What has the SC said on PMLA’s validity

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What has the SC said on PMLA’s validity

  • SC upheld several provisions of Prevention of Money Laundering Act (PMLA) that deal with a wide range of issues.

What is the verdict broadly based on?

  • UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances adopted in Vienna in 1988 (Vienna Convention) was the first treaty that called upon nations to adopt domestic laws to combat drug trafficking.
  • Financial Action Task Force (FATF) was established in the G-7 Summit in 1989 in response to concern over money-laundering.
  • It made recommendations to strengthen laws on the subject.
  • UN Convention against Transnational Organized Crime of 2000 (Palermo Convention) also advocated legislative and other measures to combat organised crime.
  • PMLA was enacted in 2002 but came into force in 2005.
  • It gave effect to India’s obligations to abide by international conventions.
  • Union government used this background to argue that PMLA provisions as its amendments were valid and necessary to fulfil obligations to combat money-laundering.
  • In its verdict, the Supreme Court agreed with the government’s contention.

Issue over defining money-laundering

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  • Major issue raised by petitioners is the definition of money-laundering under Section 3.
  • Original wording meant that only projection of tainted money as untainted, and its integration into economy would constitute the offence.
  • ED is registering money-laundering case solely on the basis of original crimes without any proof that their proceeds were laundered.
  • As a result, even transactions that date back years before PMLA came into force were being probed for laundering.
  • Court rejected the challenge, holding that explanation does not expand the scope of the original definition, and it is only clarificatory.
  • It clarified that the offence of money-laundering is dependent on illegal gain through the original crime.

Issues concerning investigation by the ED

  • ED works on the basis of an internal manual.
  • It registers an ‘Enforcement Case Information Report’ (ECIR)which is not share with the accused.
  • Therefore, why and how a money-laundering probe is initiated is unknown.
  • Petitioners argued that this left any investigation, seizure or arrest completely at the whim of ED officials.
  • Court rejected all these contentions and said that ECIR cannot be equated with an FIR.
  • There are sufficient safeguards in the process of survey, search, seizure and arrest.
  • It suggested that ED may consider informing the public through its website
    • Scope of the authority under the Act
    • Measures adopted by its functionaries and
    • Options or remedies available to the accused.

Court’s say on ED summons

  • ED has power of a civil court to enforce the attendance of a person summoned under Section 50.
  • Giving a statement and producing documents are mandatory obligations and it is an offence not to do so, and giving false statement amounts to perjury.
  • Statement should be signed by person summoned and it can be used against him in a trial.
  • This was challenged that the section is unconstitutional as it forces people to be witnesses against themselves, something prohibited by Article 20 of the Constitution.
  • Court rejected the idea that this amounts to testimonial compulsion.

Prelims take away

  • Vienna Convention
  • Financial Action Task Force
  • UN Convention against Transnational Organized Crime of 2000 (Palermo Convention)
  • Money-laundering
  • PMLA
  • Article 20 of the Indian Constitution
  • Enforcement Directorate
  • Civil Court
  • Supreme Court - power