Day 16: Prevention of Money Laundering Act

Challenges to the Prevention of Money Laundering Act

On February 23rd 2022, Justices A. M. Khanwilkar, Dinesh Maheshwari and C. T. Ravikumar continued to hear challenges to various provisions of the Prevention of Money Laundering Act, 2002.

The Bench has spent all month hearing the petitioners argue that the provisions for bail, search and seizure and summons give the Enforcement Directorate unchecked investigative powers to the detriment of the rights of the accused. More than a hundred petitioners, most of whom are accused under the PMLA, have challenged the Act in this case. The Union government’s defense of the Act was heard today.

Yesterday the Court heard Mr. Abhimanyu Bhandari on behalf of an intervenor. He argued that against the wide definition of money laundering in S 3 of the Act. The Court will continue to hear the petitioners today.

Solicitor General Mr. Tushar Mehta took the Court through the evolution of the legal regime on money laundering. He narrated the story of Al Capone, who used laundromats in the United States, where money could be deposited without detection or accountability making it difficult for the state to track. Hence the term ‘laundering’ of money. 

He then went on to explain the validity of the 2002 Act arises from global events that led to money laundering being recognised as a menace. First, in 1981, the concept of ‘proceeds of crime’ was identified. This referred to gains from criminal activities. Later, in England, proceeds from drug trafficking could be confiscated by Courts. In 1988, the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances created a centralised, global approach to tackle money laundering arising from drug trafficking. Later, in the UN Convention against Transnational Organised Crime of 2000, money laundering was specifically identified as an offence. These international conventions require participating countries to use initiatives under the conventions as guidelines for their domestic laws.