Money Laundering Offence Attracted By Mere Possession Of Crime Proceeds ; Projection As Untainted Property Not Required : SC Interprets "And" In Sec 3 PMLA As "Or"

By interpreting "and" in Section 3 of the Prevention of Money Laundering Act 2002 (PMLA) as "or", the Supreme Court held that mere possession or concealment of the proceeds of the crime is sufficient for the offence of money laundering and that it need not be projected as an untainted property.The Court on Wednesday held that Section 3 of Prevention of Money Laundering Act, 2002 (PMLA) has a "wider reach and captures every 'process and activity', direct or indirect, in dealing with the proceeds of crime and not limited to the happening of the final act of integration of tainted property in the formal economy to constitute an act of money-laundering".In the judgment passed by a Bench comprising Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar in a batch of petitions concerned with challenges to interpretation of the various provisions of the PMLA, it was clarified that the word "and" preceded by the expression "projecting or claiming" in the main provision of Section 3 ought to be construed as "or" so that the projection of the proceeds of crime as untainted property is considered as an offence on its own. "Section 3 - Offence of money laundering - 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 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." In this regard the Bench rejected the submission made by the petitioners that offence of money-laundering is limited to only the projection of proceeds of crime as legitimate property.The Court also rejected the argument of the petitioners that if this interpretation is adopted there will be no distinction between the scheduled offence and money laundering offence."We may also note that argument that removing the necessity of projection from the definition will render the predicate offence and money-laundering indistinguishable. This, in our view, is ill founded and fallacious. This plea cannot hold water for the simple reason that the scheduled offences in the 2002 Act as it stands (amended upto date) are independent criminal acts. It is only when money is generated as a result of such acts that the 2002 Act steps in as soon as proceeds of crime are involved in any process or activity. Dealing with such proceeds of crime can be in any form —being process or activity. Thus, even assisting in the process or activity is a part of the crime of money-laundering. We must keep in mind that for being liable to suffer legal consequences of ones action of indulging in the process or activity, is sufficient and not only upon projection of the ill-gotten money as untainted money. Many members of a crime syndicate could then simply keep the money with them for years to come, the hands of the law in such a situation cannot be bound and stopped from proceeding against such person, if information of such illegitimate monies is revealed even from an unknown source", the Court said.ED can investigate money laundering offence only if FIR for scheduled offence has been registered; acquittal in schedule offence will close money laundering case as well The Bench further held that the authorities under the PMLA cannot prosecute on assumption that a scheduled offence has been committed, unless it is registered with the jurisdictional police or pending enquiry or trial. Moreover, it held that once the accused is acquitted or discharged in respect to the scheduled offence or the case is quashed by the competent Court, there can be no offence of money-laundering against them. "If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him." Evolution of the definition of 'money laundering' under Section 3 PMLA International Conventions The origin was traced back to Article 3 of the Vienna Conventions of 1988, which enumerated the offences and sanctions. Thereafter, the Bench referred to Articles 2 and 6 of the Palermo Convention. Culling out the relevant provisions, it noted that in order to curb money laundering globally, the said Conventions had given a wide interpretation to the concept of money laundering. Acquisition, possession, use, concealment or disguising origin of the tainted money were considered to constitute the offence of money-laundering. Financial Action Task Force (FATF) In 1989, an intergovernmental organization, namely, Financial Action Task Force (FATF) was founded to develop policies to combat money laundering. On 20.06.2003, FATF had made 40 recommendations to ensure...

Money Laundering Offence Attracted By Mere Possession Of Crime Proceeds ; Projection As Untainted Property Not Required : SC Interprets "And" In Sec 3 PMLA As "Or"

Sohini Chowdhury

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