December 04, 2017

Is offence of Money Laundering under the Prevention of Money Laundering Act, 2002 (PMLA), a continuing offence?

1. The offence of money laundering committed before the PMLA came into effect in the year 2005;
2. The offence of money laundering committed after the PMLA came into effect into force 2005 and the alleged offence was a scheduled offence; and
3. The offence of money laundering committed after the PMLA came into effect into force 2005 and the alleged offence was not a scheduled offence.

• attempts to indulge or
• knowingly assists or
• knowingly is a party or
• is actually involved in any process or activity connected with the
  • proceeds of crime
    • including its
      • concealment,
      • possession,
      • acquisition or
      • use
  • and projecting or claiming it as untainted property

• “Keeping in view the provision as is enshrined in Section 3 postulating therein that
• whoever is connected with the proceeds of the crime
• projecting it as untainted property
• would be committing offence of Money Laundering Act, and further that
  • the proceeds of crime must have been derived or obtained, directly or indirectly by any person
  • as a result of criminal activity
  • relating to scheduled offence in terms of sub-section (u) of Section 2 of the Prevention of Money Laundering Act”

• Firstly, a person should be involved in any activity relating to the concealment, possession, acquisition or use of the proceeds of crime,

• Secondly, that person should project or claim such proceeds of crime as untainted property.

• “A continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one of those offences which arises out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liability for which continues until the rule or its requirement is obeyed or complied with. On every occasion that such disobedience or non-compliance occurs and recurs, there is the offence committed. The distinction between the two kinds of offences is between an act or omission which constitutes an offence once and for all and an act or omission which continues and therefore, constitutes a fresh offence every time or occasion on which it continues. In the case of a continuing offence, there is thus the ingredient of continuance of the offence which is absent in the case of an offence which takes place when an act or omission is committed once and for all.”

1. The Placement Stage: the malfeasant, who is holding the money generated from criminal activities, places the crime money into the normal financial system;
2. The Layering Stage: the money introduced into the financial system is layered-spread out into several transactions within the financial system with a view to concealing the origin of the original identity of the money and to make this origin/identity virtually disappear; and
3. The Integration Stage: the money is thereafter integrated into the financial system in such a way that its original association with crime is totally obliterated and the money could be used by the malfeasant and/or the accomplices to get it as untainted/clean money.

• “Although, the Respondent has not contended so in clear terms, it appears that the respondents are proceeding on the basis that an offence under Section 3 of the Act is a continuing offence.
• According to the respondent, the possession of any property linked to a scheduled offense irrespective of when it was acquired would itself constitute the offence of money-laundering.
• It is important to understand the import of such interpretation. This would mean that a person who has committed a scheduled crime; acquired proceeds therefrom; and thereafter, projected it as untainted money, prior to the Act coming into force, would nonetheless be guilty of the offence of money-laundering only for the reason that he is in possession of some property.“

• “The first stage is Placement, where the criminals place the proceeds of the crime into normal financial system.
• The second stage is Layering, where money introduced into the normal financial system is layered or spread into various transactions within the financial system so that any link with the origin of the wealth is lost.
• And, the third stage is Integration, where the benefit or proceeds of crime are available with the criminals as untainted money.
• There is much merit in this description of money-laundering and this also indicates that, by its nature, the offence of money-laundering has to be constituted by determinate actions and the process or activity of money-laundering is over once the third stage of integration is complete.”
  • * The findings recorded by the learned Single Judge of the Delhi High Court in the said judgment has been stayed by the Division Bench of the Delhi High Court in the interim order dated 30^th November 2016, passed in LPA 144/2016 filed by Directorate Of Enforcement against the order of the Single Judge.

• “It is clear that the essence of the offence of the money-laundering is "projecting of the proceeds of crime as untainted property. It is this 'projecting' that attracts the applicability of the penal provisions of PML Act.
• Now, where such sale proceeds, or the property derived from a crime, which, at that time, was not a scheduled offence, but was a scheduled offence when such sale proceeds or such property was projected as untainted, there would be no bar to the applicability of the PML Act. If the provisions of Section 3 of the PML Act are interpreted in this manner, it would not amount to giving retrospective effect to the said Legislation. If the proceeds of a crime, which has been declared as a 'scheduled offence' on the day on which the 'projection of such proceeds' as 'untainted' is attempted or undertaken, the provisions of the PML Act would apply. Such a course, cannot be said to be violative of Article 20 of the Constitution.
• In other words, the crucial date would be the date on which the projection of the proceeds of crime as 'untainted' takes place, and, if this has taken place before the commencement of the PML Act, then it cannot be suggested that a person can be prosecuted for the offence punishable under Section 4 thereof. In the instant case, most of the transactions, which are the subject matter of the case against the Applicant, have taken place before coming into force of the PML Act. They cannot be the subject matter of prosecution for the offence punishable under the PML Act. It was faintly suggested, to overcome this difficulty, that the offence of money-laundering is a continuing offence. This Dixit contention, -if it is intended thereby to suggest that even the cases where the money-laundering had already been done before the commencement of the PML Act, would give rise to the prosecution under the provisions of the PML Act, -has to be rejected forthwith.”

• “No person shall be convicted of any offence except for violation of the law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.”