Money laundering is the process where proceeds of a crime or unlawful activity are filtered in such a way that the source of their origin is disguised. Section 3 of Prevention of Money Laundering Act, 2002 (hereinafter referred to as PMLA) defines “money laundering” as Whosoever attempts to indulge in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.
Thus, the proceeds from criminal activities further propel crimes and create a parallel economy and all of these transactions operate being unnoticed.
The PMLA also enumerates a list of offences which are classified as ‘scheduled offences’ constitute as ‘crimes’.
The growing number of financial crimes and high profile embezzlement have become a matter of severe concern. As a result of which the Finance Act, 2019, has introduced an amendment to the PMLA to curb the same. The amendment provides stringent rules for investigation and gives the required clarifications on ambiguities that existed earlier. It is significant to note that the amendments have been made by inserting an ‘Explanation’.
The amendments made in the PMLA in the Finance Act, 2019 can be accessed here.
Key amendments –
- Explanation to Section 2 (u) inserted
This Explanation clarifies the position of ‘proceeds of crime’. Now, ‘proceeds of crime’ will be understood to relate to any property that directly or indirectly derived or obtained through an activity relatable to scheduled offences.
- Explanation to Section 3
Section 3 of PMLA relates to “offences of money laundering”. The Explanation under Section 3 mentions, a person shall be guilty of money laundering if the person is directly involved or is knowingly a party to one or more of the following processes, connected with the ‘proceeds of crime’:
- Concealment, (b) Possession, (c) Acquisition, (d) Use, (e) Projecting as untainted property, (f) Claiming it as untainted property, in any manner whatsoever.
The Explanation also states that the process or activity connected with proceeds of crime continues till such time a person is directly or indirectly enjoying the proceeds of the crime. Accordingly, the entire process/activity connected to the proceeds of crime is a continuing offence.
The above Explanation was inserted basis an observation made by Financial Task Action Force (FATF), that concealment, possession, acquisition and use of the proceeds of crime were not criminalized earlier under Section 3 of the PMLA.
- Proviso to Section 17(1) and 18(1) omitted
Omitting the above proviso now gives the authorized officer under PMLA the authority to enter any property for purpose of conducting search and seizure, and the search of any person, even in the absence of the reporting of a scheduled offence to a Magistrate or any other competent authority in this regard.
- Amendment to Section 44 of the PMLA
Section 44 of the PMLA encompasses the provisions for offences which can be tried by Special Courts.
A proviso has been inserted to Section 44(1)(b) of the PMLA which talks about submitting of a ‘Closure Report’ upon conclusion of investigation. It states that if no offence of money laundering can be determined after investigation, the authority shall submit a ‘Closure Report’ before the Special Court. It assists in closing of cases where investigation was completed and no offence was found.
An Explanation has been inserted to Section 44 (1) (d) of PMLA which gives the Special Court an exclusive jurisdiction regarding scheduled offences. The Explanation mentions that the trial conducted by the Special Court for scheduled offences shall be distinct from any other trial being conducted for the same scheduled offence. It shall not be considered as a joint trial.
The Explanation further adds that “Complaint” shall include any subsequent complaint that arises as a result of further investigation against any accused person. It shall be applicable for all persons, whether or not such person was included in the original complaint.
- Explanation to Section 45 (2) of PMLA
This Explanation clarifies that the offence of money laundering is a cognizable and non-bailable offence. Accordingly, an authorized officer can arrest the accused without a warrant.
The above amendments to the PMLA bring the much needed clarity on various unaddressed aspects of money laundering. It can be said that these amendments now confer the authorities with better command, regarding investigation and closure. However, the crucial question for consideration would be whether these amendments will be applicable retrospectively. It is believed that courts in future can throw some light on the same by way of litigation that may arise during the trials of such matters.