PREVENTION OF MONEY LAUNDERING ACT (Syllabus: GS Paper 3 – Internal Security)

News-CRUX-10     17th May 2024        

Context: Recently, the Supreme Court decreed that the Enforcement Directorate is barred from directly arresting individuals under the Prevention of Money Laundering Act (PMLA) once a special court acknowledges its complaint, necessitating the agency to seek court custody for such individuals.

Supreme Court Ruling

  • Limitations on ED's Powers: The Supreme Court stated that once cognizance is taken of an offense under Section 4 of the PMLA based on a complaint under Section 44, the Enforcement Directorate (ED) and its officers lack the authority to exercise powers under Section 19 to arrest an accused.
  • Custody Procedure After Appearance: If the accused appears before the special court upon receiving a summons, they need not apply for bail, but the court may direct them to furnish bonds according to Section 88 of the CrPC.
  • Special Court's Decision on Custody: The special court, upon hearing the accused, must provide an order after recording brief reasons. Custody may be permitted only if the court is convinced that custodial interrogation is necessary, even if the accused was not previously arrested under Section 19.
  • Authority for Further Investigation: The ED may arrest a person for further investigation regarding the same offense, even if not previously accused, provided the requirements of Section 19 are met.
  • Issuance of Warrants: If the accused fails to appear, the special court can issue a warrant under Section 70 of the CrPC, starting with a bailable warrant. If service of a bailable warrant is not possible, non-bailable warrants can be pursued.

Important Sections 

  • Section 19 of PMLA: It allows ED officers to arrest an individual "on the basis of material in possession (and) reason to believe (to be recorded in writing) that the person is guilty.
  • Section 44: A Special Court may, upon a complaint made by an authority authorized in this behalf under this Act take cognizance of offense under section 3, without the accused being committed to it for trial.

Prevention of Money Laundering Act (PMLA)

  • About: The Act was enacted in a 2002 response to India’s global commitment (including the Vienna Convention) to combat the menace of money laundering. 
  • Objective: The statement of objects and reasons of the PMLA Bill of 1999 refers to various international conventions and instruments dealing primarily with money laundering related to crimes involving drugs and narcotics.
  • United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988.
  • The Basle Statement of Principles, 1989.
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