What does Money Laundering mean?
Money laundering is a process by which a property or money is transferred or embezzled to conceal or assist illicit origin of those assets, to evade the legal consequence of possessing illegally acquired money. In layman's terms, Money Laundering is a process by which, illegally sourced money is converted into legally acquired money. For instance, the money acquired by the sale of drugs is converted into legally acquired money by purchasing property and the cost of that property is evaluated at a higher cost than its actual cost.
This is a serious financial misdoing and can be a way to evade taxes. Money Laundering is also considered dangerous as it usually funds illegal activities that are against State Policy like drug rackets, terrorist organizations, etc.
The Indian laws that deal with offences related to Money Laundering are:
- Prevention of Money Laundering Act, 2002
- Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
- Benami Transaction (Prohibition) Act, 1988
What is a scheduled offence under PMLA?
Scheduled offences are defined under the PMLA and are offences against the State. The PMLA Act can only be invoked if a scheduled offence has been committed.
The scheduled offences are also known as the predicated offences and are required as prerequisites to begin the proceedings. The offences are given as a list under Section 2(1)(y), divided into three categories such as Part A, Part B, and Part C.
What is the role of the Enforcement Directorate in the Prevention of Money Laundering?
The role of the Enforcement Directorate (ED) is to prevent money from being laundered and illegal financial activities being carried out. The ED is responsible for investigating financial offences, based on the investigation it files the Enforcement Case Information Report, issues summons, arrests offenders attaches and seizes the property of the financial offenders and tracks the illegal flow of money.
What is an Enforcement Case Information Report? Can it be quashed?
Enforcement Case Information Report is the first document which records and maintains the commencement of an investigation by the Enforcement Directorate. It cannot be quashed, as highlighted by the Bombay High Court in the recent case, as it is a record-keeping document and is not equivalent to the First Information Report (FIR) to the police. The importance of this document is not similar to the FIR; hence it is only supplied after the attachment of the property.
What was the relief sought and given by the Court?
Ans. The petitioner sought for quashing of two ECIRs against him based on the two FIRs on the charges of money laundering. The relief was sought as the investigation by E.D. had come to an end and the petitioner was declared clear of the charges in these two cases. The FIRs in the case had been quashed, hence the petitioner filed the petition to quash these two ECIRs.
The Directorate of Enforcement argued that there was a third ECIR and about seventy-nine complaints before RERA, which are still pending against the accused i.e., the Petitioner.
The Court stated that in the first two cases, there were no longer any scheduled offences charged against the Petitioner, hence, these two cases and their investigation by E.D. can no longer be continued. Whereas in the third ECIR, there was a scheduled offence, hence it will be an ongoing proceeding.
The High Court's observation in regard to the quashing of the earlier two ECIRs was reported by the Press Trust of India, "ECIR is not an FIR but an internal document, there cannot be any restriction to bringing on record on any subsequent 'scheduled offence' registered by way of an FIR alleged to have been committed in respect of the same transaction."
Hence, the ECIR cannot be quashed as stated by the Delhi High Court.
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Originally published January 16, 2024
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