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The Prevention of Money Laundering Act was enforced in the year 2005 as a practical measure against money laundering activities and lay down the mechanism for bringing the guilty party to justice when such crimes are committed. The PMLA is extensive and intricate, and when a person is accused of money laundering, it is vital to identify whether the crime of money laundering has even occurred. It is also essential to understand the concept of ‘continuing offence’ and how different courts in India have interpreted the term with regard to the PML Act. This blog is a detailed guide on the concept of money laundering as a continuing offence in India under the ambit of Section 3 and the latest amendments and what different Indian courts have translated this term.
A continuing offence can be defined as a kind of offence that keeps on repeatedly happening over a prolonged period of time. When an offence has been termed ‘continuous’, it is vital to establish that the offence started at a particular time and continued ceaselessly until the act was rectified.
A crime can be considered to be continuous when the act of a person causes continuous harm or injury to a person and the person committing such act causes continuous injury. Such an offence is different from a one-time offence since a one-time offence takes place one single time and ends right when it is committed. However, a continuing crime keeps occurring, causing a new offence each time it continues to occur.
To understand if money laundering is a continuing offence, it is important to know its definition and what the proceeds of crime involved in the offence of money laundering mean.
The PML Act, under Section 3, defines the crime of money laundering in the following manner:
Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of the offence of money-laundering.
Further, Section 2(u) of the Act lays down the definition of ‘proceeds of crime’ as any property that has been directly or indirectly obtained or derived by some out of a criminal act with regards to a Scheduled Offence. Proceeds of crime may also be the property equivalent in value to the value of any property situated, taken or held outside India.
By the definition laid down in Section 3, it is clear that the offence of money laundering is not considered as a single offence but comprises a chain or series of actions or transactions made to cover up the black money or tainted property so that it can be laundered later and introduced in the economy as white money.
The crime of money laundering also has different stages of laundering or clearing the tainted property or money, beginning with the placement of the proceeds of crime, then layering of such proceeds by spreading them through different financial transactions and ending with the integration of the money in the economy as untainted money.
Out of the three stages of money laundering, placement is the first step, where the tainted money is moved from illegal sources to legitimate places such as different financial instruments, financial entities, etc., and the origins of such money are hidden. At this stage, the criminals place their proceeds of crime through different channels, and often even legal transactions end up falling under the scrutiny of the ED as a method of placement.
The second step in the offence of money laundering is layering of the money, where the tainted bulk money is broken down into smaller segments and transactions, making the origins and originator difficult to identify. At the layering stage, the money is often moved internationally through different bank accounts, companies and investments so that the enforcement agency cannot identify a single source easily.
The last stage of money laundering is the integration of the laundered or cleaned money to the originator through different legitimate channels. A money launderer can, in this way, receive their illicit money back legally without even the smallest hint of its illegal origins. One of the most generic ways of doing this is by purchasing property and other assets with such money to retrieve the value in the form of some tangible and legal property. Integration involves multiple transactions that are small in nature so as to break down and hide the totality of the illegal money.
The concept of ‘continuing offence’ with respect to money laundering was first introduced via an amendment to the PML Act based on the Finance Act of 2019. The amendment lays down the following additions to the Act:
Any activity or process in relation to the proceeds of crime is continuing in nature and keeps on occurring or continuing till the time the person goes on to enjoying such proceeds of crime. Such enjoyment maybe by way of concealing, possessing, acquiring, using, claiming or projecting the proceeds of crime as clean or untainted money or property.
The amendment also increased the ambit of what falls under ‘proceeds of crime’, and included any assets that are created through any criminal act, even if the same is not mentioned in the PML Act.
After this amendment, any person who is considered guilty of even one of the acts of enjoying the proceeds of crime can be brought under the purview of the PMLA. It has also made the act of committing any activities relating to proceeds of crime ‘in any manner’, a continuing offence of money laundering.
Different Indian courts have given numerous takes on the concept of money laundering as a continuing offence. Here are some of the most crucial case laws that shed more light on this concept, making its understanding and applicability in ED matters clearer:
In Sankar Dastidar v. Banjula Dastidar, it was held by the Supreme Court that imposing the liability for a continuing injury is a vital element of a continuing offence. If the crime or wrongful action results in an injury that gets completed, there can be no continuing wrong, even if the damage caused by such action continues. Based on this interpretation by the apex court, the crime of money laundering can be considered a continuing offence when the benefits of the proceeds of crimes continue to be enjoyed by the money launderer.
In the landmark matter of State of Bihar v. Deokaran Nenshi & Anr., the Supreme Court held the following when interpreting the term ‘continuing offence’:
A continuing offence is a type of offence which is subject to the element of continuance. It is also easily differentiated from an offence that takes place once and for all. It is a kind of offence that is a result of failure to obey or follow any rules or attached requirements and also involves certain penalties. The liability of such an offence continues until the rule, or its attached requirement is obeyed or followed. With each occurrence and recurrence of non-adherence and disobedience, an offence is committed. The difference between a one-time offence and the continuing offence is between an act or omission that comprises a single-time occurring offence and an act or omission that keeps on occurring. In a continuing offence, the element of the continuance of the crime is present, which a one-time offence lacks.
Contrarily, while rejecting the idea of money laundering under Section 3 of the PML Act as a continuing offence, in the matter of Mahanivesh Oils & Foods Pvt. Ltd. vs. Directorate of Enforcement, W.P. (C) 1925/2014, the Delhi High Court was of the following view:
Based on the contentions by the respondent, the court observed that the respondent considered the act of money laundering under Section 3 as a continuing offence. The respondent claimed that possessing any property with respect to any scheduled offence, even if the same was acquired in any other manner, would comprise the offence of money laundering. However, the court stated that by going through interpretation, a person who is guilty of a scheduled offence, has obtained some property out of it, and presented it as untainted clean money, will also be held liable for the crime of money laundering based solely on the fact that he was in possession of some property.
Under the PML Act, the date of relevance is when the tainted money was processed and showed as untainted money and not the date on which the money was acquired. Based on this and highlighting that money laundering is a continuing offence, the Karnataka High Court in the year 2020 noted that the act under Section 3 of the PML Act is a standalone offence in itself, and there is no requirement of any other scheduled offence to have a valid case against the accused. To establish a crime under Section 3 of the PML Act, the mere fact that there is a connection of transaction with proceeds of crime is enough.
The Jharkhand High Court, in the matter of Hari Narayan Rai vs Union of India & Ors., observed that only the date of the offence of money laundering is enough to have a valid case under Section 3. The date on which the tainted money was acquired was not relevant, and the date on which the money was exhibited as clean is important to establish a continuing offence of money laundering.
The Supreme Court, in the case of Bhagirath Kanoria & Ors. Etc vs State Of M.P. & Ors. 1984 AIR 1688, again stated that for a continuing offence to exist, the objective and language of the Act or statute involved must be considered. The amendment to Section 3 of the Prevention of Money Laundering Act makes money laundering a continuing offence, as an act is a continuing offence when it results in a recurring injury, and the person is liable for such continuance of injury.
The matter of whether money laundering is a continuing offence or not has been discussed by numerous courts in India. After the amendments to the PMLA based on the Finance Act, a person will be held liable for the offence of money laundering till the time they enjoy the proceeds of crimes attached to such offence. The different stages of money laundering also make it a continuing offence rather than a one-time single action.
NOTE: Any individual accused of money laundering must seek PMLA advisory in order to first identify if the crime of money laundering has taken place or not and to handle the matter before the Enforcement Directorate.
Read Our Article: Different Stages of Money Laundering