Special Public Prosecutor ED Sheds Light on the Civil Side of The Prevention of Money Laundering Act, 2002

In a webinar conducted by Law Colloquy under the aegis of Dr Priya Sepaha on August 14, 2020, Mr Vikas Garg—Special Public Prosecutor, Directorate of Enforcement Admitted Solicitor, Senior Courts of England & Wales—illuminated the audience on the purpose of The Prevention of Money Laundering Act, 2002 (PMLA) and the Trigger Point or break-even point for initiation of the investigation under PMLA. He also cast light on how and when Money Laundering becomes ‘Offence of Money Laundering’ and Attachments, Adjudication Proceedings thereof.

Key Takeaways from the Webinar:

A Special Statue for a Special Intent and Purpose 

Prevention of Money Laundering Act, 2002 was enacted when it was realised, the world over, that money-laundering poses a serious threat not only to the financial systems of the countries but also to their integrity and sovereignty. To obviate such threat, the Act was passed to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering and for matters connected therewith or incidental thereto. 

The key words for which this Act was passed are ‘Obviate such Threat’ for “Prevention of Money Laundering”.

Stages of Crime

For completion of Crime, two important things are required, Mens Rea that is a Guilty Mind; and Actus Reus that is a Physical Act. Mens Rea, within its ambit, includes—Intention, knowledge, motive, recklessness and negligence. Moving deeper into the topic, Mr Garg explained the various stages of Crime as: 

• Intention 
• Preparation
• Attempt
• Commission 

Significance of the Word ‘Threat’

The word 'Threat' used in PMLA, if read with the second stage of Crime i.e. 'Preparation' gives a further meaning to the intent and purpose of Act.

There are many offences in IPC, which are punishable at the stage of 'Preparation'. 

• Section 122 Waging against Govt. of India. 
• Section 126 Committing Depredation on Territories of Power at Peace with the Govt. of India. 
• Section 399 Making Preparation to Commit Dacoity. 

Therefore, PMLA was enacted for obviating any such threat and even at that stage itself, a person is to be punished as per section 4 of the Act for the offence committed under section 3. 

The Statement of Object and Reason

The Statement of Object and Reason categorically suggests that this Act was enacted “when it was realised, the world over, that money-laundering poses a serious threat not only to the financial systems of the countries but also to their integrity and sovereignty”. 

Mt Vikas highlighted that the Act was enacted not only for obviating the threat to Financial Systems of the Countries but also for preventing any such Threat due to money laundering to the integrity and sovereignty of the Country. 

The Trigger Point 

For initiation of the investigation under PMLA, the trigger point or break-even point for investigation under PMLA is not only the scheduled offences as given in the Act, but also an information in relation to any person who

(i) has committed any act which constitute money laundering, or 

(ii) is in possession of any proceeds of crime involved in money laundering, or 

(iii) is in possession of any records relating to money laundering, (or) 

(iv) is in possession of any property related to crime.

Hence, the Trigger is "Receipt of Information" of "any such Threat" with respect to any of the points listed above. (Section 17 (1) (i) to (iv))

How and When Does It Become an Offence of Money Laundering

For the Purposes of understanding how and when the same is Offence of Money Laundering; three stages of Laundering of Money while making it and calling it an offence of money laundering are important: 

1. Placement: The first step in this process is the investment of black money/illegally acquired money in the market. 
2. Layering: The launderer converts the tainted money and projects the same as untainted money. In this process the ownership and source of money is disguised. 
3. Integration: The final stage is when the ‘laundered' property is re-introduced into the legitimate economy or in the other words tainted money is infused back into the financial world as legitimate money. 

Civil Side of PMLA

The investigations conducted under the Act are two fold—Civil and Criminal.

An Investigation conducted for the purposes of collection of evidence is Civil in nature and may amount to Attachment of Properties which are Proceeds of Crime as defined in Section 2 (1) (u) whereas the one that leads to Arrest for being involved in the above three processes of Placement, Layering, and Integration (Sections 3 and 19) or Criminal Prosecution (Section 45) or other legally authorized “coercive steps” (Sections 16 or 17, etc.) pertain to the criminal side of the Act.

It must also be noted that ‘Investigation’ includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence.