The Authority Of ED And Usage Of PMLA

Context:

The Supreme Court has asked the Enforcement Directorate (ED) Director to resign four months before his third extension bolstered the opponents to say ED has assumed powers akin to that of a policing agency.

Related Judgment:

• No Policing: The Supreme Court in Vijay Madanlal Choudhary v. Union of India (2022), held that ED authorities are not police officers. 
• Investigation: It observed that “the process envisaged by Section 50 of the PMLA is in the nature of an inquiry against the proceeds of crime and is not ‘investigation’ in the strict sense for initiating prosecution.”

Dissimilarities between ED authorities and the Police:

Money laundering:

• It is the process of hiding the source of money obtained from illegal sources and converting it to a clean source, thereby avoiding prosecution, conviction, and confiscation of the criminal funds. 
• It is an illegal exercise that converts black money into white money.
• Example: Organized criminal groups can invest cash to buy real estate, thereby converting the illegal dollars into an asset they can then sell for legitimate money. 

Consequences of Money Laundering:

• Criminal Activities: 
  • Terrorist financing and proliferation financing (the provision of funds or financial services for the acquisition of nuclear, chemical or biological weapons).
• Financial Loss to Government: 
  • Related crimes that generate money laundering activity, can threaten the stability of a country’s financial sector, which ultimately affects law and order, governance, regulatory effectiveness, foreign investments and international capital flows.
• Social Costs:
  • It includes drug traffickers, smugglers, and other criminals to expand their operations.

Prevention of Money Laundering Act (PMLA), 2002:

• About: 
  • The Parliament enacted the PMLA in January 2003 as a result of international commitment to deal with the menace of money laundering.
• Objectives:
  • To prevent and control money laundering
  • To confiscate and seize the property obtained from the laundered money 
  • To deal with any other issue connected with money laundering in India
• Provisions:
  • Section 3 of PMLA:
    • It defines the offense of money laundering.
    • The existence of a predicate offense is sine qua non to charge someone of money laundering. 
    • The investigation and prosecution of the predicate offense is done by the Central Bureau of Investigation (CBI) or the State Police.
  • Section 4 of PMLA: 
    • This section deals with punishment.
  • Section 50 of the PMLA:
    • It provides powers of a civil court to the ED authorities for summoning persons suspected of money laundering and recording statements. 
  • Prescribed Obligation: 
    • PMLA prescribes the obligation of banking companies, financial institutions and intermediaries for verification and maintenance of records of the identity of all its clients and also of all transactions and for furnishing information of such transactions in a prescribed form to the Financial Intelligence Unit (FIU-IND). 
  • Setting up of Authority: 
    • PMLA envisages the setting up of an Adjudicating Authority to exercise jurisdiction, power and authority conferred by it. 
    • It also envisages the setting up of an Appellate Tribunal to hear appeals against the order of the Adjudicating Authority and the authorities like Director FIU-IND.
  • Special Courts:
    • Under PMLA, Special Court or Special Courts are used to try the offenses punishable under PMLA and offenses with which the accused may, under the Code of Criminal Procedure 1973, be charged at the same trial. 
  • Agreement for Central Government: 
    • It allows the Central Government to enter into an agreement with the Foreign Governments for enforcing the provisions of the PMLA, exchange of information or investigation of cases relating to any offense under PMLA.

Way Forward:

• Need a Balance: While the ED has been given expansive powers under PMLA, there must be a balance between these powers and adherence to constitutional provisions to prevent political misuse. 
• Speedy Trials: The process of investigation should resolve cases with speedy trials.
• Scrutiny: Constant scrutiny over the operations of the Enforcement Directorate is necessary.
• Filling of Lacunas with Legislation: Any lacunas if seems should be filled through suitable legislation, executive action, or a revised order of the judiciary.

For more details on ED, please refer to the editorial dated 13th July

News Source: The Hindu

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