PMLA

Summons, Searches & Seizures under PMLA

Money laundering refers to the act of concealment of illicit money and portraying it as legitimate. Therefore, the Prevention of Money Laundering Act 2002 (PMLA) was introduced to curb the same. Chapter V of the Act deals with the provisions of Summons, Searches & Seizures under PMLA. The present article shall discuss these 3 concepts per the Act to clarify the same. 

Seizure under PMLA

The first concept among Summons, Searches & Seizures under PMLA is Seizure, provided u/s 17 of the Act. The same is elaborated below –

In cases wherein the Director or any other officer  with a minimum rank of  Deputy Director, and not below that rank having authorisation by him for the purposes of this section, based upon the  information in his possession, has reason to believe and the reason for such belief being recorded in writing about any person—

• Committing any act which constitutes money laundering, or
• Having possession of
• Any proceeds of a crime having involvement  in money laundering,
• Any records relating to money laundering,
• Any property related to crime,

 He may authorise any officer subordinate to him based on the prescribed rules for

• Entering and searching any building, place, vessel, vehicle or aircraft where he has a reason of suspicion that such records or proceeds of crime are kept;
• Breaking  open the lock of any door, box, locker, safe, almirah or another receptacle for exercising the powers provided by clause (a) where the keys thereof aren’t  available;
• Seizing any record or property found as a result of such search;
• Placing marks of identification on such record or  [property, if needed  or] make or cause to be made extracts or copies therefrom;
• Making a note or an inventory of such record or property;
• Examining on oath any person  found to be having control or possession of any record or property regarding  all matters relevant for the purposes of any investigation under this Act:
• In cases wherein the seizure of such record or property isn’t practicable, the officer authorised under sub-section (1) may make an order for freezing such property, whereupon the property won’t be transferred or otherwise dealt with without the prior permission of the officer making such order, and a serving copy of such order on the person concerned:
• Provided that if, at any time before its confiscation, Section 8 (5) or (7) or Section 58B or Section 60 (2A) it becomes practical for seizing a frozen property, the officer authorised under sub-section (1) may seize such property.
• The authority, having the authorisation under sub-section (1), shall, immediately after search and seizure or upon issuance of a freezing order, forward a copy of the reasons so recorded together with the material in his possession, provided in that sub-section, to the Adjudicating Authority (AA) in a sealed envelope, in the prescribed manner and such AA shall keep such reasons and material for such period, as may be prescribed.
• Where an authority, upon obtaining the information during the survey under section 16, is satisfied regarding any evidence being or likely to be  tampered with, concealed  he may, for reasons to be recorded in writing, enter  & search the building or the location of the evidence and seize that evidence:
• In the absence of any such authorisation referred to in subsection (1) would be required for search under this subsection.
• The authority seizing any record or property under sub-section (1) or freezing any record or property under sub-section (1A) shall, within a period of 30 days from such seizure or freezing, depending upon the case, file an application, requesting to retain such record or property seized under sub-section (1) or continue the order of freezing served under sub-section (1A), before the Adjudicating Authority.

Search under PMLA

The provisions with respect to search are provided under Section 18 of the said Act, which is the second concept among summon searches & seizures. The aspects regarding the same are discussed below –

