Centre defends PMLA provisions in top court
The government said India is legally and morally bound to adopt global best practices and respond to the changing needs of the times.
Emphasising India’s role in the international fight against money laundering, the Union government on Wednesday told the Supreme Court that while testing the validity of stringent provisions added to the Prevention of Money Laundering Act (PMLA), the Court must be conscious of the country’s obligations and responsibilities internationally in the prevention and prosecution of money laundering offences.
Opening arguments for the Centre in a clutch of petitions challenging the wide powers provided to Enforcement Directorate under PMLA, Solicitor general Tushar Mehta said, “If the Court finds that measures taken legislatively to tackle money laundering has been done with a view to comply with the country’s international obligations, the Court has to give certain leeway to the legislature as this concerns a special law.”
Referring to the Prime Minister’s call to the global anti-money laundering watchdog , the Paris-based Financial Action Task Force (FATF), to tackle the global scourge of money laundering, corruption and extradition of fugitive economic offenders, Mehta submitted a note to the Court which said, “India is expected to lead by example by making all efforts to ensure FATF standards are effectively complied with an India continues to enjoy international goodwill and credit worthiness.”
He referred to how the amendments have yielded results in cases probed against fugitive economic offenders Vijay Mallya, Mehul Choksi and Nirav Modi and said, “In these three cases alone, ED has confiscated over ₹18,000 crore worth proceeds of crime due to orders issued by the courts and the amount was returned to the banks.” The Centre’s note suggested that the changes were required as India was far behind other developed countries in taking up investigation under money laundering cases.
Backing its submission with data, the Centre said, “The number of the cases taken up for investigation (by ED) each year in last five years varies from 111 cases in 2015-16 to 981 in 2020-21. It is evident from the date that very small number of cases is being taken up for investigation under PMLA as compared to annual registration of cases under the Money Laundering Act in UK (7,900), US (1,532), China (4,691), Russia (2,764)…” In the last five years, according to the Centre, “only 2,086 cases were taken up for investigation under the PMLA out of approximately 33 lakh (3.3 million) FIRs registered for predicate offences by police and other enforcement agencies.”
The government said India is legally and morally bound to adopt global best practices and respond to the changing needs of the times. “It is in this context that constitutionality of the provisions of PMLA ought to be adjudicated. Same would be in stark contrast to any general provision of criminal law and rather would have to be adjudicated from the standpoint of the country’s obligations and responsibilities internationally.
Reading out the FATF framework and its periodic assessment that can land a country in global grey-list or black-list for worse off countries, the government said, “Considering that India is at the forefront of the global effort to combat money laundering, terror financing and corruption, it would be severely detrimental to India’s international reputation and political standing if it is placed under enhanced follow-up alongside Pakistan which is known to have engaged in terror financing activities.”
The petitions challenging PMLA claimed the law is violative of constitutional guarantee of right to liberty and right against self-incrimination under Articles 20 and 21. A battery of senior lawyers appearing for various accused including Karti Chidambaram submitted that the FIR registered by ED, known as ECIR is not supplied to the accused. This is complicated by stringent bail conditions.
The bench of justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar told Mehta, “You can say that this is a special offence that caters to domestic community and also international community. Ultimately that has to pass muster of our constitutional framework.”
On non-supply of ECIR, Mehta said, “If we serve the ECIR, the accused, at the click of a button will erase all evidence. So we take him by surprise or else most of the evidence will be lost.” He further submitted that in offences of money laundering, there are rarely identified victims and FATF standards, adopted by 180 countries, allow national authorities to cooperate globally in “proceeds-hunting” in the prevention and prosecution of money laundering.
As per the FATF, the scale of money laundering transactions account for 2 to 5% of global gross domestic product (GDP), and is estimated roughly by the United Nations at $ 2.1 trillion. The Centre argued that definition of money laundering has evolved and is no more restricted to include elements of projection as untainted property. “The international mandate provides any activity which is connected with proceeds of crime ought to be criminalized,” the note said, explaining why a host of laws have been added as predicate offences includes Copyright Act and Environment (Protection) Act.
