Explained: What Is The Anti-Money Laundering Law That The Supreme Court Has Upheld?

Aimed at curbing money laundering, the act defines the offence as "any process or activity connected with the proceeds of crime and projecting it as untainted property".

The PMLA was enacted in 2002 and came into force in 2005. (Representative Image/ Getty)

In a significant order that may have far reaching implications, the Supreme Court has upheld various provisions of the Prevention of Money Laundering Act (PMLA), including the powers of the Enforcement Directorate (ED) to arrest, search and, seize and attach assets related to the cases of money laundering. 

What Is PMLA?

The PMLA was enacted in 2002 and came into force in 2005. The act was formulated in fulfilment of India's commitment to various international conventions, including the Vienna Convention, as was stated in the respective bill’s statement of objects and reasons. 

Aimed at curbing money laundering, the act defines the offence as "any process or activity connected with the proceeds of crime and projecting it as untainted property". That is, if any asset, gained through illegal means, is being projected as legally attained, that may amount to the act of money laundering.

Conviction under the PMLA may lead to imprisonment of up to seven years and fine of up to five lakh rupees. The Enforcement Directorate is empowered to register cases under the PMLA.  

Amendments In The Act

Since the enforcement of the act in 2005, it has been amended thrice - in 2009, 2012 and 2019. All the amendments were mainly aimed at widening the ambit of the term “proceeds of crime”. Originally, there were 40 offences - such as drug trafficking, illegal arms, prostitution, illegal wildlife trade, corruption and waging war against the state - under six laws of the IPC.

As of now, there are almost 140 scheduled offences - also including minor offences such as copyright violations or the use of pirated software - under 30 laws that can lead to imposition of money laundering charges.

High Profile Cases Under PMLA

While the ED is currently interrogating Congress President Sonia Gandhi in the National Herald case registered under the PMLA in 2014, this is not the only high-profile case taken up by the agency. The Nationalist Congress Party leader Nawab Malik was arrested in February this year in relation to a money laundering case linked to Dawood Ibrahim.

Just before the Punjab assembly elections, the then chief minister Charanjit Singh Channi’s nephew was arrested in an illegal sand mining case. While in 2021, activist Harsh Mander’s house and office was raided by the ED in relation to alleged irregularities and corruption in the NGOs run by him. 

Allegation Of Abuse Of Law

A report ofthe Scroll.in shows that the conviction rate under the law has been low. In the 17 years of the enforcement of the PMLA, only 23 convictions have been secured. The above cited cases and the low success rate of the law have led to allegations from the accused of misusing the ED and the PMLA by the Centre to silence its critics.

The 2019 Amendments

In 2019, the central government had amended the PMLA. Along with widening the ambit of the act, the amendments had empowered the ED by doing away with the pre-requisite of an FIR or charge sheet by other agencies before the ED could initiate its probe. The 2019 amendments, along with enabling the law’s application in retrospect, also allowed the ED to arrest a suspect without warrant.

While the Centre claimed that the amendments were required to enable the ED to investigate serious financial crimes, the opposition argued that a law that was already stringent was made all the more draconian.

Latest Supreme Court Order

Soon after the 2019 amendments, many petitions were filed in the Supreme Court challenging various provisions of the law. Today, the top court pronounced its decision, upholding the parts of the law that were challenged. 

The court has termed sections 5, 8 (4), 15, 17 and 19 of the PMLA as constitutional. The sections dealt with the power of the ED under the law to arrest, attach and search and seize. 

The court noted in its order that the ED officials were not police officers. Hence, statements recorded before ED officials “are valid as evidence". Also, while arresting an accused, the ED was not bound to reveal the grounds of the arrest.