PMLA: A Law that Has Lost Its Way

April 2, 2024

Context

The Prevention of Money Laundering Act (PMLA), 2002, is being scrutinized because it expanded beyond its primary focus on combating drug money laundering.

Relevance for Prelims: Money Laundering, Enforcement Directorate (ED), Central Vigilance Commission (CVC), and The Authority Of ED And Usage Of PMLA.

Relevance for Mains: Issues in PMLA legislation, Money Laundering and Impact

PMLA: Background and Original Objective

Objective of PMLA: To curb the laundering of black money and to save the economy from being destabilised.
Global Concerns: The implementation of the PMLA was motivated by international efforts to combat money laundering, particularly revenues from drug trafficking.
United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988: All countries were urged to take urgent steps to prevent the laundering of the proceeds of drug crimes and other connected activities.
Formation of FATF: Seven major industrial nations held a summit in Paris (July 1989) and established the Financial Action Task Force (FATF) to examine the problem of money laundering and recommend measures to tackle this menace.
UNGA Resolution: The United Nations General Assembly (UNGA) adopted a resolution, namely, the Political Declaration and Global Programme of Action which called upon all member-countries to enact suitable legislation to effectively prevent the laundering of drug money.
Parliamentary Enactment: The PMLA was passed by India’s Parliament under Article 253 to implement international treaties and decisions, with a focus on fighting drug money laundering.

Aspect	PMLA Cases	Normal Criminal Cases
Reverse Burden of Proof	In certain circumstances, the accused has to prove that alleged proceeds of crime were legally earned.	The burden of proof is always on the prosecution to prove the guilt of the accused.
Bail	Bail is an exception, jail is the rule under Section 45 of PMLA. Accused has to prove prima facie innocence to get bail, which is a tough condition.	Bail is the rule, jail is an exception. If prosecution fails to establish a prima facie case, bail can be granted.
Burden of Proof for Bail	Accused has to prove prima facie innocence to get bail, contrary to general principles where the burden of proof is on the prosecution.	Prosecution has to establish a prima facie case against the accused for denial of bail.
Property Attachment	Authorities can attach suspected proceeds of crime without trial or conviction under strict provisions.	Attachment of property usually happens after conviction or with more due process.
Recording of Statements	Statements recorded before the investigating officer can be used as evidence in court, which is not allowed in normal criminal trials.	Statements recorded by police are not admissible as evidence unless certain conditions are met.

Concerns Associated with PMLA

Inclusion of Diverse Offenses: Over time, the PMLA schedule grew to encompass a variety of offences unrelated to its initial aim, such as those specified in the IPC or other special laws, diverging from its concentration on drug money laundering.
Uniform Application: The PMLA’s harsh provisions, originally designed for drug traffickers, are now applied equally to all scheduled offenses, including non-drug-related crimes such as corruption under the Prevention of Corruption Act of 1988.

The Bail Provisions under PMLA

Presumption of Guilt: The PMLA’s bail provision (Section 45) reverses the presumption of innocence, requiring the accused to prove innocence in order to be granted bail, resulting in lengthy incarceration without trial and generating concerns about individual rights.
Unconstitutional Bail Provision: It was held unconstitutional by a two-judge Bench of the Supreme Court of India in Nikesh Tarachand Shah vs Union of India (2018) as violating Article 14 and Article 21.
Vijay Madanlal Choudhary vs Union of India (2022) Case: Parliament restored this provision with certain amendments which was upheld by a three-judge Bench headed by Justice A.M. Khanwilkar in Vijay Madanlal Choudhary vs Union of India (2022).

Conclusion

Denying bail takes away personal freedom, a fundamental right under Article 21 of our constitution. The power to deny bail is a significant responsibility for the courts, to be exercised with serious consideration for its impact on both the individual and society.

Also Read: Pan India Mechanism For Directorate Of Enforcement (ED)

Prelims PYQ (2021):

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

(a) Diversion of resources to the purchase of real estate and investment in luxury housing

(b) Investment in unproductive activities and purchase of previous stones, jewellery, gold, etc.

(d) Loss of revenue to the State Exchequer due to tax evasion

Ans: (d)

Mains Question: Critically examine how the Prevention of Money Laundering Act (PMLA) stands in combating money laundering, considering the challenges in its implementation, effectiveness in prosecution, and safeguards against misuse. (15 M, 250 Words)

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