The Indian Government's crackdown on black money continues unabated and a spate of

prosecutions have been launched in the recent times under the Prevention of Money Laundering
Act, 2002. This article is an attempt to demystify the law relating to money laundering in India
and provide a brief overview of its scheme and operation.

1. WHAT IS MONEY LAUNDERING ?

Investopedia1 defines money laundering as "The process of creating the appearance that large
amounts of money obtained from serious crimes has originated from a legitimate source."

Illegal arms sales, smuggling, and other organized crime, including drug trafficking and
prostitution rings, can generate huge amounts of money. Embezzlement, insider trading, bribery
and computer fraud schemes can also produce large profits and create the incentive to
"legitimize" the ill-gotten gains through money laundering. The money so generated is tainted
and is in the nature of 'dirty money'. Money Laundering is the process of conversion of such
proceeds of crime, that is to say the 'dirty money', to make it appear as 'legitimate' money.2

1.1 The USUAL modus operandi

A case of Money laundering ostensibly appears to be an above-board financial transaction,

however, the criminality underneath is hidden by a three stage process :

The first stage is when the crime money is injected into the formal financial System. This is
called 'placement';

In the second stage, money injected into the system is layered and spread over various
transactions with a view obfuscate the tainted origin of the money. This process is called
'layering';

In the third and the final stage, money enters the financial system in such a way that original
association with the crime is sought to be obliterated so that the money can then be used by the
offender or person receiving as clean money. This is called 'Integration'.

1.2 Common forms/METHOD of money laundering

Structuring, Bulk Cash Smuggling, Cash Intensive Businesses, Trade-based laundering, Shell
companies and trusts, Round-tripping, Bank Capture, Gambling, Real Estate, Black Salaries,
Fictional Loans, Hawala, False invoicing are some of the common methods of money
laundering.

2. WHAT IS THE INDIAN LAW ON THE SUBJECT ?

In India, the specific legislation dealing with money laundering is the Prevention of Money-
Laundering Act, 2002 (for short 'PMLA'). The law was enacted to combat money laundering in
India and has three main objectives :

To prevent and control money laundering;

To provide for confiscation and seizure of property obtained from laundered money; and

To deal with any other issue connected with money-laundering in India.

Apart from the provisions of PMLA, there are other specialised provisions such as
RBI/SEBI/IRDA anti money laundering regulations. Many of these authorities are bound to
provide suspicious transaction reports, which are in-turn analysed by Financial Intelligence Units
established by the Central Government.

3. WHAT IS THE LEGAL DEFINITION OF MONEY LAUNDERING ?

3.1 Money Laundering

The offence of 'Money Laundering' is defined under Section 3 of the PMLA, which, for ease of
understanding, can be deconstructed as :

Whosoever :

directly or indirectly,

attempts to indulge, or

knowingly assists, or

knowingly is party, or

is actually involved in any process, or

activity connected,

with the Proceeds of Crime, including its :

Concealment,

Possession,

Acquisition or use; and

Projecting or Claiming it as Untainted Property

shall be guilty of offence of Money-Laundering.

It is clear that the section is most widely worded and almost any kind of dealing with the
proceeds/fruits of crime, is brought within the purview of the section and made culpable.

3.2 'Proceeds of Crime'

An understanding of the phrase 'Proceeds of Crime' is crucial to the understanding of the crime
of Money Laundering. The offence of money laundering (defined u/s 3 and punished u/s 4
PMLA) is attracted only when the laundered property falls within the definition of 'proceeds of
crime'

To understand what is meant by 'Proceeds of Crime', one has to turn to Section 2(u) of PMLA,
which provides that - 'proceeds of crime' means and includes :

Any property derived or obtained

Directly or indirectly

By any person

as a result of criminal activity

relating to a 'scheduled offense'; or

the value of any such property

To further add teeth to this provision, the Finance Act of 2015 has further widened the definition
of proceeds of crime and included within its ambit not only the specific property (which is the
subject matter of money laundering) or its value, but also the property-equivalent in value held
within the country (in a situation where property which is the 'proceed of crime' is taken or held
outside the country). Such properties are also included within the definition of 'proceeds of
crime'. This principle of equivalence has been introduced by the Finance Act, 2015 for the first
time.

