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SC verdict on PMLA fails to protect personal liberty from Draconian provisions
News: The Supreme Court in Vijay Madanlal Choudhary and Ors versus Union of India case upheld the provisions of the PMLA (Prevention of Money Laundering Act).
What is PMLA?
• After the 9/11 attacks, the attention of the world turned to terror financing. After establishing the Financial Action Task Force (FATF), India was under pressure to deal with terror financing issues.
• Thus, the Prevention of Money Laundering Act (PMLA) was enacted to deal with money laundering.
• The law was enacted to combat money laundering in India and has three main objectives - To prevent and control money laundering, to provide for confiscation and seizure of property obtained from laundered money and to deal with any other issue connected with money-laundering in India.
• It was enacted in response to India’s global commitment (including the Vienna Convention) to combat the menace of money laundering.
• The Enforcement Directorate is empowered to conduct a Money Laundering investigation.
What is Money laundering?
• Money Laundering refers to converting illegal earned money into legitimate money.
• The government does not get any tax on the money because there is no accounting of the black money. So Money Laundering is a way to hide the illegally acquired money.
• In India, “money laundering” is popularly known as Hawala transactions.
How is PMLA in India different from other International counterparts?
• Money laundering in the Indian context is linked to or is seen as a byproduct of a host of both grave and routine offences that are appended to the PMLA as scheduled ones.
• These ‘scheduled’ or ‘predicate’ offences ought to be ideally limited to grave offences such as terrorism, narcotics smuggling, corruption and serious forms of evasion of taxes and duties.
• But, in practice, the list contains offences such as fraud, forgery, cheating, kidnapping and even copyright and trademark infringements.
What are the concerns associated with PMLA?
• The Enforcement Case Report (the analogue of an FIR) is not shared with the accused, either he is informed whether he is summoned as witness or accused. Nor the full grounds of arrest shared with the accused.
• The definition of crime under this Act is almost infinitely elastic, what counts as money laundering crimes include everything in the kitchen sink. The sovereign has immense latitude to define what counts as the relevant crime. It can also in a classic instance of rule by law change the presumption of innocence.
• The punishments under PMLA may potentially be excessively punitive, in disproportion to the crime.
• The conviction rate under PMLA is very low, less than 0.5%. But every year thousands of cases are registered, people are arrested, and lives are turned upside down.
• The list of crimes included in the PMLA overrides similar crimes in other parts of the law. It can override the safeguards of the Criminal Code of Procedure.
• The burden of proof is on the accused. Under Indian conditions, the process of proving innocence itself is the punishment.
• The Enforcement Directorate has been manifestly selective in opening money-laundering probes, rendering any citizen vulnerable to search, seizure, and arrest at the whim of the executive. Thus, government of the day might use the ED against political opponents.
• The law itself has been enacted by dubious means as it was passed as money bill. One cannot determine whether the parliamentary procedure under which the law was enacted was itself proper.
What is the way forward?
• The ED’s expanded powers should be welcomed with a greater commitment to expeditiously resolve the cases, so both the judiciary and enforcement agencies can move forward with speedy trials and convictions.
• Government needs to look into major issues concerning the lower conviction rate and make sure the law is not misused.