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Supreme Court Verdict On Prevention Of Money Laundering Act

  • Supreme Court verdict on Prevention of Money Laundering Act

The Supreme Court of India is re-examining its 2022 verdict that upheld the Prevention of Money Laundering Act (PMLA) and the powers of the Enforcement Directorate (ED) under it. The PMLA, enacted in 2002, aims to prevent money laundering and enable confiscating proceeds from such activities. The recent review petition challenges specific provisions of the PMLA and the powers of the ED. The court has emphasized that its role is not to decide on the merits of the matter but to determine if a re-evaluation by a larger bench is necessary. This has sparked significant legal discourse and is of great importance in the realm of financial regulations and law enforcement.

Let's revisit and clarify what this verdict is all about.

In 2022, the Supreme Court of India reaffirmed the legislation's validity of the Prevention of Money Laundering Act (PMLA) and the authority vested in the Enforcement Directorate (ED).

A solid 240 petitions were filed against the amendments in 2019. This is considered to be a significant amendment which included the following points – 

Clarification: "Proceeds of Crime" includes assets from scheduled offenses and any property obtained through activities connected to or resembling the planned offense.

Redefining Money Laundering: Previously tied to another crime, termed the predicate or scheduled offense, the amendment aims to recognize money laundering as an independent and distinct criminal act.

Ongoing Nature of the Offense: The amendment clarifies that an individual remains implicated in money laundering as long as they continue to benefit from activities associated with money laundering, given the continuous nature of this offense.

Enforcement Directorate: Under the PMLA, the Enforcement Directorate is empowered to conduct searches, seizures, investigations, and asset attachments related to alleged proceeds of crimes. 

Petitions were filed with the intention of challenging actions, primarily to safeguard against any infringement upon personal liberty, uphold due legal procedures, and ensure adherence to constitutional mandates. The underlying concern prompting these petitions arises from a perception that there may be instances where the safeguarding of personal liberty is at risk or not adequately recognized. These legal challenges aim to reinforce the significance of preserving individual freedoms and ensuring that legal processes align with the constitutional framework.

The Enforcement Case Information Report (ECIR), equivalent to an FIR, is treated as an internal document and is not disclosed to the accused. This lack of information leaves the accused unaware of the specific allegations against them during the proceedings.

PMLA diverges from General Criminal Law, where the presumption of innocence applies to every accused until proven guilty. Conversely, under PMLA, the burden of proof is shifted to the accused individuals, requiring them to establish their innocence.

The conviction rate under this law remains notably low despite registering thousands of cases, making approximately 500 arrests, and causing significant disruptions to lives. In the fiscal year 2021-22, the agency recorded the highest numbers of money laundering (1180 cases) and forex violations (5350 cases), underscoring the challenges in translating investigations into successful convictions.

A three-judge bench of the Supreme Court has affirmed the constitutional validity of the Prevention of Money Laundering Act (PMLA) provisions, characterizing it as a "unique and special legislation." This ruling underscores the Enforcement Directorate's (ED) authority to conduct inquiries, make arrests, and attach property to pursue its duties.

The Supreme Court emphasized the distinctive nature of the PMLA, rejecting any comparison with the Criminal Procedure Code (1973). The distinction extends to the prevention, investigation, or trial mechanisms associated with scheduled offenses.

Furthermore, the court clarified the status of the Enforcement Case Information Report (ECIR), affirming that it cannot be equated with a First Information Report (FIR). The ECIR, recognized as an internal document of the ED, is not mandatory to be supplied to the accused. The court specified that it is sufficient to disclose the reasons during an arrest, and while the accused need not be provided with the ECIR, they should be informed about the grounds for their arrest.

The ongoing re-examination of the 2022 Supreme Court verdict on the PMLA and ED's powers signifies a critical juncture in India's financial and legal landscape. The amendments introduced in 2019 aimed to redefine and fortify the legal framework around money laundering, prompting a surge in petitions to safeguard personal liberties and challenge perceived procedural imbalances. The debate over the constitutional validity and powers of the ED has spurred substantial legal discourse, highlighting the delicate balance between enforcing financial regulations and protecting individual rights. The Supreme Court's affirmation of the PMLA's uniqueness, coupled with its distinctions from general criminal law, underscores the complexity of these legal matters. As the legal community grapples with these intricacies, the outcome of this re-evaluation will likely have far-reaching implications for the intersection of law enforcement, financial regulations, and individual liberties in India.

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