To illustrate, if a person X has been accused of having proceeds of crime in country X, in that
situation, his assets in India of the same value will qualify as 'proceeds of crime', even though
these assets per se are not the 'proceeds of crime' or in no way connected to it. This has been
done with a view to enable action in those cases where 'proceeds of crime' are taken or held
outside the country and to allow action to be taken for attachment of equivalent asset located
within the country. This step appears to have been taken in view of the increasing
internationalisation of crime. However, this gives rather wide and unguided powers of
attachment to the authorities under the Act, which may be exercised arbitrarily.

The Interconnectedness of PMLA and 'scheduled offence'

A reading of the above definition of 'proceeds of crime' also makes one more thing clear, which
is extremely crucial to an understanding of the offence of Money Laundering, which is that the
offence of Money Laundering is not an independent crime; it depends upon another crime, which
is known as the 'predicate offence' or 'scheduled offence', the proceeds of which are made the
subject matter of crime of money laundering. The world over, countries include almost all
serious crimes as predicate crimes for the purpose of money laundering offence, with a view to
widen the ambit of prosecution.

In the next section we deal with the Schedule and the list of predicate offences.

4. WHAT ARE THE SCHEDULED/PREDICATE OFFENCES WHICH ENTAIL

PROCEEDINGS UNDER PMLA ?

4.1 List of Offences

Under PMLA, commission of any offence, as specified in the Part A and Part C of the Schedule
of PMLA will attract the provisions of PMLA. Some of the Acts and offences, which may attract
PMLA, are enumerated herein below:

Part A enlists offences under various acts such as : Indian Penal Code, 1860 (including but not
limited to offences against Property such Cheating, Forgery, Counterfeiting, Fraud, murder etc)
Narcotics Drugs and Psychotropic Substances Act, 1985, Prevention of Corruption Act, 1988
SEBI, Customs Act, 1955, Foreigners Act, Arms Act, Antiquities and Art Treasures Act,
Copyright Act, 1957, Trademark Act,1999, Wildlife Protection Act, 1872, Information
Technology Act, 2000, amongst others.

Part B offences (offence under the Customs Act), provided the value of property involved is
more than one crore rupees or more;

Part C deals with trans-border crimes, and reflects the commitment to tackle Money Laundering
across International Boundaries.

5. AUTHORITIES ENTRUSTED TO INVESTIGATE/PROSECUTE UNDER THE PMLA?

Though the Code of Criminal Procedure governs the procedural aspects of prosecution, there are
marked deviations from the standard procedure considering the special nature of the offence
(including its cross border character) and slightly different process is envisaged. The offence is
cognizable which means arrest can be made without a warrant.3 There is a specialised
investigative body for investigation of these offences. The Directorate of Enforcement in the
Department of Revenue, Ministry of Finance is responsible for investigating the offences of
money laundering under the PMLA. Investigation usually begins with the registration of an
Enforcement Case Information Report (also known was ECIR) which sets the investigation into
motion.

This authority is empowered to carry out interim measures such as survey, search, seizure and
arrest of the accused. Similarly, if an asset is found to be the proceeds of crime, the same can be
confiscated and appropriated by the Government.

Financial Intelligence Unit - India (FIU-IND) under the Department of Revenue, Ministry of
Finance is the central national agency responsible for receiving, processing, analyzing and
disseminating information relating to suspect financial transactions to enforcement agencies and
foreign FIUs.
The predicate/scheduled offences are separately investigated by agencies mentioned under those
acts, for example - the local police, CBI, customs departments, SEBI or any other investigative
agency, as the case may be.

After investigation is complete for the offence of money laundering, a complaint is filed by the
investigating authority before the Special Court, where the trial for the offence actually takes
place.

Since the offence of Money laundering is inextricably connected with the predicate offence,
2013 amendments to the PMLA provide that the trial for the predicate offence as well as offence
punishable under Section 4 shall be conducted by the Special Court. If court which has taken
cognizance of the scheduled offence is other than the Special Court (which has taken the
cognisance of the complaint of the offence of money laundering under sub-clause (b), it shall, on
an application by the authority authorised to file a complaint under this Act, commit the case
relating to the scheduled offence to the Special Court and the Special Court shall, on receipt of
such case proceed to deal with it from the stage at which it was committed. 4

As opposed to this, the process relating to attachment of property (including its confirmation) is
dealt with by the Adjudicating Authority established under the Act.

