Black money crackdown: Govt proposes key amendments to PMLA in Budget 2018

Allow confiscation of overseas property, restitution of proceeds of crime

Probe agencies can take action on properties held overseas by money launderers equivalent to the “proceeds of crime” committed, according to a proposal of the Union Budget 2018.

The Budget has proposed tightening the Prevention of Money Laundering Act, 2002, by bringing in provisions to that effect. So far, the government could act on properties within the country. To add teeth to the provisions under the Act, the Finance Bill 2018 proposes to include corporate frauds as scheduled offences, enabling the Registrar of Companies to report such cases to enforcement agencies.

Relief for victims

The new provision will allow distributing confiscated properties generated from the proceeds of crime to the rightful claimant, instead of depositing them with the exchequer.  Currently the PMLA is not equipped to help investors get a refund.

The move follows long-pending demands by investors battling court cases to get their money back. A good example is that of the 13,000 investors, whose money was blocked in the Rs 56 billion National Spot Exchange (NSEL) scam. The scam came to light in 2013 and despite probes by multiple agencies, there has been no recovery so far. The Enforcement Directorate (ED) has attached properties close to Rs 40 billion in the case.

Even in ponzi schemes cases such as the City Limouzine scam, savings of middle-classes are stuck for years. Even politics-driven cases such as Saradha, Rose Valley, Pearl Agrotech Corporation and so on, there has been no restitution. However, there is lack of clarity on whether the proposed changes would be retrospective in nature. There is a question mark over what these would mean for those under investigation. 

“It is a good move to amend the law to the extent that such seized property is returned, maybe on the execution of bonds to the prima facie claimant or the person from whose possession it is taken,” said senior criminal lawyer Majeed Memon. 

At present, once the ED provisionally attaches a property, an adjudicating authority has to confirm the decision. This sets in motion a series of appeals from the level of appellate tribunals to high courts and the Supreme Court.

Confiscation of foreign assets 

Officials from investigating agencies point out that by the time the PMLA kicks in, offenders usurp properties. “It’s necessary to permit the authority to attach the properties to make up the value of proceeds of crime,” said senior lawyer Hiten Venegavkar, counsel for the ED in various matters.

In the ongoing probe into money laundering, enforcement agencies find it difficult to establish who will get the illicit money, since the legalisation process adopted by money launderers is complex and they often find ways to channelise the slush money into the system. “Such power makes it more efficient legally to deal with offenders by freezing their assets even if they are located outside India,” said a senior ED officer. 

According to the latest data, the ED had registered and was probing 3,758 cases (3,567 under forex laws and 191 under the anti-money laundering law) related to the period from November 8, 2016, to September 2017. This apart, it is also probing more than 150 cases on offshore global leaks like HSBC Geneva, Panama Papers, and Paradise. 

According to an ED official, the additional powers will help the agency control the entry of dirty money in any form since they would generate a sense of threat that the assets they create are illegitimate and will get confiscated. Memon pointed out that the PMLA gives wide powers to investigative agencies and the prosecution. “The concept of proceeds of crime, though defined under the statute, is often extended to the property which may have nothing to do with the crime. Also, the powers to attach such property are vulnerable to abuse,” he added.  Legal experts say there will be challenges as investigating agencies will require approval from foreign authorities to execute the confiscation. “They (probe agency) may have the powers to attach the property, but such acquisition has to be subject to judicial scrutiny by the foreign courts,” said Memon. The new amendment will give 90 more days to the ED to file charge sheets after confirming attachment orders by the adjudicating authority. The existing provision does not allow even a single day after the orders are confirmed.