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Money Laundering – Retrospective Amendment

Sonal Pruthi

| Updated: Feb 08, 2021 | Category: Finance

Money Laundering- Retrospective Amendment

The article highlights the money laundering recent retrospective amendment. Recently, the Karnataka High court has given the judgement on the retrospective application of the Prevention of Money Laundering Act, 2019. The Amendment covered Section 3 of the Act. Section 3 covers the meaning of money laundering.

Before the amendment, section 3 is all about- whoever directly or indirectly, attempts to

a) indulge or knowingly assist or knowingly is a party or is involved in any process or activity b) connected with the proceeds of the 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.

After the Amendment, section 3 is read as follows- the explanation was added in words, for the clarification of doubts, it was held that a person should be held guilty of money laundering if such person is found directly or indirectly attempted to indulge or knowingly is a party or is involved in one or more of the following process or activities connected with the proceeds of the crime are – concealment, or possession or, acquisition or use, projecting as untainted property, or claiming untainted property, in any manner whatsoever connected with proceeds of the crime, is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime, by its concealment or possession or acquisition or use or projecting it as untainted property.

The object of Amendment under Money Laundering Section 3

Section 3 before Amendment

After the joint reading of both the sections, it can be held that from the section before amending that any person who has derived property from criminal activity relating to the scheduled offences, which include concealment, possession or acquisition or use, and projecting or claiming it as untainted property shall be guilty of the offence of money laundering.

After Amendment

The new section incorporates the use of the word “or”, which implies that the words like possession or acquisition, are in itself the offences because of the substitution of the word “or” to the word and whereas the offences concealment, possession or retaining untainted property has been made as a continuing offence.

The another point which has been added is the proceeds of the crime, the word has been amended in the sense, initially it included the property derived from the criminal activity which has been listed in the scheduled offences, were only covered under Money Laundering Act. After Amendment, the two categories have been added that, a) the property derived in the course of criminal activity defined under schedule offence b) the property derived in the course of criminal activity.

In both the categories, the person shall be liable under the Prevention of Money Laundering Act, 2019.

The case I: Obulapuram Mining Company Pvt Ltd v Joint Director Directorate of Enforcement Government of India

The case gave the judgment over the point view of the retrospective amendment of Money Laundering Act- under section 3.

The court held that a person cannot be tried for the offence under the Act when the said has not been listed in the schedule of offences in the Act. The court mentions that the article 20(1) of the Constitution would be infringed. It is a fundamental right. The court clearly mentions that the petitioner has committed the offences that were not mentioned in the offences’ schedule. The offences were committed by the petitioner were before the insertion of the provisions in the schedule of Prevention of Money Laundering Act (Amendment) 2009[1]. The directorate could not invoke the PMLA provisions retrospectively.

Delhi High Court Judgment- Mahanivesh Oils & Foods Pvt Ltd v Directorate of Enforcement (January 1, 2016)

For Money Laundering the Delhi High Court has given the judgment regarding the no retrospective application of Section 3 of Prevention of Money Laundering Act, 2019.

Where the court has mentioned that, the PMLA cannot be read as to empower the authorities established under the Act to initiate the money laundering proceedings before the Act came that is 2005, or before the related crime is included under the list of schedule of offences in the Act.

The Act is considered in the nature of the penal offence and no retrospective amendment is possible.

Finance Act , 2019- Money Laundering Retrospective Application

The Amendment which has been incorporated under section 3 – that defining money laundering offences has come from Finance Act, 2019. The definition which has been amended is the proceeds of the crime, which implies the retrospective amendment of the PMLA. Criminal activity is not defined yet- which means whether the untainted property has been acquired, concealment, possession, projecting or claiming of the property obtained from schedule offences. The term is not so exact yet.

Conclusion

It can be concluded that the retrospective amendment of the Money Laundering Act has been not clearly defined. The Amendment of Section 3 has made the offence as of continuing nature. The possibility is less, considering the stages of the operation of Act, which is Section 4 and Article 20 (1) of the Constitution of India. Considering the three stages of the Amendment, where the first stage is the placement of the offence, where the criminal places the proceeds into the financial system and second is the layering, where money is introduced in the financial system and spread across the various transactions, so that the link of the original transaction or wealth is lost. Third is the benefit of the proceeds which the criminal takes away in the form of untainted money.

By adding explanation under section 3 which makes the offences a continuing offence. This implies that the offence is constituted till the time person is enjoying the benefits from the tainted property.

If this is accepted, then the offence of money laundering is never made under section 4 of the Act. Prior to this Amendment, the various High Courts have rejected the view of retrospective application of Money Laundering Act. The appeal in Supreme Court is pending.

Read our article:Money Laundering and Terrorist Financing for NBFCs

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Sonal Pruthi

She is B.Com (H), LL.B LLM, Cs (Module 2) And Certification In Cyber Law From ILI Qualified. She has Been A Legal Teacher In The Previous Organization. My Strength Is My Expertise Knowledge In Civil Laws, Corporate Law And Tax Laws. I Have Been Legal Teacher And Legal Trainer In The Past Organization. Her Knowledge About The Subjects Have Expanded Due To Teaching Number Students From Various Universities All Over India.

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