6. ACTIONS THAT MAY BE INITIATED AGAINST PERSON LAUNDERING MONEY?

Attachment of property under Section 5, seizure/freezing of property and records under Section
17 or Section 18.

Persons (Individuals and/or juristic person such as a Company etc) found guilty of an offence of
Money Laundering are punishable with imprisonment for a term which shall not be less than
three years but may extend up to seven or even ten years (depending on circumstances) and shall
also be liable to fine (no upper limits) [Section 4].5

7. ATTACHMENT OF PROPERTY.

The PMLA gives extremely wide powers to the authorities to attach properties suspected to be
involved in Money Laundering. Section 5 of the PMLA authorises the Director or any other
officer not below the rank of Dy.Director to attach property. This power is to be exercised if the
authority, as specified above, has a reason to believe (and such reasons have to be recorded in
writing to prevent arbitrariness), on the basis of material in their possession, that -
Any person is in possession of any Proceeds of Crime; and such Proceeds of crime are likely to
be :

Concealed,

Transferred, or

dealt with in any manner

which may result in frustrating any proceedings relating to confiscation of such proceeds of c
rime .

If the aforesaid conditions are satisfied, the authority may by order in writing, provisionally
attach such property for a period not exceeding 180 days from the date of order.

Under normal circumstances, presence of a complaint/police report against the accused for the
predicate/scheduled offence, whether in India or abroad, is a necessary precondition for
provisional attachment of property. This is, however, not an absolute pre-condition and in cases
where immediate attachment is needed and non-attachment is likely to frustrate the proceedings,
the Director or the Dy.Director, for reasons to be recorded in writing, may nevertheless go ahead
with provisional attachment even with there being no prosecution qua the scheduled offence
against the accused.

It may be noted that there is no provision for a prior notice of a provisional attachment and the
same can come like a total bolt from the blue.

What happens post-provisional attachment ?

After provisional attachment, the Director or any other officer, has to file a complaint stating the
facts of such attachment before the Adjudicating Authority, within a period of thirty days from
such attachment
Remedy

Thereafter, the person aggrieved by the provisional attachment may file his objections before the
Adjudicating Authority. This is the remedy under the PMLA, however, an order without
jurisdiction or suffering from any jurisdictional error may be challenged directly before the High
Court by invoking Article 226 of the Constitution. The Courts have held that a mere mechanical
noting that the property in question is likely to be concealed, transferred or dealt-with would not
meet the requirements of Section 5(1) of the Act and such a non speaking order by a Director can
be set aside in writ proceedings by the High Court if it is devoid of strong and cogent reasons6

8. CAN PROVISIONAL ATTACHMENT BE INVOKED AGAINST A PERSON NOT

ACCUSED OF ANY SCHEDULED OFFENCE ?

The answer is Yes. Provisional attachment can be invoked even against a person who is not
accused of any 'scheduled-offence'. A conjoint reading of Sections 2(s) and 2(u) reveals that
reference made is to 'any person'; this coupled with the purpose and intent of the Act, calls for a
wide interpretation.

In fact, Section 5(1) second proviso specifically allows attachment of property in the hands of a
third person even without there being a prosecution qua that person under the PMLA. It provides
that if the designated officer has reason to believe that the property in possession of such person
is involved in Money-Laundering, and non-attachment will frustrate any proceedings under the
Act, he can go ahead and attach the same. The essence of the matter being 'freezing of tainted
assets' at the earliest.

However, even post attachment, the person may continue in the enjoyment of the property during
the period of attachment, but is prohibited from creating any third party interest in the property.

