Why in News?

• The Supreme Court ruled that criminal conspiracy will be treated as a scheduled offence under the Prevention of Money Laundering Act 2002 if it is used to perpetrate an offence listed in the Act's Schedule.

What’s in Today’s Article?

• About the Prevention of Money Laundering Act (PMLA) 2002
• Salient Provisions of the PMLA 2002
• The Recent SC Verdict on the PMLA

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

• It is an Act of the Parliament of India enacted to prevent money-laundering and to provide for confiscation of property derived from money-laundering.
• The Act (and Rules) impose an obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information in prescribed form to Financial Intelligence Unit - India (FIU-IND).

Salient Provisions of the PMLA 2002:

• Key definitions:
  • Attachment: Prohibition of transfer, conversion, disposition or movement of property by an appropriate legal order.
  • Proceeds of crime: Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence.
  • Money-laundering: Whoever, directly or indirectly, attempts to indulge or assist another person, or who is actually involved in any activity involving criminal proceeds and portraying it as untainted property.
  • Payment system: A system that enables payment to be effected between a payer and a beneficiary. It includes the systems enabling credit card, debit card, smart card, money transfer or similar operations.
• Punishment for money-laundering:
  • The Act prescribes that any person found guilty of money-laundering shall be punishable with rigorous imprisonment from 3-7 years.
  • Where the proceeds of crime involved relate to any offence under the Offences under the Narcotic Drugs and Psychotropic Substance Act, 1985, the maximum punishment may extend to 10 years.
• Adjudicating authority:
  • The Adjudicating Authority is the authority appointed by the central government through notification to exercise jurisdiction, powers and authority conferred under PMLA.
  • It decides whether any of the property attached or seized is involved in money laundering.
  • It shall not be bound by the procedure laid down by the Code of Civil Procedure 1908, but shall be guided by the principles of natural justice and subject to the other provisions of PMLA.
• Appellate tribunal:
  • It is the body appointed by the Government of India and given the power to hear appeals against the orders of the Adjudicating Authority and any other authority under the Act.
  • Orders of the tribunal can be appealed in the appropriate High Court (for that jurisdiction) and finally to the Supreme Court (SC) of India.
• FIU-IND:
  • It was set by the Government of India in 2004 as the central national agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions.
  • FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and related crimes.
  • FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.

The Recent SC Verdict on the PMLA:

• Background:
  • The matter before the SC arose out of an appeal filed by a woman (former VC of the Alliance University), who was sought to be prosecuted for money laundering.
  • According to the Enforcement Directorate (ED), she facilitated the accused to use her bank accounts to syphon off the university funds, thereby assisting in the activity connected with the proceeds of crime.
• The argument of the ED before the SC:
  • Because Section 120B of the IPC is contained in Part A of the Schedule to the PMLA, even if the allegation is of making a criminal conspiracy to commit an act not listed on the Schedule, the offence would become a scheduled offence.
• The SC’s Verdict:
  • The offence punishable under Section 120­B (criminal conspiracy) of the Indian Penal Code will become a scheduled offence only if the conspiracy alleged is of committing an offence which is specifically included in the Schedule.
  • By ED’s logic, a conspiracy to commit any offence under any penal law which is capable of generating proceeds, can be converted into a scheduled offence by applying Section 120­B of the IPC.
  • The court said the interpretation suggested by the ED would defeat the legislative object of making only a few selected offences as scheduled offences under the PMLA.