make the provision as an inclusive one, by way of adding the phrase ‘proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming’ the same as untainted property in order to hold a person liable for the money laundering offence.
The conflicts did not cease to arise as the issues were now revolving around whether the presence of one or more of such concealment, possession, acquisition or use etc. will hold an accused guilty of money laundering. To resolve the incessant disputes over this issue, the 2019 amendment has inserted an explanation to Section 3 by clarifying that a person, directly or indirectly found to attempt indulging or assisting or knowingly being a party or involved in one of more of such above-mentioned processes or activities connected with the proceeds of crime or any manners whatsoever will be guilty of offence of money laundering. Hence, the phrases like ‘one or more’ and ‘any manner whatsoever’ used in the Explanation to Section 3 justifies the expansion of the scope of money laundering offence under this Act. The Amendment therefore clarifies the fact that instead of the proceeds of crime per se, the activities connecting to the proceeds of crime with knowledge and direct / indirect involvement are subject to the offence money laundering – which ultimately exempts the innocent person possessing such proceeds in good faith.
Transforming into a Continuing Offence
The 2019 amendment finally put an end to the continuous and indirect enjoyment of the proceeds of crime which were axiomatic mostly in cases of fugitive economic offenders like Vijay Mallya, Nirav Modi etc. The amendment through the explanation to Section 3, laid down the process or activity so connected with the proceeds of crime as a continuing offence till the offender is directly or indirectly in enjoyment or involvement or associated with it or any other manner. Therefore, broadening the horizons of money laundering so as to cover it under the purview of the Act was one of the objectives efficiently achieved by the amendment.
Broadening the meaning of ‘Proceeds of Crime’
The definition of ‘proceeds of crime’ under Section 2(1)(u) is supplemented by a newly inserted Explanation through the amendment which clarifies the doubts concerning the definition of the proceeds of crime and widening its scope and application by covering any property which may directly or indirectly be derived or obtained from any criminal activity connected to the scheduled offence. The impact of this specific amendment is therefore far-reaching and limitless as it includes ‘any criminal activity related to the scheduled offence’ under the ambit of ‘proceeds of crime’.
Various Procedural Changes
The amendment to Section 44 concerning the trial of money laundering offence by Special Courts, reflects the following changes in order to act as a catalyst in expediting the procedure so involved herein:
- The newly inserted proviso to Section 44(1)(b) mandates the submission of closure report by the investigating agency before the Special Court in cases where no offence of money laundering was discovered.
- An Explanation inserted to Section 44(1)(d) provides that in the course of investigation, inquiry and trial under PMLA, the Special Court’s jurisdiction shall be independent of any orders passed with regard to scheduled offence and both the trials on different offences shall not be merged into a joint trial.
- The Complaint as per the above inserted Explanation also includes a subsequent complaint which can be filed as an outcome of further investigation and against any person involved in such offence, whether being accused to the initial complaint or not.
Cognizable and Non-bailable Offence
Insertion of an Explanation to Section 45(2) envisages the establishment of a stringent anti money-laundering framework in India and hence, deems to regard all offences under the Act as cognizable and non-bailable offence, which in turn vests the enforcement authority under the Act with the power to arrest without warrant and subject to due compliance of Section 19. The doubts raised by the Apex Court in ‘Nikesh Tarachand Shah v. Union of India’ were therefore resolved by this amendment.
Going back to the question primarily addressed in this article, it can therefore be undeniable that the 2019 amendment has certainly been a ray of hope as it proceeds to restructure the existing framework into a fertile one. Although the amendment still poses a question on its nature and application as prospective or retrospective, the changes introduced therein will certainly pave us away towards a stringent anti money-laundering regime, with a concerted effort of enforcement authorities and judiciary.
 (2018) 2 SCC 1