Is the Prevention of Money Laundering Act being misused?

The Supreme Court is currently hearing a series of petitions which allege that the Prevention of Money Laundering Act, 2002 (PMLA) is being misused for political advantage.

What is the PMLA?

The PMLA is the law for preventing money laundering and dealing with property derived from it. Money laundering means converting money obtained from unlawful means like smuggling weapons and drugs trade, to make it seem like it has been obtained from legitimate sources. Investments in real estate, transactions in foreign banks, etc are some ways of money laundering.

Who can be charged with ‘Money Laundering’ under the PMLA?

Any person, who is directly involved or assists in any of the steps in the process of money laundering, is liable under the Act. The person could be involved in concealing, possessing, purchasing, using, projecting or claiming as untainted property.

Which offences does the PMLA cover?

A number of offences have been brought under the ambit of the PMLA. However, to constitute a crime under PMLA, the alleged offence must be accompanied by a ‘predicate offence’.

A ‘predicate offence’ is an offence that forms a part of a larger crime. Some examples include drug trafficking, human trafficking, tax evasion, corruption, forgery, murder, smuggling, illegal wildlife trafficking etc. The ‘monetary proceeds’ gained from such illegal activities can be used to buy property or make investments. The property or investments so acquired can then be projected as ‘legitimate or untainted property’. This is money laundering.

The schedule to the PMLA mentions the list of offences that can take place in the process of money laundering. It includes tax evasion, IPC offences like criminal conspiracy, waging or attempting to wage war against Government of India, etc as well as offences under specific acts like Narcotic Drugs and Psychotropic substances Act 1985, Explosive Substances Act 1908, Explosive Substances act 1908, etc.

Which are the authorities responsible for investigation of PMLA offences?

The Financial Intelligence Unit is the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions. They coordinate different investigative agencies nationally and internationally to curb economic crimes. It reports to the Economic Intelligence Council headed by the Finance Minister.

The Enforcement Directorate (ED) investigates PMLA offences specifically. They can also take assistance from other agencies like CBI, customs department etc for further inquiry into other scheduled offences.

What happens when someone is accused of money laundering?

The ED files an Enforcement Case Information Report once a case of money laundering is initiated. This is similar to the First Information Report filed at a police station in criminal cases.

Once ED completes its investigation, it submits a report to specifically designated ‘PMLA courts’. They can order seizure of property or freezing of bank accounts of the person/s involved. In addition, they can order the attachment of the ‘tainted property’ obtained in the process of money laundering.

If the court finds the accused guilty of money laundering, it can punish them with rigorous imprisonment for 3 to 7 years and a fine.

What is the controversy right now?

The petitioners contend that there have been increased instances of misuse of PMLA provisions, especially in cases of tax evasion. Other complaints are that the requirement of ‘predicate offence’ is not being followed and that the ED is being used as an intimidation tool. They also contend that by including a broad list of crimes in the schedule, the government is diluting the original objectives of the PMLA.

Also, unlike FIR whose copy is provided to the accused, a copy of the Enforcement Case Information Report is not given to the accused. 

The Supreme Court is yet to give a view on this issue.

Recently, the Madras High Court directed the National Medical Council to inform all State Medical Councils to take action for professional misconduct against any medical professional who is providing ‘conversion therapy’ to any LGBTIQA+ person. 

What is ‘conversion therapy’?

Conversion therapy is an attempt to change the sexual orientation of LGBTIQA+ people to heterosexual, cis-gender people. It can involve spiritual intervention, exorcisms, physical assault, corrective rape and food suppression. Medical attempts to cure homosexuality include hormonal therapy and electro convulsive treatment. Ayurveda, Yoga, Unani, and Homeopathy are also used to treat trans and gender non-conforming people.

What is the stand of the medical community as far as homosexuality  and transsexualism is concerned?

The curriculum for MBBS students in India is set by the National Medical Commission (previously Medical Council of India). The Forensic medicine curriculum describes “sodomy”, “lesbianism” and oral sex as sexual offence and transvestism (cross-dressing) as “sexual perversion”. This means that outdated and unscientific knowledge is being given to medical students, some of whom refuse to treat LGBTIQA+ people, physically examine or operate upon them or negligently perform conversion therapy on them.

Why did the Madras High Court need to issue such a direction?

In early 2021, the Madras High Court heard a case of a lesbian couple who had to flee their home after being harassed and were seeking police protection from their parents’ intimidation. In an unprecedented move, the judge hearing the case underwent counselling and spoke to members of the LGBTQ community to understand ‘the lived experiences of a homosexual couple’. 

The judge then issued these directions in June 2021 to medical authorities –

• To prohibit any attempts to medically “cure” or change the sexual orientation of LGBTIQA+ people to heterosexual or the gender identity of transgender people to cisgender.
• To act against any professional involved in any form of conversion therapy, including withdrawal of license to practice.

In August 2021, the judge referred to incidents of psychiatrists prescribing antidepressants, erectile-dysfunction drugs and cognitive behavioral therapy to cure differences in gender identity and sexuality. The judge issued directions to the National Medical Council and Indian Psychiatric Society to explain how they intended to handle this issue in the future by making changes in the curriculum.

In response to this direction, the National Medical Council set up a Committee to give recommendations on the changes to be introduced in the curriculum.

What were the recommendations of the Committee set up by the National Medical Council?

The Committee clarified that administration of “conversion therapy” amounted to professional misconduct. It recommended that the National Medical Council – Ethics and Medical Registration Board ought to take action whenever “conversion therapies” are administered by any medical professional. 

Based on the same, the Madras High Court directed the National Medical Commission to circulate the recommendations of the Committee to all State Medical Councils so that they could prosecute medical professionals involved in such actions.

To learn more about the rights of LGBTIQA+ persons with regard to healthcare, read our explainer.