Introduction of money laundering
Money laundering can be understood as the processing of criminal proceeds to disguise their illegal origin. It’s more like undergoing dirty clothes through a process to get clean ones. The clothes were dirty in the first place is okay when it is clothes, but dirty money is that earned through illegal means. Money laundering by criminals allows them to earn illegal profits without departing their resources.
Illegal activities like the terrorism, illegal arms sales, human trafficking and activities that include organised crimes like drug trafficking, prostitution etc. When this type of criminal activity generates substantial profits, the individuals or groups involved in such activities reroute the funds in a safer manner by disguising the funds, changing the form or moving the funds in a way they become less likely to get any attention.
3 Stages of Money Laundering
- Placements
- Layering
- integration
Placements
In the initial or placement stage of money laundering, the launderer introduces his illegal wealth into the financial system, by disguising his large amounts of money into less conspicuous smaller sums that are directly deposited in bank accounts.
Layering
In the layering stage, the launderer makes a series of the funds so that he can integrate the black money into the banks and financial system of the world.
Integration
At the integration stage, the funds re-enter the legitimate economy. Hereafter, the launderer can use this money into the real estate, purchase the luxury assets or business ventures, as the case may be.
Offenses under Prevention of Money Laundering Act
Section 3 of the PMLA Act states that whoever directly or indirectly attempts or knowingly involved or knowingly assist any person for that work or he is actually involved in that crime or any activity connected with the proceeds of crime, including its
- concealment
- possession
- acquisition
- use
- projecting
Here is an explanation of the aforementioned actions:
- Concealment
To conceal means to hide something in order to show things clean and clear.
- Possession
Possession means someone receives or obtains those assets from criminal activities.
- Acquisition
Acquisitions means someone receives or obtains those assets from criminal activities.
- Use
It means that person utilises the proceeds of money laundering and uses his money or those assets obtained from criminal activities.
- Projecting
Projecting means the person doing money laundering will clean his illegal assets or cash by showing that cash or assets as genuine.
Punishments for Money Laundering
Section 4 of the Money Laundering Act reflects the punishments for money laundering. According to the provision, whoever commits the offense of money laundering shall be punishable with rigorous imprisonment of a term which shall not be less than three years but which may extend to seven years and also liable for fine. Here, the legislators extend discretionary powers to the Judge in the Court deciding the matter. Based on specific facts of the case, the imprisonment imposed could be 3 years, 3.5 years, or nothing less than 7 years in particular case.
However, the proceeds of crime involved in money laundering are related to an offence undel special laws like the Narcotic Drugs and Psychotropic substances Act, the punishment may extend to rigorous imprisonment for ten years.
Case Laws on Money Laundering Offences
Directorate of Enforcement v. Aditya Tripathi
In the case of Directorate of Enforcement v. Aditya Tripathi, adjudicated on May 12, 2023, the Supreme Court granted bail in money laundering case under the PMLA Act 2002. The Enforcement Directorate challenged the bail granted to Aditya Tripathi by the High Court. It was argued that the High Court had not adequately considered the seriousness of allegations and proceeded while ignoring the conditions imposed by Section 45 of PMLA.
The Supreme Court held that the High Court did not follow the conditions properly. Therefore, the Apex Court set aside the Court order granting bail and sent the case back to High Court for fresh decision.
P. Chidambaram v. Directorate of Enforcement
On the September 5 2019, the Supreme Court of India refused to grant bail to the former Union Minister P. Chidambaram in the case INX Media money laundering case which was investigated by the Enforcement Directorate. The Court held that granting him a bail at this time will affect the investigation.
The Court observed that money laundering takes place in a systematic way with often involves placement, layering and integration which makes the process look complex and more time consuming. Therefore, the Court rejected the anticipatory bail to the former Union Minister P. Chidambaram.
Conclusion
Money Laundering is the grave of financial crimes that enables criminals earning illegal money and disguising it as legal income. The menace of money laundering also supports and sustains unlawful activities like terrorism, drug trafficking and organised crimes in the world. The Prevention of Money Laundering Act, 2002 criminalizes this activity under Section 3 and prescribes strict punishments under Section 4, including rigorous imprisonment and fines. The process of money laundering usually has three stages each design to make that difficult to find illicit funds.
Taking some crucial steps in prevention of money laundering in the country will protect the stability and uphold the rule of law. Public awareness, legal enforcement on money laundering is important and also powerful to prevent those who are doing this crime.
The offences and punishments in money laundering have been addressed by our intern, Mr. Tejas Fondu Sawant. He joined the team to assist and bring informational legal blogs.
