PMLA 2002, Laws to Combat Money Laundering Threats

Trinamool Congress leader and former head of the West Bengal Primary Education Commission, Manik Bhattacharya, recently asked the Supreme Court to quash his detention by the Enforcement Directorate (ED) on suspicion of money laundering for his alleged participation in the 2014 Teacher Qualification Test for hiring primary school teachers.

What is money laundering?

Money laundering is the process of making large sums of money obtained through illicit activities, such as trafficking illicit drugs or financing terrorism, appear to come from legitimate sources. Criminal activities such as illegal arms sales, smuggling, prostitution, drug gangs, insider trading, bribery and computer fraud schemes have reaped huge gains.

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As a result, it gives money launderers an incentive to “legitimize” their illicit proceeds from money laundering. The money created is called “dirty money,” and the act of turning “dirty money” into “legitimate” money is called money laundering.

Money laundering involves three stages. The introduction of illicit funds into the established financial system marks the beginning of this process. In the second stage, the injected funds are piled up and dispersed in various transactions to hide their corrupt origins.

In the third and final stage, money is introduced into the financial system in an attempt to remove its initial link to crime, allowing criminals to use it as “clean money.”

What is the Prevention of Money Laundering Act of 2002 (PMLA)?

India signed the Vienna Convention pledging to combat the global threat of money laundering, leading to the creation of the Prevention of Money Laundering Act (PMLA). These include the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. 1989 Basel Declaration of Principles

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The Financial Action Task Force on Money Laundering issued 40 recommendations in 1990. The United Nations General Assembly approved the Political Declaration and Global Programme of Action in 1990.

A criminal law was passed to curb money laundering and provide for the confiscation of assets obtained through or related to money laundering and related activities. It is the cornerstone of India’s legal system to combat money laundering.

The provisions of the legislation apply to all financial institutions, especially banks (including RBI), mutual funds, insurance companies and their financial intermediaries.

What recent revisions have been made?

The term “proceeds of crime” refers not only to property resulting from a scheduled offence, but also to any other property obtained or acquired through participation in any criminal activity related to or similar to a scheduled offence.

Money laundering is a crime that is dependent on another crime, called a predicate or scheduled crime, rather than a stand-alone crime. The legislation aims to make money laundering a separate offence.

If an individual is in any way directly or indirectly involved in the proceeds of crime, they will be charged with money laundering under Section 3 of the PMLA. The amendment further states that since money laundering is a continuing crime, individuals are considered to be participating in criminal activity as long as they benefit from the relevant action.

What is happening now?

A political leader recently asked the Supreme Court to overturn his arrest by the Department of Enforcement (ED) on suspicion of money laundering, but the court denied his request.

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In June, a Kolkata High Court judge allowed the CBI to challenge Bhattacharya over the scam in a series of orders, detaining him if necessary if he refused to comply. The HC division bench then confirmed this.

However, the SC ordered that no coercive action be taken against the defendant in response to the appeal. Bhattacharya was subsequently detained by the Education Department on 10 October.

TMC leaders challenged this before the SC, arguing that the ED’s detention of him for the “same crime” during this period was “unfounded” as the Supreme Court had already protected him from arrest in the CBI case . Bhattacharya asked the court to rule in his petition that the arrest was illegal.

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