9. POST ATTACHMENT PROCEEDINGS.

We have already seen that after provisional attachment u/s 5 of the PMLA, the Director has to
file a complaint before the Adjudicating authority. Section 8 of PMLA lays down an elaborate
procedure for adjudication of a complaint under Section 5 of PMLA. It calls for a show cause
notice to be issued to the offender/person from whom property has been seized, so as to give the
person an opportunity to make a case against attachment/confiscation. Such a person, in order to
avoid confiscation, can demonstrate the legitimate sources of his income, earning or assets, out
of which or by means of which he has acquired the property attached, the evidence on which he
relies and other relevant information and particulars, and to basically convince the authority as to
why all or any of such properties should not be declared to be the properties involved in money-
laundering and confiscated by the Central Government. The Authority after giving him a hearing
reaches a finding, which needless to state is open to challenge before the Appellate Tribunal.

If the Adjudicating Authority, after the enquiry, comes to the conclusion that any property is
involved in money laundering, it can, by an order in writing, confirm the attachment of the
property. Such attachment shall :

continue during the pendency of proceedings relating to any scheduled offence before a Court;
and

become final after the guilt of the person is proved before the Special Court and order of such
Court becomes final;

after the confirmation of provisional order of attachment, the Director or any other officer
authorised by him in this behalf shall forthwith take the possession of the attached property.

Essentially, once the provisional attachment is confirmed, the final fate of the property depends
on the decision of the Special Court (trying the offence under the PMLA). If the offence under
PMLA stands proved, the Special Court shall order confiscation of the property to the Central
Government. If the Special Court reaches the conclusion that the offence has not taken place, it
shall order release of such property to the person entitled to receive it.

Appeal against confirmation of Attachment

Decisions of the adjudicating authority of first instance can be appealed to the Appellate Tribunal
created under the Act.

Adjudicating Authority and Special Court - Relative scope

It is to be noted that the Adjudicating Authority under this section is concerned with questions of
continuation of attachment and/or retention of property involved in money laundering and not
the trial of offence of money laundering or the scheduled offence, which function falls for a
judicial trial by the Special Court.

Procedure before the Adjudicating authority

The Adjudicating Authority has been given vast powers of discovery, inspection, compelling
production of records as per S.11 of the Act. Section 11 spells out the powers of the Adjudicating
Authority in discovery of facts, Section 50 does so in respect of a Director.

Needless to state, being a quasi judicial authority, both of them have to conform to the principles
of Natural Justice.

As per established principles, following duties are imposed on quasi judicial authorities :- (i) A
quasi-judicial authority ought not to make any decision adverse to a party without affording an
opportunity of meeting the allegations made against him; (ii) The party whose rights are to be
affected should be provided with the information upon which the action is raised and the affected
party should have reasonable notice of the case which he has to meet/face. Of course, an
opportunity is to be provided to the affected party which must be real, reasonable and substantial
too; (iii) The affected party should have the opportunity of letting in/adducing evidence which he
relies upon.

9A. Whether an accused can be called upon to disclose documents and give statements, or can he
exercise the right to silence?

Section 11(2) & S.50(3) of the PMLA makes it mandatory for a person so summoned by the
adjudicating authority to attend in person and bound to disclose documents as may be required,
and answer such questions as are put and for the purposes of these sections, the adjudicating
authority is considered a 'court' and proceedings 'judicial proceedings'.

Moreover, Section 50(1) prescribes taking of affidavits on oath with respect to discovery of facts.
On a plain reading, any person will include an accused person too. Now, whether the accused
can be compelled to disclose documents and disclose facts is a serious question as it makes
serious inroads into the constitutional right of silence of the accused and protection from self
incrimination, as guaranteed under Article 20(3) of the Constitution. However, the law as it
stands makes the statement recorded before the Investigating officer under PMLA admissible in
evidence before the Court.7 (This, it may be noted, is in stark contrast to any other criminal
prosecution where statements given to Police during investigation are not admissible in evidence
during trial).

10. POWERS OF THE ENFORCEMENT DIRECTORATE RELATING TO SEARCH,

SEIZURE AND ARREST.

10.1 Search of premises

Section 17 gives wide powers of search and seizure to the investigating agency. If the
investigating agency has reason to believe (and such belief should be recorded in writing) the
commission of offence under the PMLA and possession of proceeds of crime, it can enter and
seize property/records etc, make an inventory of the same. The seizure memo is required to be
signed by two independent witnesses.

Whereas this section provides for search of premises, Section 18 provides for search of an
individual.

