PREVENTION OF MONEY LAUNDERING ACT, 2002

1. WHAT IS MONEY LAUNDERING?

Investopedia defines money laundering as "The process of creating the appearance

that large amounts of money obtained from serious crimes has originated from a
legitimate source."

Illegal arms sales, smuggling, and other organized crime, including drug
trafficking and prostitution rings, can generate huge amounts of money.
Embezzlement, insider trading, bribery and computer fraud schemes can also
produce large profits and create the incentive to "legitimize" the ill-gotten gains
through money laundering. The money so generated is tainted and is in the nature
of 'dirty money'. Money Laundering is the process of conversion of such proceeds
of crime, that is to say the 'dirty money', to make it appear as 'legitimate' money.2

Money laundering poses a serious threat not only to the financial systems of
countries, but also to their integrity and sovereignty. To obviate such threats,
certain legislations including PMLA, have been enacted. The above analysis of the
PMLA manifests that the Act, although extremely well intentioned, compromises
on the fundamental principles of natural justice, fair trial and due-process. In its
enthusiasm to fight black money, the Act transgresses upon basic rights and
liberties. Some of the provisions under the Act are legally and jurisprudentially
unsound and tenuous and may not pass constitutional muster. Since the Act is
fairly new, it is expected that the Hon'ble Courts would interpret/strike/read-down
these provisions in such a manner, so as to make the Act less prone to arbitrary
exercise of power and ensure that its operation is constitutionally compatible.
AUTHORITIES ENTRUSTED TO INVESTIGATE/PROSECUTE UNDER THE
PMLA?

Though the Code of Criminal Procedure governs the procedural aspects of

prosecution, there are marked deviations from the standard procedure considering
the special nature of the offence (including its cross border character) and slightly
different process is envisaged. The offence is cognizable which means arrest can
be made without a warrant. There is a specialized investigative body for
investigation of these offences. The Directorate of Enforcement in the Department
of Revenue, Ministry of Finance is responsible for investigating the offences of
money laundering under the PMLA. Investigation usually begins with the
registration of an Enforcement Case Information Report (also known was ECIR)
which sets the investigation into motion.

This authority is empowered to carry out interim measures such as survey, search,
seizure and arrest of the accused. Similarly, if an asset is found to be the proceeds
of crime, the same can be confiscated and appropriated by the Government.

Financial Intelligence Unit - India (FIU-IND) under the Department of Revenue,

Ministry of Finance is the central national agency responsible for receiving,
processing, analyzing and disseminating information relating to suspect financial
transactions to enforcement agencies and foreign FIUs.

The predicate/scheduled offences are separately investigated by agencies

mentioned under those acts, for example - the local police, CBI, customs
departments, SEBI or any other investigative agency, as the case may be.

After investigation is complete for the offence of money laundering, a complaint is

filed by the investigating authority before the Special Court, where the trial for the
offence actually takes place.
Since the offence of Money laundering is inextricably connected with the predicate
offence, 2013 amendments to the PMLA provide that the trial for the predicate
offence as well as offence punishable under Section 4 shall be conducted by the
Special Court. If court which has taken cognizance of the scheduled offence is
other than the Special Court (which has taken the cognizance of the complaint of
the offence of money laundering under sub-clause (b), it shall, on an application by
the authority authorized to file a complaint under this Act, commit the case relating
to the scheduled offence to the Special Court and the Special Court shall, on
receipt of such case proceed to deal with it from the stage at which it was
committed.

As opposed to this, the process relating to attachment of property (including its

confirmation) is dealt with by the Adjudicating Authority established under the
Act.

ACTIONS THAT MAY BE INITIATED AGAINST PERSON LAUNDERING

MONEY?

 Attachment of property under Section 5, seizure/freezing of property and

records under Section 17 or Section 18.

 Persons (Individuals and/or juristic person such as a Company etc) found

guilty of an offence of Money Laundering are punishable with imprisonment
for a term which shall not be less than three years but may extend up to
seven or even ten years (depending on circumstances) and shall also be
liable to fine (no upper limits) [Section 4].

