ED must proceed with caution to maintain due process and public trust

The Prevention of Money Laundering Act, 2002 (PMLA) never seems to disappear from the news. The bail applications of several high-profile arrests regularly surface in various courts, or more recently: PTI This is ensured by the analysis of the ‘intensified’ actions of the Enforcement Directorate (ED) in recent years, the agency given powers under PMLA.

Interpol defines money laundering as concealing or disguising the origin of illegally obtained proceeds so that they appear to have come from legitimate sources. PMLA was introduced in 2002 as part of India’s obligations under international law, recognizing the clear threat of money laundering to countries’ financial systems, integrity and sovereignty. The emphasis was on preventing the laundering of proceeds from drug crime and drug-related money. Considering India’s geographical vulnerability to drug flow, it was very important to have such a law. The law came into effect on July 1, 2005.

Substantial amendments were subsequently made to the PMLA in 2009, 2013 and 2019. These amendments were made in accordance with the Statement of Objections presented to Parliament at the relevant times to address the concerns raised by the Financial Action Task Force (FATF) and to close loopholes in the law or, more specifically, to overturn court rulings.

It should be noted that these amendments were tabled by governments and political parties across the board and after careful consideration by standing committees. (Incidentally, all of them were accomplished by resorting to the Finance Bill/Money Bill route; the question of whether PMLA can fall within the purview of a Money Bill is before a larger bench of the Supreme Court.) These amendments significantly changed the nature of PMLA, expanding its scope beyond dealing with the proceeds of drug-related crimes, and making it the harsh law that it is today.

The law, as it stands after these amendments, which defines money laundering, has a ‘broader scope’: it covers every process (concealing, possessing, acquiring, using or projecting or claiming as untainted property) and activity in the handling the proceeds of crime. , directly or indirectly, and is not limited to the final act of integration into the formal economy.

Proceeds of crime means all goods obtained directly or indirectly, not only obtained from the planned criminal offense, but also all goods that may be obtained directly or indirectly from criminal activities related to the planned criminal offense.

The schedule for the PMLA includes a long list of offenses: the scheduled or predicate offenses. They have expanded beyond offenses under the Narcotics, Drugs, and Psychotropic Substances Act (NDPS) to include laws including the Prevention of Corruption Act, the provisions of which have been invoked in carrying out the high-profile political arrests.

The ED has the power to provisionally seize property arising directly or indirectly from criminal activities related to a planned offence, including property of equal value even located outside the country. The ED officer also has the powers of search, seizure, summons and arrest. This brings us to one of the most talked about provisions of PMLA-Sec 45 regarding bail.

Violations under PMLA are cognizable and non-bailable. Sec. 45 of the Act provides that no person accused of an offense under the PMLA shall be released on bail unless the Public Prosecutor has been given an opportunity to oppose the application for release and the Court is satisfied that there are reasonable grounds to assume that he will not be released. guilty of such an offense and is not likely to commit an offense while on bail. All the amendments that substantially expanded ED’s powers under PMLA have been upheld by the Supreme Court in its 2022 decision; the conditions imposed pursuant to art. 45 have been deemed ‘reasonable’ – in other words, bail will not be considered unless the Court is satisfied that the suspect is innocent. It will take a very courageous judge to reach such a conclusion before charges are even filed.

PMLA is therefore an extraordinary act, with regulatory, preventive and penal provisions. The decisions of the courts while hearing petitions relating to bail and attachment of property under PMLA will have to be viewed in this context. It can be said that PMLA has come a long way from its original goal of focusing on drug-related proceeds of crime. But this seems to be the intention of the legislature.

Such as the analysis of PTI in the release shows, ED has been very busy: 7,264 searches took place in the period 2014-2024; during the same period, 5,155 cases were registered, 755 persons arrested, Rs 1,21,618 crore worth of assets seized and 1,281 prosecutions initiated – a feat significantly higher (86 times in some cases) compared to the 2005-2014 period. With great power comes great responsibility: the ED will have to act with restraint and ensure that it does not become vulnerable to accusations of abuse of its powers. After all, credibility is crucial for all enforcement agencies.

(The writer is former chairman of the Central Board of Indirect Taxes & Customs)