While upholding the Prevention of Money Laundering Act (PMLA), the Supreme Court has put its stamp on Kafka’s law.
The Supreme Court upheld the constitutional validity of the provisions of the Prevention of Money Laundering Act (PMLA) in Vijay Madanlal Choudhary & Ors Vs Union of India. The SC calls it a “unique and special law” and outlines the powers of the Enforcement Directorate (ED) to conduct inquiries, arrest people and attach properties. The court noted that the principle of innocence of the accused/offender is treated as a human right, but that presumption can be obstructed by a law made by the Parliament/legislature.
What is money laundering?
Money laundering refers to the conversion of illegally acquired money into legitimate money.
Due to lack of account of black money, the government does not charge any tax on this money. So money laundering is a way to hide illegally earned money. The term “money laundering” originates from a mafia group in the United States. Mafia groups have created huge amount of extortion, gambling etc and this money is shown as legal money. In India, “money laundering” is known as hawala transactions.
money laundering system
The money laundering case clearly appears to be an above-board financial transaction, however, the criminality below is hidden by a three-step process:
The first stage is when crime money is injected into the formal financial system. This is called ‘placement’;
The second stage is, the money put into the system is layered and spread across various transactions with a view to obscure the tainted origin of the money. This process is called ‘layering’. The third and final stage is money enters the financial system in such a way that the original association with crime is sought to be erased so that the money can be used as clean money by the criminal or the person receiving it. This is called ‘integration’.
What is PMLA Act?
Money Laundering Act introduced in 2002 to tackle the problem of money laundering.
It is subject to several amendments including 2005, 2009, 2012.
There are mainly 3 objectives of PMLA:
To prevent and control money laundering.
Confiscation and confiscation of property obtained by money laundering.
To deal with, any other issue related to money laundering in India. It was enacted in response to India’s global commitment to combat the menace of money laundering (including the Vienna Convention).
Money laundering has become a matter of international concern and India has made several international commitments in this regard.
International Prevention of Money Laundering Act vs Indian PMLA
By-product of a host: Money laundering in the Indian context is associated or seen as a by-product of both serious and routine offenses which are included in the Act as a Schedule.
Comprehensive offences: These ‘scheduled’ or ‘predictable’ offenses should ideally be limited to serious offenses such as terrorism, drug trafficking, corruption and serious forms of evasion of taxes and duties. However in practice, the list includes crimes such as fraud forgery fraud kidnapping and even copyright and trademark infringement.