Money laundering is the process of making substantial sums of money obtained through criminal activities such as drug trafficking or terrorist financing appear to have originated from a legitimate source.

Illegal arms sales, smuggling, drug trafficking, prostitution rings, insider trading, bribery, and computer fraud schemes all generate substantial revenues.

As a result, it offers an incentive for money launderers to use money laundering to "legitimise" ill-gotten gains.

The money created is referred to as "dirty money," and money laundering is the act of converting "dirty money" into "legal" money.

Usage in Ordinary crimes:

PMLA has been drawn into the investigation of even "ordinary" crimes, and assets belonging to legitimate victims have been attached.

The PMLA was implemented in response to India's global commitment to combat money laundering (including the Vienna Convention). Instead of being "cribbed, cabined, and confined," rights have been "cribbed, cabined, and confined."

The PMLA was enacted to combat the threat of money laundering, particularly as it related to the narcotics trade.

Currently, the offences included in the Act's schedule are far too broad, and in many cases have nothing to do with narcotics or organised crime.

Lack of Transparency and Accountability:

Even the Enforcement Case Information Report (ECIR), which is akin to the FIR, is deemed a "internal document" and is not provided to the accused.

The ED regards itself as an outlier to criminal procedural law principles and practises, deciding to register an ECIR on its own whims and fancies on its own file.

There's also some ambiguity about how the ED chooses which cases to investigate. The commencement of an inquiry by the ED has ramifications that have the ability to limit an individual's liberty.

The Prevention of Money Laundering Act, 2002 was adopted by the Indian Parliament to prohibit money laundering and to provide for the confiscation of property obtained via money laundering.

The Proceeds of Crime Act (PMLA) defines money laundering and provides for the freezing, seizure, and confiscation of criminal proceeds.

In 2005, 2009, 2012, and 2019, the statute was updated. The Money Laundering Prevention and Mitigation Act (Amendment) Act of 2012 broadened the definition of money laundering to include behaviours such as concealment, acquisition, possession, and use of proceeds of crime.

Features:

The PMLA has united the RBI, SEBI, and IRDA under its umbrella, making its laws applicable to all financial institutions, banks, mutual funds, insurance firms, and their financial intermediaries.

The following are the penalties that may be imposed under the Act:

The Act stipulates that anyone convicted of money laundering faces a sentence of three to seven years in prison, with the maximum sentence increasing to ten years if the proceeds of crime are related to any offence listed in paragraph 2 of Part A of the Schedule (Offenses under the Narcotic Drugs and Psychotropic Substance Act, 1985).

Attachment of tainted property:

Appropriate authorities chosen by the Indian government can temporarily seize property suspected of being "proceeds of crime" for a period of 180 days.

An independent Adjudicating Authority (the authority nominated by the federal government through a notification to exercise jurisdiction, powers, and authority conferred under PMLA) must confirm such an order. It determines whether any of the attached or confiscated property is being used to launder money.

When money laundering involves two or more interconnected transactions, and one or more of those transactions is or is proven to be involved in money laundering, the remaining transactions are deemed to be part of those interconnected transactions for the purposes of adjudication or confiscation.

A person accused of money laundering must show that the supposed proceeds of crime are in fact legal property.

The Government of India appoints an Appellate Tribunal.

It has the authority to consider appeals against the Adjudicating Authority's and any other authority's orders made under the Act. The tribunal's orders can be challenged in the appropriate High Court (for that jurisdiction) and then in the Supreme Court.

The most significant changes are the deletion of provisos in Sections 17 (Search and Seizure) and 18 (Search of Persons) sub-sections (1), which eliminate the need for a FIR or charge sheet from other agencies authorised to investigate the offences mentioned in the PMLA schedule.

The addition of an explanation in Section 44 is another significant alteration. "While dealing with the offence under this Act, during investigation, inquiry, or trial under this Act, the Special Court's jurisdiction shall not be dependent on any orders passed in respect of the scheduled offence, and the trial of both sets of offences by the same court shall not be construed as joint trial.”

The definition of "proceeds of crime" under Section 2 has been broadened to include properties that "may directly or indirectly be derived or obtained as a result of any criminal conduct related to the scheduled offence."

All PMLA violations will be cognizable and non-bailable, according to a new explanation added to Section 45. As a result, ED officers have the authority to arrest an accused without a warrant if specific requirements are met.