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Prevention of Money Laundering Act (PMLA) UPSC NOTE

 

  • There was widespread realisation that the black money generated through the flourishing drug trade and integrated into the legitimate economy was likely to destabilise the world economy and endanger the integrity and sovereignty of nations.

  • The United Nations took serious note of this, and in 1988, held the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. 

  • All countries were urged to take urgent steps to prevent the laundering of the proceeds of drug crimes and other connected activities. 

  • Subsequent to this, seven major industrial nations held a summit in Paris (July 1989) and established the Financial Action Task Force (FATF) to examine the problem of money laundering and recommend measures to tackle this menace.

  •  Thereafter, in 1990, the United Nations General Assembly adopted a resolution, namely, the Political Declaration and Global Programme of Action which called upon all member-countries to enact suitable pieces of legislation to effectively prevent the laundering of drug money.

  • In pursuance of this resolution of the UN General Assembly, the Government of India used the recommendations of the FATF to formulate a legislation to prevent drug money laundering. 

  • As drug trafficking is a trans-border operation, the UN held a special session on June 10, 1998 on the theme ‘Countering World Drug Problem Together’ and made another declaration on the urgent need to combat money laundering. 

  • Accordingly, the Indian Parliament enacted the Prevention of Money Laundering Act in 2002. But it was brought into force in 2005.


  • The UN resolutions, and the FATF recommendations are all focused on the prevention of money from the laundering of drugs. However, the PMLA of India acquired a different character through amendments from time to time

  • The law on money laundering revolves around the “crime proceeds” which are laundered. Not only the persons involved directly in the crime and the generation of the crime proceeds but also persons who have nothing to do with the crime but who have some involvement at a later stage in the laundering process are also guilty under this law.

  • But the most serious aspect of the PMLA is that it includes a large number of offences in the schedule which have nothing to do with the original purpose of this law — namely, combating the laundering of drug money.

The PMLA’s enactment

  • PMLA was enacted by India’s Parliament under Article 253 which empowers it to make laws for implementing the international conventions. 

  • This Article indicates that a law Parliament makes to implement any decision of an international body will be confined to the subject matter of that decision. 

  • Item 13 in the Union list of the Seventh Schedule of the Constitution is specific on this point. 

  • Thus, the law on money laundering enacted under Article 253 and Item 13 of the Union list in the context of the UN resolution referred to above can only be on drug money. 

  • Various amendments made in this Act at different times bloated the schedule which now contains such offences which are either ordinary offences listed in the IPC or for which there are special laws in force. 

The bail provision

  • The bail provision of the PMLA Act (Section 45) is invested with a lot of political significance in present day India. 

  • It was held unconstitutional by a two-judge Bench of the Supreme Court of India in Nikesh Tarachand Shah vs Union of India (2018) as violating Article 14 and Article 21. 

  • However, Parliament, with great eagerness, restored this provision with certain amendments which was upheld by a three-judge Bench headed by Justice A.M. Khanwilkar in Vijay Madanlal Choudhary vs Union of India (2022)

  • The top court held that this provision is reasonable and has direct nexus with the purposes and objects of the PMLA Act.

  • A fundamental principle of Anglo-Saxon jurisprudence is that a person is presumed innocent until proven guilty. 

  • PMLA turns this principle upside down. An accused will be denied bail by the entire hierarchy of courts because the bail provision contained in section 45 of the PMLA says that a judge can give bail only when he is satisfied that the accused is innocent.


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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Prevention of Money Laundering Act (PMLA) UPSC NOTE
Prevention of Money Laundering Act (PMLA) UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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