PMLA Act 2002

The Prevention of Money Laundering Act (PMLA), 2002 is a key legislation enacted by the Government of India to combat the menace of money laundering. It came into force on 1st July 2005, and its primary objective is to prevent and control money laundering, provide for the confiscation of property derived from such activities, and deal with matters connected with or incidental to it. The Act gives statutory backing to India’s commitment to fight financial crimes in line with international standards, especially as a member of the Financial Action Task Force (FATF).

Objectives of the PMLA::

1. Prevent Money Laundering: The Act aims to stop the process through which criminals disguise the original ownership and control of proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.

2. Confiscation of Illegally Acquired Property: The Act allows authorities to attach, freeze, seize, and confiscate assets and properties believed to be involved in money laundering.

3. Punish Offenders: The law provides for stringent punishment of those found guilty of the offense of money laundering.

4. Coordinate with International Agencies: The Act allows cooperation with foreign countries to trace and recover laundered money or assets.

5. Ensure Financial Transparency: It encourages financial institutions and intermediaries to maintain records and follow due diligence procedures.

Definition of Money Laundering under PMLA:

Section 3 of the PMLA defines money laundering as:

“Whosoever directly or indirectly attempts to indulge or knowingly assists or is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offense of money laundering.”

This means that any activity involving the concealment, possession, acquisition, or use of proceeds of crime and presenting them as clean money constitutes money laundering.

Important Provisions of the Act:

• Attachment of Property (Section 5)

The Act empowers the Director or any authorized officer to provisionally attach property believed to be involved in money laundering. The attachment is valid for 180 days and is subject to confirmation by the Adjudicating Authority.

• Adjudicating Authority (Section 6)

A special authority is appointed to decide whether any of the attached or seized property is involved in money laundering. The authority can confirm or revoke attachments after hearing both parties.

• Special Courts (Section 43)

Special courts are designated to try offenses under the PMLA. These courts are established by the Central Government in consultation with the Chief Justice of the High Court.

• Financial Intelligence Unit – India (FIU-IND)

FIU-IND was created in 2004 as an independent body responsible for receiving, processing, analyzing, and disseminating information related to suspect financial transactions.

• Presumption of Guilt (Section 24)

Under the PMLA, the burden of proof lies on the accused to show that the alleged proceeds of crime are not involved in money laundering, which is contrary to general criminal law.

• Search and Seizure Powers (Section 17 & 18)

The Act allows authorized officers to conduct searches and seize property or documents without prior approval from a magistrate, under specific conditions.

• Punishment (Section 4)

The offense of money laundering is punishable with rigorous imprisonment for a term not less than 3 years, which may extend up to 7 years, and also with a fine. For offenses involving drugs under the NDPS Act, the imprisonment may extend to 10 years.

Amendments and Expansions:

• Over the years, the Act has been amended multiple times (notably in 2005, 2009, 2012, 2015, 2018, and 2019) to widen the scope and strengthen enforcement.

• Scheduled Offenses under the PMLA include crimes listed in the Indian Penal Code, NDPS Act, Arms Act, Explosive Substances Act, Prevention of Corruption Act, and more.

• In 2023, the Supreme Court upheld key provisions of the PMLA, including the reverse burden of proof and wide investigative powers of the Enforcement Directorate (ED).

Criticisms and Concerns:

1. Excessive Powers to Enforcement Agencies: Critics argue that ED has unchecked powers for arrest, seizure, and detention, raising concerns over misuse.

2. Lack of Judicial Oversight: The Act allows attachment and searches without prior court approval in some cases, which raises questions on due process.

3. Reverse Burden of Proof: Requiring the accused to prove innocence contradicts the principle of “innocent until proven guilty”.

4. Delay in Trials: Many cases under PMLA remain pending due to limited special courts and complex procedures.