THE PMLA — A LAW THAT HAS LOST ITS WAY

THE CONTEXT: The Prevention of Money Laundering Act (PMLA), 2002, was enacted in response to global concerns about money laundering, particularly from drug trafficking, which threatened economic stability and national sovereignty. The United Nations and the Financial Action Task Force (FATF) urged countries to legislate against this menace, leading to India’s formulation of the PMLA.

ISSUES:

• Deviation from Original Purpose: The Prevention of Money Laundering Act (PMLA), 2002, was initially enacted to combat drug money laundering, but over time, its scope has expanded to include a wide range of offenses beyond its original purpose.
• Broadening of Scheduled Offences: The PMLA’s schedule of offenses has been expanded through amendments, incorporating crimes listed in the IPC or covered by other laws. However, this has subjected minor offenses to the same rigorous treatment as serious crimes. For example, public servants charged with corruption are now treated the same as hardcore drug traffickers under the PMLA.
• Presumption of Guilt and Bail Provisions: PMLA changed the presumption of guilt and overturned presumed innocence until proven guilty. Section 45 requires judges to be convinced of innocence before granting bail, criticized for prolonged jail without trial, challenging liberty, and due process.
• Judicial Interpretation and Legislative Amendments: The Supreme Court declared Section 45’s bail provision unconstitutional in 2018, but it was later restored with amendments and upheld by the Court in 2022. The Court’s decision reflects a technical approach to bail in PMLA cases, emphasizing legislative policy. This significantly differs from earlier perspectives on personal liberty and bail powers.
• Impact on Personal Liberty: The PMLA’s strict bail provisions affect personal liberty and challenge the core values of the justice system. It raises ethical and human rights concerns, highlighting the need to balance enforcing anti-money laundering measures and safeguarding individual liberties.
• Challenges in Operationalization: The expanded scope of the PMLA poses significant challenges. The broad application requires clear guidelines and criteria for including offenses in the PMLA’s schedule to ensure the law’s application remains focused and effective.

THE WAY FORWARD:

• Streamlining the Schedule of Offences: Streamlining the schedule of offenses under the PMLA can help it focus on its original objective of combating money laundering, particularly drug trafficking. This requires reviewing and removing less significant offenses. For instance, the inclusion of the Prevention of Corruption Act of 1988 in the PMLA’s schedule may dilute the law’s focus and need reassessment.
• Enhancing Transparency and Accountability: The Enforcement Directorate’s lack of transparency under PMLA has been criticized. Clear procedures should be established to prevent arbitrary actions and improve accountability to ensure that the Enforcement Case Information Report (ECIR) is disclosed to the accused and filed based on consistent criteria.
• Revising Bail Provisions: The bail provisions under Section 45 of the PMLA have been controversial due to their inversion of the presumption of innocence. Revising these provisions could involve setting clear criteria for granting bail without presuming guilt. The Nikesh Tarachand Shah vs Union of India (2017) case highlights the need for constitutional rights to be upheld in the context of bail.
• Consistent Application of Legal Principles: The Supreme Court’s judgments on bail under Section 45 of the PMLA have shown inconsistencies. A more consistent application of legal principles is needed to ensure fairness and reduce case backlogs. The principle of parity, for instance, should be considered when co-accused in similar circumstances have been granted bail, as seen in the case of Benoy Babu v. Directorate of Enforcement.
• Addressing the Reversal of Burden of Proof: Reversing the burden of proof on the accused to prove their innocence under the PMLA is problematic. Legal reforms could be introduced to ensure that the burden of proof remains with the prosecution, as is standard in criminal law. This would protect the rights of the accused and uphold the principle of innocent until proven guilty.
• Regular Review and Amendment of the PMLA: To prevent the misuse of the PMLA’s provisions and ensure that they serve the public interest, regular reviews and amendments of the Act could be mandated. This would involve assessing the law’s effectiveness, identifying areas for improvement, and making necessary changes. The government could set up a dedicated committee involving legal experts, civil society, and other stakeholders to undertake this task.

THE CONCLUSION:

The evolution of the PMLA from its original focus on combating drug money laundering to its current broad application raises significant concerns regarding the deviation from its foundational objectives, the expansion of scheduled offenses, the presumption of guilt, and the implications for personal liberty and due process. The legislative and judicial developments surrounding the PMLA’s bail provisions highlight the complexities and challenges in balancing the objectives of preventing money laundering with the principles of justice and individual rights.

UPSC PAST YEAR QUESTION:

Q.1 Money laundering poses a serious threat to a country’s economic sovereignty. What is its significance for India, and what steps must be taken to control this menace? 2013

MAINS PRACTICE QUESTION:

Q.1 Analyze the evolution of the Prevention of Money Laundering Act (PMLA) since its inception in 2002, discussing the key amendments and their implications for India’s legal and economic landscape. Suggest reforms to address these issues while strengthening the Act’s effectiveness in combating money laundering.

SOURCE:

https://www.thehindu.com/opinion/lead/the-pmla-a-law-that-has-lost-its-way/article68017135.ece