Note4Students: 

Prelims: Polity; Prevention of Money Laundering Act  of 2002;

Mains: Polity; Internal Security; Prevention of Money Laundering Act  of 2002;

Mentor comments: The Enormous volume of black money generated through International Drug Trafficking poses a grave threat to our Indian economy as well as many other countries too. We all are awared that the black money is generated through the flourishing of the drug trade and then it is  integrated with the legitimate and domestic economy that can destabilize the world and endanger the integrity and sovereignty of various Nations. Hence, today we are going to discuss some major ongoing issue which is aligned with same context – the issue with the Prevention of Money Laundering Act  of 2002.

Let’s learn. 

—

Why in the News?

The Prevention of Money Laundering Act (2002),  includes a large number of offenses in its schedule that have nothing to do with the original purpose of this law. So, there is an urgent need to have an effective law with the rising of newer challenges in Drug Money Laundering offenses.

The Background of the Law:

• Since the mid-1980s, there has been global concern over the proceeds of criminal activities such as drug trafficking being ‘laundered’ or used in financing terrorism. 
• The UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances adopted in the Vienna Convention (1988) was the first treaty that called upon nations to adopt domestic laws to combat drug trafficking. As part of these laws, countries were asked to prohibit the conversion or transfer of property gained through dealing in narcotics to conceal its illicit origin. 
• The Financial Action Task Force (FATF) was established at the G-7 Summit in Paris in 1989 in response to mounting concern over money laundering. The Task Force made recommendations from time to time to strengthen laws on the subject. 
• The UN Convention against Transnational Organized Crime of 2000 (Palermo Convention) also advocated legislative and other measures to combat organized crime, and specifically called for ‘criminalizing the laundering of proceeds of crime’

About the Prevention of Money Laundering Act (PMLA), 2002:

• Enactment of PMLA in India:
  • Article 253: This gave the Union Parliament the exclusive power to make laws for any part of India’s territory to implement any treaty, agreement or convention involving one or more countries.
  • Seventh Schedule: Item 13 (Communication which is subject to provisions in List I and III) in the Union list of the Seventh Schedule of the Constitution is specific on this point. 
• It was enacted in January 2003 and seeks to combat money laundering in India under three major domains:
  • Preventing and controlling Money Laundering
  • Confiscating and seizing the property obtained from the laundered money
  • Issues that are directly connected with Money Laundering in India.
• Section 3 of the PMLA defines the offense of money laundering as whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly 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 the offense of money-laundering.
• The Act was amended by the Prevention of Money Laundering (Amendment) Act, 2009 and by the Prevention of Money Laundering (Amendment) Act, 2012. Recently, the PMLA was amended through the Finance Act, 2015, Finance Act, 2018 and Finance Act, 2019.

Why PMLA has lost its way? 

• Draconian Nature: The provisions contained are now being used in other scheduled offenses too without mitigating their rigor. 
• Redundant Law: The various amendments made in this Act at different times bloated the schedule offenses which now contain such offenses that are either ordinary offenses listed in the IPC or for which there are special laws in force.
  • For Example, the Prevention of Corruption Act, 1988 which is aimed at curbing corruption among public servants. This Act was added to the schedule of offenses in 2009. The PMLA now applies with all its rigor to public servants also. Thus, a public servant charged with corruption and a hard-core drug trafficker are treated alike.
• Non-aligned with Fundamental Principles: A very disturbing thing about the PMLA is that an accused under this law is presumed to be guilty until proven innocent. A fundamental principle of Anglo-Saxon jurisprudence is that a person is presumed innocent until proven guilty. 
• Stringent Bail Provisions: An accused will be denied bail by the entire hierarchy of courts because the bail provision contained in section 45 of the PMLA says that a judge can give bail only when he is satisfied that the accused is innocent. 
• Legislative vs. Judiciary Nexus: The bail provision is invested with a lot of political significance in present-day India. The Act originally aimed to curb the laundering of black money and to save the economy from being destabilized. But the less serious offenses are also under purview of PMLA. The learned judges nearly said that the inclusion of a particular offense in the schedule comes within the domain of the legislative policy.