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Explaining Investigation Process in Money Laundering Cases

Ashish M. Shaji

| Updated: Nov 08, 2021 | Category: Finance

Investigation process in Money Laundering

Money laundering can adversely impact any country therefore tackling and curbing money laundering with robust laws, and efficient enforcement system is necessary. In India, Prevention of Money Laundering Act is the legislation dealing with the aspects of money laundering. This Act has gone through some significant amendments in 2005, 2009, 2013 and 2015. This Act describes various money laundering and anti-money laundering aspects. One of the most essential aspects in money laundering matters is the investigation process. In this article, we will discuss the investigation process in money laundering.

Investigation Process in Money Laundering Matter: Who investigates the cases of money laundering?

According to Section 48 & 49 of the PMLA, the officers of the ED (Enforcement Directorate) have been given powers to investigate the matters of money laundering. The officers can also initiate proceedings for attachment of property and prosecution in designated special court.

Powers of Investigating Officers

The investigating officers have the following powers:

  • To conduct survey of a place;
  • To conduct personal search;
  • To conduct search of building, place, vehicle or aircraft; seize records and property;
  • To summon and record statements;
  • To make arrest of those accused of committing money laundering;
  • To provisionally attach properties.

Investigation Process in Money Laundering Matters

The investigation process in money laundering cases is specified below:

  • Registration of FIR (Cognizable Offence)

Money laundering is not an independent offence which means to establish the money laundering offence there should be an offence that has made the money illegitimate. The offences defined under money laundering are called as scheduled offences under the PML Act[1].

These schedule offences are related to 30 statutes as provided in the schedule of the PMLA from Part A to C. 

The government has tried to make money laundering a separate offence, and an amendment was made in this regard also. Different aspects of amendments were challenged in the apex court in a number of cases.

  • Registration of ECIR

Cases under PMLA are investigated by the Directorate of Enforcement. An Enforcement Case Information Report is filed under Section 3 of the PML Act. It happens to be generally the first document executed by the Directorate of Enforcement in the investigation process.  The Enforcement Case Information Report includes the grounds and allegations based on which the investigation process runs.

It may be noted here that the copy of the ECIR is not made routinely available to the accused, unlike in case of FIR. Here the contentious part is that the accused is unaware of the reason why he is being investigated by the ED. The practice of not giving the ECIR copy was challenged before the Supreme Court of India, and this issue was raised in Rajbhushan Omprakash Dixit case, but the matter is sub-judice.

  • Issuance of Summons (Section 50)

The person against whom the ECIR has been registered or a person who can be associated to the case, is issued summons by the ED to record his/her statements. Therefore the receiver of such summons is required to be present in person or through his representative at the office of the ED.

Unlike in case of normal offences under IPC wherein the statement given to the police authorities is not admissible as proof due to Section 162 of the CrPc and Section 25 of the Evidence Act in money laundering cases, any statement given to ED under Section 50 will be admissible and it can be held against the accused during the trial. In case the accused resile from the statement made earlier, then such person can face action under Section 193 of IPC.

  • Filing Final Complaint in Special Court

When the investigation is finished by the ED in the matter, a final complaint is filed in the special court (Section 43 PML Act). Only the special courts can try an offence under PML Act and from there on, the trial is completed. The appeal can be filed in the High Court.  

ED’s power to arrest

The provision dealing with this investigation part is Section 19 vide Section 45 of the PML Act. It provides that in case where the concerned officer, with the evidence he has, has the reason to believe that the person is involved in the offence of money laundering, then the officer has the authority to arrest such person. The arrested person has the right to know the reason for such arrest. Moreover, the person arrested must be brought to the Special Court or Judicial Magistrate or to the Metropolitan Magistrate within 24 hours of his arrest.

According to Section 45, money laundering offence is both cognizable and non-bailable where the bail cannot be availed from the ED but by Special Court.

Conclusion

The investigation process is one of the fundamental processes under the PML Act. Some of the critical provisions relating to the investigation process in money laundering cases are pending before the Supreme Court. Further, one can see contradictory judgments from various courts on different aspects of PMLA. Therefore there is a need to fill these gaps by the judiciary and legislature. PMLA is one of those acts which has been amended quite a few times now.

Read our article:What is FATF (Financial Action Task Force)?

Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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