10.2 Search of person

If the investigating authority has a reason to believe that a person has secreted about his
possession, ownership or control, proceeds of crime, in that case the person can be searched.
Before the search of a person, as per his wish, the authority shall take the said person before a
Gazetted officer superior in rank to the authority or a Magistrate within 24 hours excluding the
time of journey. This is the safeguard laid down in S. 18(4) of the PMLA, however, strangely
there is no corresponding obligation on the investigating agency to inform the person about to be
searched of this valuable right. Something akin to a Miranda warning will be apposite here.

The property seized has to be forwarded to the adjudicating authority for further orders.
10.3 Arrest

The offence is cognizable which means arrest can be made without a warrant.8 Section 19 gives
the authority power to arrest. Standard safeguards relating to arrest apply. Every person arrested
has to be produced before the Magistrate within 24 hours (excluding time of journey). The
provision also mandates that such arresting official has to forward a copy of such arrest memo
with the material in his possession to the adjudicating authority in a sealed envelop as per the
procedure prescribed.

Apart from these, the investigating officer may summon and record the statements of persons
concerned (S.50 of PMLA)

11. RIGHT TO BAIL

Section 45 of the PMLA makes the offence of money laundering non-bailable, which means that
a person arrested is not entitled to bail as a matter of right, and bail becomes a matter of
discretion for the court. If the predicate offence provides for punishment more than 3 years, then
there is an embargo on release on bail, unless either the offence concerns a child, woman, sick or
infirm; if not, then bail can only be granted after hearing the Prosecutor and only after the court
comes to the conclusion that "there are reasonable grounds for believing that he is not guilty of
such an offence and that he is not likely to commit any offence while on bail". Now this is an
extremely tall order, especially having regard to the fact that the matter is usually at a
preliminary stage when the question of bail is being decided. For a court to record a finding, at
that stage, that there are no reasonable grounds for believing commission of the offence is an
unnaturally high threshold. Usually the prosecution will prepare the case in such a way so that it
contains the basic allegations and there is a very less likelihood of it being thrown out at the very
outset. Once that is done, the court, at the stage of bail, will normally not be in a position to
return a finding of non-guilt in favour of the accused.

This makes serious inroads into the right & presumption of innocence in favour of the accused.
An accused is presumed to be innocent till his guilt is proved beyond reasonable doubts. Pre-trial
incarceration is frowned upon by law, as it carries a substantial punitive content and has a
stigmatic effect. Such incarceration is not only a denial of 'due process' but prejudices the
accused in the preparation of defence of his case.
Secondly, if in a case, the court releases the accused on bail, in view of the above findings and at
the same time frames charges against him and takes the matter to trial, would not the two
findings be mutually destructive of each other. These are some of the major anomalies with this
provision and a serious constitutional challenge can be mounted on this provision on the above
grounds.

12. CAN A COMPANY AND ITS DIRECTORS/MANAGERS/SECRETARIES BE

ACCUSED OF OFFENCE UNDER PMLA ?

Section 70 of PMLA deals with offences by Companies. It states that where a person committing
a contravention of any of the provisions of this Act or of any Rule, Direction or Order made
there under is a Company (company" means a body-corporate and includes a firm or other
association of individuals), in that case: every person who, at the time the contravention was
committed, was in charge of, and was responsible to the company, for the conduct of the
business of the company as well as the company, shall be deemed to be guilty of the
contravention and shall also be liable to be proceeded against and punished under PMLA. This is
an instance of what is known as 'Vicarious Liability' where liability for the acts of the company
is also attributed on the individuals heading responsible positions in the company on the premise
of them being the alter egos/nerve-centers of the company.

The possible defence and exception to this is for the individual to argue and prove that the
contravention took place without his knowledge/despite all due diligence.

S.70(2) further provides that if the contravention has took place with the consent or connivance
of, or is attributable to any neglect on the part of any Director, Manager, Secretary or other
Officer of any Company, such Director, Manager, Secretary or other Officer shall also be
deemed to be guilty of the contravention and shall be liable to be proceeded against and punished
accordingly.

