PMLA| May Not Be Possible To Say That "Mere Use" Of Proceeds Of Crime Is Not Money Laundering: Supreme Court Indicates

The Supreme Court on Tuesday indicated that it may not be possible to say that "mere use" of proceeds of crime is not money laundering.Advocate Abhimanyu Bhandari, for one of the petitioners, had sought to differentiate between projecting of proceeds of crime as untainted money and "merely using" of proceeds of crime- "Section 3 of the PMLA Act should be read down to say that mere use or possession of tainted money does not amount to money-laundering. There has to be a projection of this money as untainted and its integration into the economy."He sought to draw the attention of the bench to section 8(5) and 8(6) of the Act to buttress the argument. Section 8(5) says that Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of money-laundering shall stand confiscated to the Central Government. Section 8(6) provides that Where on conclusion of a trial under this Act, the Special Court finds that the offence of money-laundering has not taken place or the property is not involved in money-laundering, it shall order release of such property to the person entitled to receive it."They say 'property involved in money laundering' and not 'proceeds of crime'", argued Mr. Bhandari.Justice C. T. Ravikumar observed, "When you are purchasing something with the proceeds of crime, you are passing on tainted money to the person you are buying it from. Are you then not projecting it as untainted money?"Justice A. M. Khanwilkar reflected, "You know it is 'proceeds of crime'. Now you want to invest this ill-gotten money in a car. You go and purchase the car, you pay by cash but you disclose in your account that you have paid by cash, and the other party records that cash is received. Therefore, it is integrated into the system, into the regular economy. Your act is complete by the time you go and purchase and obtain the receipt from the seller. The seller does not know it is proceeds of crime but you know and you have used it and shown that this vehicle is purchased from untainted money. Money laundering is complete."Justice Dinesh Maheshwari observed, "The concept of money laundering in our Act is very broad, very wide and not based on one expression alone. Section 3 says that 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. So it encompasses many things, even a person indirectly involved.""If in a given situation, somebody has been harassed or the provision has been wrongly applied, that does not make the provision itself bad and that can be taken care of", added the judge."If mere possession of proceeds of crime is money laundering and if somebody continues to possess it even today, then the biggest example that has been seen historically would be the East India Company. Then property in other countries also would be attached, if mere possession and use of proceeds of crime continues to be money laundering. The balance is found if it is said that if it has been integrated in the economy and projected", concluded Mr. Bhandari.'Money laundering is an act, it is not continuing in that sense. But the colour of proceeds of crime may be a continuing feature. Once after coming into the force of the Act, if you indulge in money laundering, it is an offence'- SCThe bench was hearing Senior Advocate Siddharth Aggarwal, for one of the petitioners, on the following questions of law- (i) Whether prosecution for the offence of money-laundering u/Ss. 3/4 of the PMLA is permissible if the commission of the scheduled offences and the generation of proceeds of crime took placea. prior to the coming into force of the PMLA; or,b. prior to the offence being made a part of the Schedule to the PMLA?(ii) Whether the offence under Sections 3/4 of the PMLA was a continuing offence,and impact thereof?(iii) In the above context, what is the impact of insertion of Clause (ii) of theExplanation to Section 3 of the PMLA [by way of an Amendment in 2019 (w.e.f. 01.08.2019)], insofar as it makes "the process or activity connected with proceeds of crime" a "continuing activity"? By way of the Finance Act 2019, Explanation (ii) was introduced to section 3 clarifying that the "process or activity connected with proceeds of crime is a continuing activity" and it continues till a person enjoys the proceeds as specified in the terms of the clause.Mr. Aggarwal had submitted, "The offence of money laundering is defined under Section 3, PMLA. The gravamen of the offence of money laundering is, and concerns, 'proceeds of crime'. Various activities are made punishable, but ...

PMLA| May Not Be Possible To Say That "Mere Use" Of Proceeds Of Crime Is Not Money Laundering: Supreme Court Indicates

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