ATTACHMENT OF PROPERTY.
The PMLA gives extremely wide powers to the authorities to attach properties
suspected to be involved in Money Laundering. Section 5 of the PMLA authorizes
the Director or any other officer not below the rank of Dy.Director to attach
property. This power is to be exercised if the authority, as specified above, has
a reason to believe (and such reasons have to be recorded in writing to prevent
arbitrariness), on the basis of material in their possession, that -

Any person is in possession of any Proceeds of Crime; and such Proceeds of crime
are likely to be:

 Concealed,

 Transferred, or

 dealt with in any manner

which may result in frustrating any proceedings relating to confiscation of such

proceeds of c rime .

If the aforesaid conditions are satisfied, the authority may by order in

writing, provisionally attach such property for a period not exceeding 180 days
from the date of order.

Under normal circumstances, presence of a complaint/police report against the

accused for the predicate/scheduled offence, whether in India or abroad, is a
necessary precondition for provisional attachment of property. This is, however,
not an absolute pre-condition and in cases where immediate attachment is needed
and non-attachment is likely to frustrate the proceedings, the Director or the
Dy.Director, for reasons to be recorded in writing, may nevertheless go ahead with
provisional attachment even with there being no prosecution qua the scheduled
offence against the accused.
It may be noted that there is no provision for a prior notice of a provisional
attachment and the same can come like a total bolt from the blue.

What happens post-provisional attachment?

After provisional attachment, the Director or any other officer, has to file a
complaint stating the facts of such attachment before the Adjudicating Authority,
within a period of thirty days from such attachment

Remedy

Thereafter, the person aggrieved by the provisional attachment may file his
objections before the Adjudicating Authority. This is the remedy under the PMLA,
however, an order without jurisdiction or suffering from any jurisdictional error
may be challenged directly before the High Court by invoking Article 226 of the
Constitution. The Courts have held that a mere mechanical noting that the property
in question is likely to be concealed, transferred or dealt-with would not meet the
requirements of Section 5(1) of the Act and such a nonspeaking order by a Director
can be set aside in writ proceedings by the High Court if it is devoid of strong and
cogent reasons

Appeal against confirmation of Attachment

Decisions of the adjudicating authority of first instance can be appealed to the

Appellate Tribunal created under the Act.

Adjudicating Authority and Special Court - Relative scope

It is to be noted that the Adjudicating Authority under this section is concerned

with questions of continuation of attachment and/or retention of property involved
in money laundering and not the trial of offence of money laundering or the
scheduled offence, which function falls for a judicial trial by the Special Court.

Procedure before the Adjudicating authority

The Adjudicating Authority has been given vast powers of discovery, inspection,
and compelling production of records as per S.11 of the Act. Section 11 spells out
the powers of the Adjudicating Authority in discovery of facts, Section 50 does so
in respect of a Director.

Needless to state, being a quasi-judicial authority, both of them have to conform to

the principles of Natural Justice.

As per established principles, following duties are imposed on quasi-judicial

authorities :- (i) A quasi-judicial authority ought not to make any decision adverse
to a party without affording an opportunity of meeting the allegations made against
him; (ii) The party whose rights are to be affected should be provided with the
information upon which the action is raised and the affected party should have
reasonable notice of the case which he has to meet/face. Of course, an opportunity
is to be provided to the affected party which must be real, reasonable and
substantial too; (iii) The affected party should have the opportunity of letting
in/adducing evidence which he relies upon.

POWERS OF THE ENFORCEMENT DIRECTORATE RELATING TO

SEARCH, SEIZURE AND ARREST.

Search of premises

Section 17 gives wide powers of search and seizure to the investigating agency. If
the investigating agency has reason to believe (and such belief should be recorded
in writing) the commission of offence under the PMLA and possession of proceeds
of crime, it can enter and seize property/records etc, make an inventory of the
same. The seizure memo is required to be signed by two independent witnesses.

Whereas this section provides for search of premises, Section 18 provides for
search of an individual.

