Inclusion of less serious offences under PMLA

Source-This post on Inclusion of less serious offences under PMLA has been created based on the article “The PMLA — a law that has lost its way” published in “The Hindu” on 1 April 2024.

UPSC Syllabus-GS Paper-3– Internal Security- Money-Laundering and its prevention.

Context-The article highlights the problems of inclusion of certain offences under PMLA (Prevention of Money Laundering Act) which are not directly aimed at combating money laundering. Inclusion of less serious offences under PMLA

What is the historical background of enactment of PMLA?

1) United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances– This convention urged all countries to take urgent steps to prevent the laundering of the proceeds of drug crimes and other connected activities.

2) Establishment of FATF– After this convention, 7 major industrial nations held a summit in Paris (July 1989) and established the Financial Action Task Force (FATF) to examine the problem of money laundering and recommend measures to tackle this menace.

3) Political Declaration and Global Programme of Action –This resolution urged all member-countries to enact suitable pieces of legislation to effectively prevent the laundering of drug money.

4) Countering World Drug Problem Together –Since drug trafficking is a trans-border operation, the UN held a special session on June 1998 on the theme ‘Countering World Drug Problem Together and made another declaration on the urgent need to combat money laundering. Accordingly, the Indian Parliament enacted the Prevention of Money Laundering Act in 2002.

Why is historical background important?

It is important to emphasize the original objective and the circumstances under which the law was enacted. The UN resolutions, and the FATF recommendations are all focused on the prevention of money from the laundering of drugs.

What are the issues with inclusion of less serious offences under PMLA?

1) Diluting the original intent of law– The UN resolution has only focused on the offence of the laundering of drug money, which has the potential to destabilize the economy and endanger the sovereignty of the nation. However, inclusion of other less serious offences in the schedule dilutes the original intent of law. For ex-the Prevention of Corruption Act, 1988, was added to the schedule of offences in 2009. As a result of this, a public servant charged with corruption and a hard-core drug trafficker are treated alike.

2) Violation of the provisions of Article 253– Article 253 empowers the Parliament to enact laws for implementing the international conventions. Any law enacted under this article cannot go beyond the subject matter of the law, which in this case, is money laundering.

Further, Item 13 in the Union list of the Seventh Schedule of the Constitution is also specific about this point. Thus, inclusion of other offences under PMLA is violation of provisions of the constitution.

3) Breach of fundamental principle of Anglo-Saxon jurisprudence– As per this principle, a person is presumed innocent until proven guilty. However, under PMLA, a person is presumed to be guilty until proven innocent. So, inclusion of less serious offences under PMLA may create a situation where the accused is languishing in jail without trial because the person would be presumed to be guilty until proven innocent.

4) Violation of article 14 & 21-The bail provision of the PMLA Act (Section 45) was held unconstitutional by the Supreme Court in Nikesh Tarachand Shah vs Union of India (2018) as violation of Article 14 and Article 21. However, Parliament restored this provision with certain amendments which was upheld by the Supreme Court in Vijay Madanlal Choudhary vs Union of India (2022). There is no problem in ensuring tough bail provisions for serious crimes like money laundering but inclusion of less serious offences under the act infringes upon fundamental rights of accused to get bail.

Read more-Money Laundering- Explained, pointwise

Question for practice

What were the important international resolutions which led to the enactment of PMLA? Highlight the issues with inclusion of less serious offences under PMLA?