UPSC Daily Editorial Analysis | Narrow View – PMLA | 29th July 2022

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What is the article about:

  • The Supreme Court’s recent verdict upheld all the controversial provisions of the Prevention of Money Laundering Act (PMLA).

Relevance:

  • GS2: Role of Judiciary
  • GS3: Security – Money Laundering

What is the issue:

  • Certain provisions of PMLA are controversial according to the opposition. These are:
    1. The procedure followed by ED officers
    2. The scheduled list of offences
    3. Lack of Judicial oversight in an investigation

Analysis:

  • Undergirding every aspect of its analysis is a belief that India’s commitment to the international community to strengthening the domestic legal framework for combating money laundering is so inviolable that possible violation of fundamental rights can be downplayed.
  • The judgement repeatedly invokes the “international commitment” behind Parliament’s enactment of the law to curb the menace of laundering of proceeds of crime which, it underscores, has transnational consequences such as adversely impacting financial systems and even the sovereignty of countries.
  • There is, no doubt, widespread international concern over the malefic effects of organised crime fuelling international narcotics trade and terrorism. Much of these activities are funded by illicit money generated from crime, laundered to look legitimate and funnelled into the financial bloodstream of global and domestic economies.
  • A stringent framework, with opposite departures from the routine standards of criminal procedure, may be justified in some circumstances.

    However, experience suggests that money laundering in the Indian context is linked or is seen as a byproduct of a host of both grave and routine offences that are appended to the Act as a schedule.

  • These ‘scheduled’ or ‘predicate’ offences ought to be ideally limited to grave offences such as terrorism, narcotics smuggling, corruption and serious forms of evasion of taxes and duties. However, in practice, the list contains offences such as fraud, forgery, cheating, kidnapping and even copyright and trademark infringements.
    Nor was it impressed by the argument that the search and seizure provisions lack judicial oversight and are exclusively driven by ED officers.
  • Provisions that allow prosecution for money laundering even without the scheduled offence being established and amendments deleting safeguards have passed muster with the Bench, solely on the ground that these were for removing lacunae pointed out by international evaluators of the efficacy of the law.

Way Forward:

  • A Strict act like PMLA is the need of the hour, but at the same time, it should promote transparency and uphold values enshrined in the Constitution.



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