Search of person

If the investigating authority has a reason to believe that a person has secreted
about his possession, ownership or control, proceeds of crime, in that case the
person can be searched. Before the search of a person, as per his wish, the
authority shall take the said person before a Gazetted officer superior in rank to the
authority or a Magistrate within 24 hours excluding the time of journey. This is the
safeguard laid down in S. 18(4) of the PMLA, however, strangely there is no
corresponding obligation on the investigating agency to inform the person about to
be searched of this valuable right. Something akin to a Miranda warning will be
apposite here.

The property seized has to be forwarded to the adjudicating authority for further
orders.

Arrest

The offence is cognizable which means arrest can be made without a

warrant.8 Section 19 gives the authority power to arrest. Standard safeguards
relating to arrest apply. Every person arrested has to be produced before the
Magistrate within 24 hours (excluding time of journey). The provision also
mandates that such arresting official has to forward a copy of such arrest memo
with the material in his possession to the adjudicating authority in a sealed envelop
as per the procedure prescribed.
Apart from these, the investigating officer may summon and record the statements
of persons concerned (S.50 of PMLA)

RIGHT TO BAIL

Section 45 of the PMLA makes the offence of money laundering non-bailable,

which means that a person arrested is not entitled to bail as a matter of right, and
bail becomes a matter of discretion for the court. If the predicate offence provides
for punishment more than 3 years, then there is an embargo on release on bail,
unless either the offence concerns a child, woman, sick or infirm; if not, then bail
can only be granted after hearing the Prosecutor and only after the court comes to
the conclusion that "there are reasonable grounds for believing that he is not guilty
of such an offence and that he is not likely to commit any offence while on bail".
Now this is an extremely tall order, especially having regard to the fact that the
matter is usually at a preliminary stage when the question of bail is being decided.
For a court to record a finding, at that stage, that there are no reasonable grounds
for believing commission of the offence is an unnaturally high threshold. Usually
the prosecution will prepare the case in such a way so that it contains the basic
allegations and there is a very less likelihood of it being thrown out at the very
outset. Once that is done, the court, at the stage of bail, will normally not be in a
position to return a finding of non-guilt in favour of the accused.

This makes serious inroads into the right & presumption of innocence in favour of
the accused. An accused is presumed to be innocent till his guilt is proved beyond
reasonable doubts. Pre-trial incarceration is frowned upon by law, as it carries a
substantial punitive content and has a stigmatic effect. Such incarceration is not
only a denial of 'due process' but prejudices the accused in the preparation of
defence of his case.
Secondly, if in a case, the court releases the accused on bail, in view of the above
findings and at the same time frames charges against him and takes the matter to
trial, would not the two findings be mutually destructive of each other. These are
some of the major anomalies with this provision and a serious constitutional
challenge can be mounted on this provision on the above grounds.

PUNISHMENT UNDER PMLA

Section 4 of PMLA prescribes the punishment for Money-Laundering as under:

 Rigorous Imprisonment for a term

 which shall not be less than 3 years, but

 which may extend to 7 years/10 years, and

 shall also be liable to fine.

A notable feature is that there is no upper limit on the fine that may be imposed for
an offence under the PMLA. The obvious intent is for the fine imposed to be
commensurate to the nature and extent of offence committed and the money
laundered.

THE PREVENTION OF CORRUPTION ACT, 1988

1. INTRODUCTION

The Prevention of Corruption Act, 1988 (the "Act") was recently amended by the
Prevention of Corruption (Amendment) Act, 2018 (the "Amendment Act"). Most
of the amendments are aimed at tightening up the existing provisions in the Act
and expanding the coverage of the offences.
POLICE OFFICERS AUTHORISED TO INVESTIGATE UNDER THE
PREVENTION OF CORRUPTION ACT, 1988

An investigation into the offence is of great essence in criminal justice system.

The investigation part is done by the police generally. It is their prime
responsibility to collect evidences and try to find out the real persons behind the
crime. For this purpose huge powers are given to the police. But, sometimes these
wide powers are misused by the police. As in here the matter is related with
administration and governance by the public servants, these powers should be
scrutinized effectively. For this purpose not all the policemen are allowed to
investigate. Only the police officers above a specified rank are allowed to
investigate into the case. The police officer competent to investigate the offences
would be one not below the rank of

(a) an inspector of Police of Delhi special police establishment (CBI);

(b) an Assistant Commissioner of Police in the metropolitan areas of Bombay,

Calcutta, Madras and Ahmedabad and in any other metropolitan area notified

as such under sub-section (1) of Section 8 of the Code of Criminal Procedure,

1973;

(c) a Deputy Superintendent of Police or a police officer of equivalent rank,

elsewhere; or

(d) an Inspector of Police authorized by state government by general or special

order in this behalf

Further, it is also provided under the same provision that such concerned officer
may investigate without getting an order from Metropolitan Magistrate or a
Magistrate of first class, as the case may be. In addition, he may go ahead to arrest
the accused without any warrant from such Metropolitan Magistrate or a
Magistrate of first class, as the case may be; as we have discussed. In this way, we
can analyze that not all the policemen are allowed to investigate into the cases of
corruption under the Prevention of Corruption Act, 1988. Only the specified police
officers can carry out investigation into the offences. Thus, an effective
arrangement has been made in context and a fine balance has been made between
the two parties i.e., the accused and prosecution so that no public servant is
harassed by the police inappropriately. It is an effective arrangement to control the
evil of corruption and to establish the rule of law carrying out the noble purpose of
natural justice.

INVESTIGATION OF THE OFFENCES

The aim of law is to establish a system into the society which is based upon the
principles of equity and natural justice. These principles are dependent upon
effective working of criminal justice system. An effective criminal justice system
seeks for justice and provides adequate relief to the victim. Before coming to a
conclusion in a particular case, we have to conduct an effective and fair
investigation to obtain all the relevant evidences necessary to prove the guilt or
innocence of the accused.

Investigation into the cases under this Act can be made by the following persons or
higher rank

(a) In the case of Delhi Special Police Establishment, an inspector of police;

(b) In the metropolitan areas of Bombay, Calcutta, Madras and Ahmedabad and in
any other metropolitan areas notified as such under sub sec. (1) of sec. 8 of the
Code of Criminal Procedure 1973 (2 of 1974), an Assistant Commissioner of
Police;

(c) Elsewhere a Deputy Superintendent of police or a police officer of equivalent

rank;

(d) Any police officer not below the rank of an Inspector of police; specially
authorized by the State Government in this behalf.

These persons can make investigation into the cases under this Act notwithstanding
anything given or contained in the Code of Criminal Procedure. The power of
investigation into the cases can be applied even without the order of a Metropolitan
Magistrate or a Magistrate of first class. Another significant aspect of this power is
that the investigating officer can make arrest without a warrant. The proviso to the
main Section 17 also provides that if an officer of police not below the rank of an
Inspector of Police is specially authorized by the State government in this behalf,
he shall also be having the same powers as are given to other officers as are
mentioned in (a) to (c). It is also provided that such authorized police officer shall
not investigate the case under Section 13 (1) (e) of the Act, without the order of a
police officer not below the rank of a Superintendent of Police. Now, we are going
to discuss as to how the procedure for the investigation into the offences of bribery
and corruption is executed by the concerned police officers. If the police officer
has reason to suspect that, upon information received or otherwise, an offence has
been committed by any person and for which he is authorized to investigate or
inquire, shall go on to start investigation or inquiry as he thinks appropriate. For
this purpose, he may inspect Bankers‘ Books if they are of some relevance to the
finding or discovery related to the offence alleged to have been committed. He
may go on to inspect that these account books are related with the offence or not.
In addition, he may also inquire about the account books of other persons related to
the accused to find out the truth behind the account books, as such person may be
holding money or property on behalf of the accused. He can take or cause to be
taken certified copies of the relevant entries made into those account books and it
shall be the responsibility of such concerned bank to provide all necessary
assistance to the police officer making the investigation under the Act. All other
related provisions shall also be abided by the police officer making the
investigation e.g. no power under this section in relation to the accounts of any
person shall be exercised by a police officer below the rank of a Superintendent of
Police, unless he is specially authorized in this behalf by a police officer of or
above the rank of a superintendent of Police. These are some basic aspects of
investigation discussed under the Act.

