IN a matter concerning the validity of the various provisions of the Prevention of Money Laundering Act [PMLA], the Union Government earlier today informed the Supreme Court that a total of 4,700 cases are being investigated by the Directorate of Enforcement [ED] as of now. A total of 981 cases came to be registered by the ED in 2020-21 alone. It added that since 2002 – the year when Parliament enacted the PMLA, only 313 arrests by ED have taken place. In addition, it submitted that of the 33 lakh predicate offences, the ED has taken up only 2,086 cases in the last five years under PMLA.

Details of offences being investigated by ED: 

Financial Year	Number of cases taken up for investigation under PMLA
2015-16	111
2016-17	200
2017-18	148
2018-19	195
2019-20	562
2020-21	981

It also informed the Court that a sum of  Rs. 18,000 crores have been returned to the banks so far in the cases of Vijay Mallya, Nirav Modi and Mehul Choksi.

This information was shared by the Solicitor General [SG] Tushar Mehta before a bench comprising Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar, while defending the validity of PMLA’s provisions after petitioners had argued earlier this month that the ED has become an unbridled horse. Mehta compared these figures with the annual cases registered under the Money Laundering Act in the UK (7,900), USA (1,532), China (4,691), Austria (1,036), Hong Kong (1,823), Belguim (1,862), and Russia (2,764). He thus argued that a very small number of cases are being taken up for investigation under the PMLA by ED as compared to other countries.

Also Read: How PMLA lost its procedural fairness, counsel explains to the Supreme Court

Mehta argued that considering that the PMLA is a part of the global response of the world community, and is in tune with the international standards as per the obligation of India, the court should give a little leverage to the legislature while interpreting the provisions of the Act. He added that the PMLA is not a conventional penal statute but is a statute which is aimed at necessarily preventing money laundering, regulating certain activities relatable to money laundering, confiscating the “proceeds of crime” and the property derived therefrom, and it also requires offenders to be punished by the competent court after filing of a complaint.

Mehta took the bench through the United Nations [UN] Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988 and the UN Convention Against Transnational Organized Crime And The Protocols Thereto to apprise the bench of the global background behind the offence of money laundering. These conventions mandate the signatory nations to take all measures in order to promote cooperation to prevent and combat transnational organized crime more effectively. These conventions also define “proceeds of crime” and “predicate offence”.

Mehta sought to submit, as per these international conventions, that mere possession of ‘proceeds of crime’ with knowledge is sufficient to constitute an offence of money laundering. He added that it was never intended to constitute an offence of money laundering; there has to be a projection or claiming of such proceeds of crime as untainted property.

The bench sought to know from Mehta whether any provisions in these international conventions match with Section 45 of the PMLA which takes away the discretion of the court to grant bail. Mehta read out Article 11 of the United Nations Convention against Transnational Organized Crime, which states: “Each State Party shall endeavour to ensure that any discretionary legal powers under its domestic law relating to the prosecution of persons for offences covered by this Convention are exercised to maximize the effectiveness of law enforcement measures in respect of those offences and with due regard to the need to deter the commission of such offences”. He emphasised on the words “maximize the effectiveness of law enforcement” to say that section 45 of PMLA meets this test.

Referring to the petitioners’ argument that the ED does not provide the accused with ECIR, Mehta said if the ECIR is shared immediately, the person, on the click of a button, would destroy the evidence. (The Enforcement Case Information Report [ECIR], is a document on the files of ED in which it notes down the allegations of money laundering. It is akin to a first information report, with the only difference that the ED claims ECIR is an internal document and is therefore not subject to be disclosed to the accused.)

He also said that PMLA is not a standalone offence. On these aspects, Mehta would be making elaborate arguments later.

Mehta also brought to the notice of the court the Financial Action Task Force [FATF] – which is the global money laundering and terrorist financing watchdog. The essential part of the FATF activities is assessing the progress of its members in complying with the FATF recommendations. The FATF attempts to accomplish this activity through assessments performed annually by the individual members and through mutual evaluations. Mehta submitted that listing/rating of the countries by FATF, among other things, can affect cross-border capital flows, especially for the trade sector, as other countries look over grey listed countries with a lot of speculation. Besides, the economy gets affected adversely due to a lack of investment opportunities, and this takes a toll on the financial needs of the country.

Also Read: ‘The process has become a punishment unto itself under PMLA’, counsel tells Supreme Court

This submission invited a query from the Court as to the relevance of these consequences in examining the constitutional validity of the statute because it has to be done as per the constitutional parameters of our country. Mehta agreed to it but added he was bringing this to the notice of the court only for seeking a little leverage in favour of the legislation while examining the validity of its provisions.

Making submissions on the extent of the money laundering phenomenon, Mehta referred to the International Monetary Fund and the FATF’s estimates that the scale of money laundering transactions is between two and five per cent of the global GDP [gross domestic product]. He also informed the bench that the UN has recently put the figure at US $ 2.1 trillion or 3.6 per cent of the global GDP.

Mehta will continue to make submissions on Thursday.

Click here to read the written submissions.