NEWS

• According to a Rajya Sabha report, the Enforcement Directorate (ED) has taken up 5,892 cases under the Prevention of Money Laundering Act (PMLA), 2002 since 2015.
• However, only 15 convictions have been secured, highlighting:
  • A poor conviction rate.
  • Increasing money laundering cases, indicating weak enforcement of financial crime laws.

HIGHLIGHTS

What is Money Laundering?

• Defined under Section 3 of the PMLA, money laundering involves:
  • Concealing, possessing, acquiring, or using money obtained from criminal activity.
  • Projecting such proceeds as untainted or legitimate.

Three Stages of Money Laundering

1. Placement:
   • Introduction of illicit funds into the financial system.
2. Layering:
   • Hiding the source through complex or multiple transactions to obscure the trail.
3. Integration:
   • Reintroducing the ‘cleaned’ money into the economy via:
     • Real estate
     • Business investments
     • Luxury assets

Key Issues & Legal Challenges

• Extremely low conviction rate under PMLA undermines deterrence.
• Supreme Court ruling (Vijay Madanlal Chaudhary vs Union of India, 2022):
  • Held that no FIR is required before initiating action under Section 3 of PMLA.
  • Expanded ED’s investigative powers—raising due process and misuse concerns.
• Allegations of political misuse of ED powers further weaken public trust in enforcement.

Role of FATF & DTAA

• India is obligated to follow Financial Action Task Force (FATF) guidelines to:
  • Enhance financial transparency.
  • Prevent money laundering and terrorist financing.
• India has signed Double Taxation Avoidance Agreements (DTAA) with over 80 countries, which:
  • Help in tracking cross-border fund flows.
  • Require stronger implementation to be effective.