The Act was passed as the preamble indicates to make more effective provisions
for the prevention of bribery and corruption among the public servants. New
definition of criminal misconduct in discharging an official duty and new rules of
presumption against accused in the case of the said offence are incorporated in the
Act. But in the year 1952 by Act 59 of 1952 presumably on the basis of the
experience gained, Sec. 5-A was inserted in the Act to protect the public servants
harassment and victimization. If it was in the interest of the public that corruption
should be eradicated it was equally in the interest in public that honest public
servants should be able to discharge their duties free from false, frivolous and
malicious accusations. To achieve these object high ranks of police officers were
authorized to conduct investigation.

The Preamble of the Act shows the intention and true objectives of the legislature
behind the enactment. The Act was enacted to make more powerful provisions for
the prevention of bribery and corruption among the public servants. New meaning
was given to the term ―criminal misconduct‖ in discharging official functions by
the public servants. In addition, new rules were framed to raise presumption
against the accused regarding various offences committed under the Act. In the
year 1952, by Act 59 of 1952 probably on the premise of the experience gained in
this area, Section 5-A was embedded in the Act to ensure the protection of public
servants.

It is in the interest of the society to punish the wrongdoers. Similarly, it is also the
duty of the State to protect honest public servants from harassment and illegal
victimization so that they may feel themselves ready to fight with this evil of the
society. Hence, they should be prevented and protected from false accusation and
malicious prosecution. The said amendment was made into the Act to further the
idea of witness protection. To accomplish this purpose a system was created where
only the police officers of higher ranks were authorized to make investigation into
the offences of bribery and corruption by the public servants.

APPOINTMENT OF SPECIAL JUDGES

The main purpose of law is to try to attain a crimeless society. A perfect crimeless
society has always been a distant dream because of various complex reasons. Then
the rule of priority comes to the picture which seeks to prevent those offences
which affect society on a larger scope on priority basis. The aim of law is to
prevent such crimes which are more dangerous to the society. The crimes of
bribery and corruption come in this category because these are posing hindrances
to the constitutional objectives of bringing equality and restricting the functions of
welfare State. Not only this, these are also the mother of many other crimes. Thus,
the prevention of offences of bribery and corruption is necessary and has to be
dealt with caution and on priority basis.
For fulfilling the above mentioned purpose, there are provisions of establishing
Special Courts for the effective and speedy disposal of the cases of bribery and
corruption. Sections 3 to 6 and Section 26 of the Prevention of Corruption Act,
1988 deal with the appointment, working and functions of the Special Judges. The
power to appoint Special Judges is given to the Central Government and State
government both. The provision given in the Act states that the Central
government or the State government by Notification in the Official Gazette may
appoint as many special judges as may be necessary for such area or areas or for
such case or group of cases as may be specified in the notification to try the
following offences namely:

a) Any offence punishable under this act; and

b) Any conspiracy to commit or any attempt to commit or any abetment of any of

the offences specified in clause (a).

It is also provided under the Act that every special Judge appointed under the
Criminal Law Amendment Act, 1952 for any area or areas and is holding office on
the commencement of this Act shall be deemed to be a special Judge appointed
under Section 3 of this Act for that area or areas and, accordingly, on and from
such commencement, every such Judge shall continue to deal with all the
proceedings pending before him on such commencement in accordance with the
provisions of this Act. Thus Section 26 of the Prevention of Corruption Act, 1988
brings light upon the jurisdiction of special judges.

BIBLIOGRAPHY

STATUTES
  PREVENTION OF MONEY LAUNDERING ACT, 2002
 PREVENTION OF CORRUPTION (AMENDMENT) ACT, 2018

WEBSITES

 www.manupatrafast.in
 www.scconline.com