The Prevention of Money Laundering Act (PMLA), 2002 is a significant law in India enacted to prevent money laundering and provide for the confiscation of property obtained through illegal means. It was introduced by the NDA government and came into effect on July 1, 2005. The Act obliges banking companies, financial institutions, and intermediaries to verify clients’ identities, maintain records, and submit information to the Financial Intelligence Unit – India (FIU-IND).
Key Objectives
The PMLA is designed to:
- Prevent and control money laundering.
- Confiscate and seize properties obtained from laundered money.
- Address any other issues related to money laundering.
Important Definitions
- Attachment: Legal prohibition on transferring or converting property believed to be connected to money laundering.
- Proceeds of Crime: Any property derived from criminal activities related to a scheduled offense.
- Money Laundering: The act of concealing or attempting to make illegally obtained money appear legitimate.
Salient Features
- Punishment: Offenders can face imprisonment from three to seven years, or up to ten years for offenses related to narcotic drugs.
- Attachment of Property: Authorities can temporarily attach property suspected to be proceeds of crime for 180 days, subject to confirmation by an Adjudicating Authority.
- Adjudicating Authority: Appointed by the central government, it determines whether attached or seized properties are involved in money laundering, guided by the principles of natural justice.
Legal Procedures and Powers
- Burden of Proof: The accused must prove that the proceeds of crime are lawful.
- Inter-connected Transactions: If one transaction in a series is proven to involve money laundering, all related transactions are presumed to be part of the scheme.
- Appellate Tribunal: This body hears appeals against orders of the Adjudicating Authority and other authorities under the Act. Appeals from the Tribunal can be taken to the High Court or the Supreme Court.
Enforcement and Judicial Oversight
- The Special Court: The Central Government, in consultation with the Chief Justice of the High Court, designates Special Courts for trial under PMLA.
- Financial Intelligence Unit – India (FIU-IND): Established in 2004, FIU-IND processes, analyzes, and disseminates information on suspicious financial transactions. It coordinates national and international efforts to fight money laundering.
Criticism and Controversies
The PMLA has faced criticism for its low conviction rate—only 23 convictions in 5,422 cases over 17 years. Critics argue that the Act is sometimes used for political purposes, invoking a lengthy and punitive legal process against opponents or dissenters.
Judicial Scrutiny and Amendments
- In 2017, the Supreme Court struck down a stringent bail provision in the Act, ruling it unconstitutional for violating Articles 14 and 21 of the Indian Constitution.
- In 2022, the Supreme Court upheld the powers of the Enforcement Directorate (ED) but also agreed to review certain provisions, including those related to presumption of innocence and access to the Enforcement Case Information Report (ECIR).