FEMA,PMLA and Supreme Court Flashcards
Why in News?
In a recent hearing, the Supreme Court of India upheld the constitutional validity of the Prevention of Money Laundering Act, 2002.
The court underlined that the principle of innocence of the accused/offender is regarded as a human right but that presumption can be interdicted by a law made by the Parliament/Legislature.
What has the Supreme Court said in the Ruling?
1.Enforcement Case Information Report (ECIR):
Enforcement Case Information Report (ECIR) cannot be equated with an FIR.
Supplying an ECIR in every case to the person concerned is not mandatory and “it is enough if the Enforcement Directorate (ED), at the time of arrest, discloses the grounds of such arrest”.
The ECIR is an internal document of the ED and the fact that FIR in respect of scheduled offence has not been recorded, does not come in the way of ED authorities to commence inquiry/investigation
- Section 3 of PMLA Act:
Section 3 of the PMLA Act 2002 has a wider reach and captures that offence of money laundering is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence.
The ruling also made it clear that:
Offence under Section 3 “is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence”.
The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and pending enquiry including by way of criminal complaint before the competent forum. - Enforcement Directorate:
The bench upheld the ED’s power under Section 5 of the Act (order provisional attachment of any proceeds of crime).
The Court stated that Section 5 provides for a balancing arrangement to secure the interests of the person and also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act.
It rejected the argument that ED authorities are police officers and, hence, a statement recorded by them under Section 50 of the Act would be hit by Article 20(3) of the Constitution which says no person accused of an offence shall be compelled to be a witness against himself.
What do we know about the Prevention of Money Laundering Act, 2002?
It is a criminal law enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money-laundering and related matters.
It forms the core of the legal framework put in place by India to combat Money Laundering.
The provisions of this act are applicable to all financial institutions, banks (Including RBI), mutual funds, insurance companies, and their financial intermediaries.
PMLA (Amendment) Act, 2012:
Adds the concept of ‘reporting entity’ which would include a banking company, financial institution, intermediary etc.
PMLA, 2002 levied a fine up to Rs 5 lakh, but the amendment act has removed this upper limit.
It has provided for provisional attachment and confiscation of property of any person involved in such activities.
HISTORY OF ED
The Directorate of Enforcement or the ED is a multi-disciplinary organization mandated with investigation of economic crimes and violations of foreign exchange laws.
The origin of this Directorate goes back to 1st May, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947 (FERA ’47).
With the onset of the process of economic liberalization, FERA, 1973, which was a regulatory law, was repealed and in its place, Foreign Exchange Management Act, 1999 (FEMA) came into operation.
Recently, with the increase in the number of cases relating to economic offenders taking shelter in foreign countries, the Government has passed the Fugitive Economic Offenders Act, 2018 (FEOA) and ED is entrusted with its enforcement.
Functions of ED
The Prevention of Money Laundering Act, 2002 (PMLA):
ED has been given the responsibility to enforce the provisions of the PMLA by conducting investigation to trace the assets derived from proceeds of crime, to provisionally attach the property and to ensure prosecution of the offenders and confiscation of the property by the Special court.
The Foreign Exchange Management Act, 1999 (FEMA):
ED has been given the responsibility to conduct investigation into suspected contraventions of foreign exchange laws and regulations, to adjudicate and impose penalties on those adjudged to have contravened the law.
The Fugitive Economic Offenders Act, 2018 (FEOA):
It is a law whereby the Directorate is mandated to attach the properties of the fugitive economic offenders who have escaped from India warranting arrest and provide for the confiscation of their properties to the Central Government.
Sponsoring agency under COFEPOSA:
Under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA), Directorate is empowered to sponsor cases of preventive detention with regard to contraventions of FEMA.
About Supreme Court of India
The Supreme Court of Judicature in Calcutta was created as a Court of Record with full jurisdiction and authority
with the adoption of the Regulating Act of 1773.
It was formed to entertain, hear, and decide on any lawsuits or actions in Bengal, Bihar, and Orissa in addition to
hearing and deciding on all complaints for crimes of any kind.
King George III founded the Supreme Courts at Madras and Bombay in 1800 and 1823, respectively.
The India High Courts Act of 1861 established High Courts in a number of provinces, abolished the Sadar Adalats
in Presidency towns, and closed the Supreme Courts in Bombay, Calcutta, and Madras.
Up until the Federal Court of India was established by the Government of India Act 1935, these High Courts held
the distinction of being the highest Courts for all cases.
The Federal Court had the authority to hear appeals against decisions from High Courts as well as resolve conflicts
between provinces and federal states.
The Constitution of India was enacted on January 26, 1950, following India’s acquisition of independence in 1947.
The Supreme Court of India was also established, and its inaugural session took place on January 28, 1950.
