Tracing the Act of Money Laundering in India

A major part of crime committed in any country of the world is with the motive of making money. A number of organised crime syndicates manage to accomplish this, however the money thus obtained can incriminate the possessor through tracking the means. To tackle this, criminal organisations started the process of . However, this illegal practice came into the purview of law only in the 1980s in the United States. It gained popularity in India in the 90s when a lot of big names got caught in the net of .

INTRODUCTION

Money laundering is an illegitimate process, wherein a person converts the money which he has obtained through illegal means to make it seem like it has originated from a legal source. It is a layered process first designed to bring into use the illegal money obtained by the mafia. The process of cleaning money came to be known as money laundering is said to have originated from the American mafia, who owned laundromats all over and used it as a legal front for the money they earned through extortion, gambling, smuggling, dealing drugs and other criminal activities. The money secured is known to have funded many terrorist organisations.

Over the years, plenty of creative ways to dispose off the dirty money and obtain clean cash have been discovered by launderers to obstruct the path of law. One of the most popular one being Casinos. A launderer can walk into a casino with illicit money and buy chips with, after which he deals for a small amount of time ad cashes the chips immediately thereafter. When recovering such money the individual asks for a check or at least a receipt to show that the money has been obtained through legal means.

Tracing the Act of Money Laundering

Another method is to invest the wrongful money in a cash intensive business, wherein most of the revenue is earned in cash. Such businesses often deposit huge amounts of cash into banks. Such companies can openly operate and deposit the lawlessly procured cash along with the revenue earned by the business legitimately without arousing suspicion. Service industry is the most suited for this method with businesses including salons, car washes, parking lots, strip clubs, restaurants and bars.

A more layered way to make the process more elaborate and harder to track is to break down the cash in small units and physically deposit it in domestic banks and other financial institutions to ward off any suspicions of laundering. After which the funds are channeled away from their original source by converting them into stocks, bonds, or other negotiable instruments. As a final move, the launderer reintroduces the money into the economy by the way of investing in companies, purchasing property or other luxury goods. Thus having successfully converted the origin of the cash.

INDIAN LEGAL PROTECTION

India in its present day scenario of rapidly growing economy is vulnerable to money laundering. In the Anti Money Laundering Basel Index of 2013, India ranked 70th out of 140 countries facing the heightened risk of money laundering and terrorist financing. To combat the rise in money laundering in the nation, the Prevention of Money Laundering Act of 2002 was enacted.

The Act defined money laundering as, ‘Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected 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.’

Whoever commits a crime in this respect shall be confined to a rigorous punishment which shall not be less than 3 years imprisonment which can extend upto 7 years. The act also enables the authorities to seal and confiscate properties that seems to be earned through these means. The assets thus frozen are vested with the central government, granted that there is no other person with vested interest in the property. The legislation further safeguards the authority reporting the crime in good faith from imprisonment.

When the designated authority under this Act has reason to believe that any act has been committed which constitutes the offence of money laundering, they are empowered to break into and enter the property, seize any record found on the property, make identification marks on such records and make an inventory of the records found. They are also encouraged to examine on oath any person who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act

RECENT INCIDENTS

One of the more famous cases of large scale money laundering in the country is choppergate. the Indian helicopter bribery scandal refers to a multimillion-dollar corruption case in India, wherein money was paid to middlemen and Indian officials in 2006 and 2007 to purchase helicopters for high level politicians. As per the , this amounted to ₹2.5 billion (US$36 million), transferred through bank accounts in the UK and UAE. Enforcement Directorate investigated money laundering  allegations. In March 2015, the traced and identified the properties worth around ₹1.12 crore owned by Christian Michel and issued a provisional attachment order. The claimed that Michel bought a flat in south Delhi’s Safdarjung Conclave in the name of media firm Media Exim using the bribe money. He was also reportedly in possession of a luxury car and a Fixed Deposit of ₹54 lakh. In September 2015, the adjudicating authority confirmed the attachment of properties and allowed the agency to retain the properties. In September 2015, the ED attached assets worth about ₹7 crore alleged to be in the name of family members of ex-IAF Chief S. P. Tyagi. The CBI and the ED have sent letters rogatory to as many as eight countries including Italy, Tunisia, Mauritius, the UAE, the UK, Switzerland, Singapore and the British Virgin Islands.