• In case of any authority, authorised on this behalf by the Central Government by general or special order, having  reason to believe (the reason for such belief to be recorded in writing)  regarding any person secreting about his person or in anything under his possession,  control,  or ownership of any record or proceeds of crime  that may be useful for or relevant to any proceedings under this Act, the person can be searched by such authority followed by the and seizure of  such record or property that may be useful for or relevant to any proceedings under this Act:
• The authority, having such authorisation under sub-section (1), must, immediately post the search and seizure, forward a copy of the reasons duly recorded along with the material in his possession, referred to in that sub-section, to the AA  in a sealed envelope, in the prescribed manner and  AA shall keep such reasons and material for such period, as may be prescribed.
• Where an authority is about to search any person, he shall, if such person so requires, take such person within 24 hrs  to the nearest Gazetted Officer, superior in rank to him, or a Magistrate:
• It must be noted that the period of 24 hours shall be excluding the time essential for the journey undertaken to take such person to the nearest Gazetted Officer, superior in rank to him, or Magistrate’s Court.
• If the requisition under sub-section (3) is made, the authority shouldn’t detain the person for more than 24 hours prior to taking him before the Gazetted Officer, superior in rank to him, or the Magistrate referred to in that sub-section
• The period of 24 hours shall be excluding the time essential for the journey from the place of detention to the office of the Gazetted Officer, superior in rank to him, or the  Court of the Magistrate.
• The Gazetted Officer or the Magistrate before whom any such person is brought shall discharge such person he sees no reasonable ground for search but otherwise should direct that search be done if Prior to doing the search under sub-section (1) or sub-section (5), the authority must summon 2 or more persons for attending and witnessing the search and the search must be done in the presence of such persons.
• The authority must prepare a list of records or property seized in the course of the search, followed by obtaining the signatures of the witnesses on the list.
• A female must be searched by a female only.
• The authority must record the statement of the person searched as per  sub-section (1) or sub-section (5)  regarding the records or proceeds of crime found or seized  during the search:
• The authority must file an application before the AA requesting the retention of the seized property or record within 30 days of such seizure.

Summons under PMLA

The final concept among summon searches & seizures is summon; the details in respect of the same are discussed hereinunder.

• A Director and the required papers [Section 50(2) of the Money Laundering Law] can issue a summons for attending his office.
• The summoned person has an obligation of attending to any matter under consideration and speak the truth. He must make a declaration followed by the submission of the necessary papers.
• For reasons to be documented, the created records may be imposed by the authorities unless approved by the Director [records can’t be maintained beyond the period of 3 months.
• The invitation is in specified form V.
• The Department of Enforcement under FEMA has these authorities.

Landmark Case Law Summon, Searches and Seizure

The provision of PMLA regarding search and seizure was also discussed as an issue in the landmark case. 

Whether Section 17 Of Pmla, As Amended, Relating To Search And Seizure Is Unconstitutional And Void?

The Apex Court had observed that the power of search and seizure could only be exercised by the Director or any officer not below the rank of Deputy Director as authorised by the Director.  

The court has considered the fact that these officers are not only high-ranking officials, but they must be fully satisfied that there is reason to believe the commission of the offence of money laundering based on the information in their possession.

It was further noted that it could not be disputed that the PMLA Act is special legislation and is a self-contained Code regarding the subject of searches and seizures in matters related to the offence of money laundering under the 2002 Act¹, along with the fact that the purpose and objective of the 2002 Act are to prevent money-laundering; and it being an independent offence regarding the process and activity connected with the proceeds of crime.

The court further stated that the argument of the petitioner about the Rule 3(2) proviso in the 2005 PMLA Rules about the search and seizure, forms or freezing together with the manner of forwarding the material and reasons to the Adjudicating Authority remained un-amended despite the proviso being deleted in Section 17(1) from the 2002 Act.

Addressing this contention, the apex court stated that the fact that the effect of amending the Act is being questioned based on an un-mended Rule is unfathomable. It is well-settled that in case the Rule is not in consonance with the provisions of PMLA, the amended provisions in the Act would prevail. 

The court held that the statute could not be declared ultra vires on the basis of the Rule framed under the statute. In lieu of this, the court has asked the central government for taking corrective steps to obviate confusion regarding the subject proviso, if any.

Finally, the Supreme Court concluded that “in view of the inbuilt safeguards and stringent stipulations to be adhered to by the Authorities, it ought to be regarded as reasonable provision having nexus with the purposes and objects sought to be achieved by the 2002 Act. It is certainly not an arbitrary power at all.

Conclusion

The PMLA was enacted for fighting the offence of legalisation of revenue/benefit from an unlawful source. The Act grants police broad powers, which entails the search, seizure, and imposition of records, to guarantee an efficient execution of the Act.  

Frequently Asked Questions

Read Our Article: Tracing the Developments in the Prevention of Money Laundering Act, 2002

1. https://en.wikipedia.org/wiki/Prevention_of_Money_Laundering_Act,_2002