13. OBLIGATIONS OF BANKING COMPANIES, FINANCIAL INSTITUTIONS AND

INTERMEDIARIES

Under Section 12 of PMLA, there is a mandate on all Banking Companies, Financial Institutions
and Intermediaries to maintain records of all transactions, including information relating to
transactions for a period of 5 years, in such manner as to enable the investigating agency/Court
to reconstruct individual transactions and find out criminality. The aforesaid agencies are
required furnish to the concerned Authorities under PMLA, all information relating to such
transactions, whether attempted or executed; the nature and value of such transactions; verify the
identity of its clients and the beneficial owner, if any; and maintain record of documents
evidencing identity of its clients and beneficial owners as well as account files and business
correspondence relating to its clients.

14. TRIAL OF PMLA OFFENCE AND SCHEDULED OFFENCE

Since the offence of Money laundering is inextricably connected with the scheduled offence,
2013 amendments to the PMLA provide that the trial for the predicate offence as well as offence
punishable under Section 4 shall be conducted by the Special Court. If a Court which has taken
cognizance of the scheduled offence is other than the Special Court (which has taken the
cognizance of the complaint of the offence of money laundering under sub-clause (b), it shall, on
an application by the authority authorised to file a complaint under this Act, commit the case
relating to the scheduled offence to the Special Court and the Special Court shall, on receipt of
such case proceed to deal with it from the stage at which it was committed. 9 However, this by
itself should not be construed to mean a joinder or clubbing of trial. The simultaneous trial in
both the cases by the same court is an expedient to reduce delays. Needless to state, both the
cases are independently tried and decided on the basis of evidence in each case. The trial of
scheduled offence and PMLA offence is to be conducted by the same court - only for the sake of
expediency.

The interconnectedness of PMLA and 'scheduled offence'

It would be a truism to say that the offence of Money Laundering is inextricably linked with the
scheduled offence and, logically, an exoneration in the latter should, by itself, lead to an
acquittal/discharge for the offence of money laundering too. This view seems not only just and
legal but also deserves to be adopted for its eminent common-sense, for if there is no scheduled
offence, there cannot be any 'proceeds of crime' either, as the 'crime' in the phrase 'proceeds of
crime' is nothing but the scheduled offence. In other words, the Special Court trying the PMLA
case cannot conclude, without the scheduled offence being proved, that some property associated
with that offence is tainted as 'proceeds of 'crime. For something to be 'proceeds of crime' there
has to be a crime in the first place. Any other view would make the two judgments mutually
inconsistent, absurd and contradictory. Therefore, an acquittal/discharge in the
predicate/scheduled offence should ipso facto lead to exoneration in the PMLA offence too.
Infact, since it is the same Court which tries both the scheduled offence and the PMLA case
(arising out of the scheduled offence), a discharge/acquittal in the scheduled offence itself leads
to a discharge/acquittal for the PMLA offence too. A conclusive decision by the Hon'ble
Supreme Court is required on the matter so as to settle the issue.

It may be noted that this provision cannot be construed to mean that the Enforcement Directorate
(the investigating body under the PMLA) can investigate into the scheduled offences also.
Investigation for each of the offences is to be done by agency(agencies) authorised under the
respective acts. Investigation by an agency other than ED for an offence under PMLA may open
the entire investigation (and its result) to challenge.

15. EVIDENCE, PRESUMPTIONS AND BURDEN OF PROOF

Keeping in view the difficulty of investigation in complex cases like money laundering, PMLA
makes a departure from the standard rule of presumption of innocence and raises certain
presumptions. This is an application of the 'doctrine of reverse burden'. Such provisions, needless
to say, make the defence of a PMLA case quite challenging.

15.1 Presumption of property being tainted property

Section 24 of the PMLA casts the burden of proving that (alleged) proceeds of crime are not
involved in Money Laundering on the Accused. This prima facie appears harsh, but on a deeper
scrutiny it seems that this section will not relieve the prosecution of its responsibility of making a
specific allegation that the monies that are allegedly being laundered are earned by committing a
particular schedule offence or offences under the PMLA and are, therefore, proceeds of crime.
The section cannot be read so as to obviate the requirement for the prosecution to prove these
foundational facts. Any other view shall seriously undermine the fairness of the process, as one
has to keep in mind that negative proof (proof of innocence, as opposed to proof of commission),
by its very nature, is extremely difficult to be established. It is always easier to prove a positive,
than a negative. The language of Section 24 (a) demonstrates that a person should be 'charged'
for an offence under Section 3, in order for the presumption to follow. Charge has to be read to
mean a specific charge and not a vague and omnibus allegation. However, once that charge is
made, the accused will have justify that the property is not tainted with vice. This can be done by
making it reasonably probable that the property is legitimately acquired by lawful means. He can
disclose his sources of Income, Earnings or Assets, out of which or means by which he has
acquired the property attached. As per fairly established principles of standard of proof, the
accused does not have to prove all this to the hilt or beyond all reasonable doubt, but on a
standard of preponderance of probability, that is to say, that it is more probable that the property
is above board, than not.
15.2 Presumption in inter-connected transactions

