Prevention of Money Laundering Act, 2002 (PMLA)

The most common trap is assuming that 'proceeds of crime' only refers to the direct financial gain from a crime. In reality, it includes any property derived or obtained *directly or indirectly* as a result of criminal activity. This means even assets purchased with illegally obtained money fall under this definition, even if they've increased in value.

The PMLA shifts the burden of proof to the accused because it's often extremely difficult for the prosecution to definitively prove the illegal origin of funds, especially when dealing with complex financial transactions and shell companies. This shift allows authorities to effectively pursue money laundering cases. However, it also raises concerns about potentially violating the principle of 'innocent until proven guilty'.

The FIU-IND is the central national agency responsible for receiving, processing, analyzing, and disseminating information relating to suspect financial transactions. Banks and financial institutions are required to report suspicious transactions to the FIU-IND. The FIU then analyzes this data and shares relevant information with the Enforcement Directorate (ED) and other law enforcement agencies for further investigation. It acts as a crucial bridge between financial institutions and investigative agencies.

Scheduled offenses, also known as predicate offenses, are the underlying crimes that generate the 'proceeds of crime' which are then laundered. The PMLA only applies if the money being laundered originates from a scheduled offense listed in the Act's schedule. Without a scheduled offense, there can be no money laundering offense under the PMLA. These offenses range from corruption and fraud to drug trafficking and terrorism financing.

This is a sensitive issue requiring a balanced response. Acknowledge the concerns about the ED's perceived bias and the potential for misuse. However, also emphasize the importance of the ED in combating money laundering, which is a serious threat to national security and economic stability. You could suggest reforms to ensure greater transparency and accountability in the ED's operations, such as independent oversight mechanisms, while maintaining its operational effectiveness.

Recently, the ED has identified eight priority areas for coordinated action: tracking foreign assets, misuse of the Insolvency and Bankruptcy Code, trade-based money laundering, cyber fraud, illegal online gambling, drug financing, share market manipulation, and foreign interference through illicit funding. They are particularly focused on tracing proceeds of crime parked abroad and dismantling financial networks behind illegal betting platforms.

The PMLA allows India to cooperate with other countries in investigating and prosecuting money laundering offenses through information sharing, providing assistance in investigations, and extraditing individuals accused of money laundering. This is crucial for tackling cross-border money laundering schemes, as criminals often move funds across international borders to evade detection.

In 2022, the Supreme Court upheld the validity of key provisions of the PMLA, affirming the ED's powers of arrest, attachment, and search and seizure. This judgment reinforced the government's efforts to combat money laundering and clarified the scope of the ED's authority. It addressed challenges to the Act's constitutionality and provided greater legal certainty.

Students often confuse the PMLA's attachment powers with those under laws like the CrPC (Code of Criminal Procedure) or the SARFAESI Act. The key difference is that PMLA's attachment is specifically for 'proceeds of crime' linked to scheduled offenses, even before conviction. Other laws might allow attachment for different reasons or require different procedures. Also, PMLA attachment orders need confirmation by an adjudicating authority.

The broad definition can inadvertently ensnare individuals who unknowingly deal with the proceeds of crime. For example, a person who unknowingly purchases a property with money derived from illegal activities could be prosecuted, even if they were not involved in the original crime. This can lead to unjust outcomes and create a climate of fear and uncertainty.

answerPoints: * Narrowing the definition of 'money laundering' to focus on those directly involved in the criminal activity and proceeds. * Strengthening safeguards to prevent the misuse of the ED's powers, such as requiring judicial oversight for attachment orders. * Revisiting the burden of proof provisions to ensure fairness and protect the rights of the accused. * Enhancing transparency and accountability in the ED's operations through independent oversight mechanisms.

The PMLA targets the laundering of proceeds from *any* scheduled offense, while the Black Money Act specifically targets *undisclosed foreign income and assets* held by Indian residents.