In another instance,The Enforcement Directorate, in June, questioned the former Bank CEO , her husband Deepak Kochhar and Videocon promoter Venugopal Dhoot in connection with a money laundering case involving their business concern. The ED registered a criminal case under the earlier this year against Chanda Kochhar, Deepak Kochhar, Dhoot and others to probe alleged irregularities and corrupt practices in sanctioning Rs.1,875-crore of loans by Bank to the Videocon corporate group.The ED, sources said, is also probing at least two other instances of loans given by Bank (during Chanda Kochhar’s tenure) to Gujarat-based pharmaceutical firm Sterling Biotech and to Bhushan Steel group, both of which are under its probe for alleged money laundering charges.

Earlier in the month of July 2019, in cognisance of 16 FIRs filed against the Amrapali Real Estate Group, the Enforcement Directorate filed a criminal case of money laundering against the company and its promoters. The company has allegedly failed to give 42,000 homebuyers, the possession of their flats. On 16th of July, the Supreme Court directed the ED to investigate money laundering by directors and officials of the Amrapali Group. The court also cancelled the lease granted by Noida and Greater Noida authorities to all projects of the realty group. It directed the Centre and the state governments to take appropriate action against builders who have not delivered projects on time.

Tracing the Act of Money Laundering

JUDICIAL PRECEDENTS

In PAREENA SWARUP V. UNION OF INDIA, a writ petition was filed under Article 32 of the Constitution, seeking to declare various sections of the Prevention of Money Laundering Act dealing with adjudicating authorities, composition powers, establishment  and composition of appellate tribunal, as ultra vires of fundamental rights of equality and life. The Supreme Court said that it is necessary to draw a line which the executive may not cross in their misguided desire to take over bit by bit and judicial functions and powers of the State exercised by the duly constituted Courts. While creating new avenue of judicial forums, it is the duty of the Government to see that they are not in breach of basic constitutional scheme of separation of powers and independence of the judicial function. The Court agreed that the provisions of Prevention of the Money Laundering Act are so provided that there may not be independent judiciary to decide the cases under the Act but the Members and the Chairperson to be selected by the Selection Committee headed by Revenue Secretary. Thus, the Court found merit in the arguments of the Petitioner and ordered to implement amended rules in the Act which can be seen by way of amendment of 2008 in the Act.

In B. RAMA RAJU, s/o B. RAMALINGA RAJU vs. UNION OF INDIA, it was held that Parliament has authority to legislate and provide for forfeiture of proceeds of crime which is a produce of specified criminality acquired prior to enactment of Act as well. It has also authority to recognise degrees of harm such conduct has on the fabric of society and to determine appropriate remedy. Thus provisions of second proviso to Section 5 were applicable to property acquired even prior to coming into force of this provision and even so were not invalid for retrospective penalization and considering object and scheme of the Act, the provisions of Section 8 could not be held invalid for vagueness; incoherence as to onus and standard of proof; ambiguity as regards criteria for determination of nexus between property targeted for attachment/confirmation and offence of money-laundering; or for exclusion of mens rea/ knowledge of criminality in acquisition of such property.

In conclusion, owing to the ignorance surrounding the crime of money laundering, many have claimed it to be a victimless crime. To tackle this, there has to be widespread awareness of the ill effects and danger of the crime. Combating this offence can often be difficult as the launderers come up with creative ways to wash money. One of the effective ways of dealing with this crime would be to decentralise the law and hand more power to the states so they can widen the reach of the provisions. Furthermore, the provision of financial confidentiality in other countries is an issue. The states are unwilling in compromising with this confidentiality. There is a need to draw a line between such financial confidentiality rules and these financial institutions becoming money laundering havens.

As it can be seen that money laundering involves activities that are international in nature, therefore, to make a heavy impact it is necessary that all countries should enact strict and as far as possible, similar laws so that the money launderers will have no place to target in order to launder their proceeds of crime by way of weakness of jurisdiction.Thus, there is a need to enlist common predicate offences to solve the problem internationally particularly keeping in mind the border-crossing characteristic of the offence of money laundering.

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