Where proceeds of crime are layered through plural transactions, the intent to camouflage the
source of the property as a derivative of criminality renders it difficult to identify the succeeding
transactions as relatable to the initial proceeds of crime. It is for this reason and to effectuate the
purposes of the Act that Section 23 incorporates the presumption that where money-laundering
involves two or more connected transactions and one or more such transactions is/are proved to
be involved in money-laundering, then for the purposes of adjudication or confiscation under
Section 8, it shall, unless otherwise proved to the satisfaction of the adjudicating authority, be
presumed that the remaining transactions form part of such interconnected transactions i.e.,
involved in money-laundering as well. (Section 23 of PMLA).

15.3 Presumption in cases of records/property found in possession of person

A presumption is raised that property/records/documents found, seized from the possession or

control of a person actually belong to such person (from whom they are seized) and the contents
of such records are true. Further, there is also a presumption as to the records being in the
handwriting/signatures of the person from whose possession they are seized. Due to the
operation of the presumption, the onus, once again, is on accused to rebut the same. (Section 22
of PMLA)

16. PUNISHMENT UNDER PMLA

Section 4 of PMLA prescribes the punishment for Money-Laundering as under:

Rigorous Imprisonment for a term

which shall not be less than 3 years, but

which may extend to 7 years/10 years, and

shall also be liable to fine.

A notable feature is that there is no upper limit on the fine that may be imposed for an offence
under the PMLA. The obvious intent is for the fine imposed to be commensurate to the nature
and extent of offence committed and the money laundered.
17. CONCLUSION

Money laundering poses a serious threat not only to the financial systems of countries, but also
to their integrity and sovereignty. To obviate such threats, certain legislations including PMLA,
have been enacted. The above analysis of the PMLA manifests that the Act, although extremely
well intentioned, compromises on the fundamental principles of natural justice, fair trial and due-
process. In its enthusiasm to fight black money, the Act transgresses upon basic rights and
liberties. Some of the provisions under the Act are legally and jurisprudentially unsound and
tenuous and may not pass constitutional muster. Since the Act is fairly new, it is expected that
the Hon'ble Courts would interpret/strike/read-down these provisions in such a manner, so as to
make the Act less prone to arbitrary exercise of power and ensure that its operation is
constitutionally compatible.

Footnotes

1. http://www.investopedia.com/terms/m/moneylaundering.asp

2. FAQ on Money Laundering Act, Enforcement Directorate, Government of India

http://www.enforcementdirectorate.gov.in/faqs_on_pmla.pdf

3. Chahagan Chandrakant Bhujbal v. Union of India, 2016 SCC OnLine Bom 938.

4. Section 44 of the PMLA.

5. If the proceeds of crime involved in money-laundering relates to any offence specified under
paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the
words "which may extend to seven years", the words "which may extend to ten years" had been
substituted. Section 4 - proviso.
6. M/s. Mahanivesh Oils & Foods Pvt. Ltd. v. Directorate of Enforcement - 2016 SCC OnLine
Del 475

7. Section 50(2) and 50(3) of the PMLA. The person summoned is bound to attend and state the
truth upon any subject respecting which they are examined or make statements and produce such
documents as may be required. These proceedings are deemed to be judicial proceeding within
the meaning of Section 193 and 228 of the IPC. The proceedings relating to perjury/contempt of
court apply with respect to these proceedings.

8. Chahagan Chandrakant Bhujbal v. Union of India, 2016 SCC OnLine Bom 938.

9. Section 44 of the PMLA.