case study on money laundering in india

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Biggest money laundering cases in India

This article is written by Nishka Kamath , a graduate of Nalanda Law College, University of Mumbai. In this article, the author has discussed the most infamous cases of money laundering, along with the economic, social, and political impact caused by the issue of money laundering. Furthermore, different measures that can be implemented to combat the issue of money laundering, are also discussed in brief at the very end.

This article has been published by Sneha Mahawar .​​ 

Table of Contents

Introduction 

Louisa May Alcott rightly quoted, “ Money is the root cause of all evil”,  and our country, India, is no stranger to several high-profile cases of money laundering. 

In this era, everyone is in the rat race to earn more and more money. While we have some individuals who use ethical and legal means to earn money, there are some who resort to unethical or illegal activities for financial gain. Vijay Mallya, Nirav Modi, Mehul Choksi, and Chandan Kochar- we have often heard about these individuals and their money laundering scams. To give legality to their money obtained illegally, they use different techniques, one of which is money laundering. 

In February 2022, India witnessed its biggest-ever banking fraud of around 22,842 crores involving ABG Shipyard Ltd. (discussed in detail below), which is a shipbuilding and repair company. In 2020, after an investigation, Rana Kapoor, the CEO, and founder of Yes Bank, was caught up in a financial fraud case wherein the ED attached properties worth 2,203 crores, including his personal property. This article is an attempt to discuss all such infamous money laundering cases in India. Let’s begin! 

Money laundering : an overview 

Before we dive deep into the biggest money laundering cases, let us have a look at the nitty-gritty of money laundering. 

What is money laundering 

Money laundering can be described as an offence wherein an individual or establishment passes illegal funds through complex channels to give it an appearance of legalised basis. The finances are passed on through various phases of conversions and transfers to reach a legally accepted institution. In short, the launderer looks for effective means to get their money ‘cleaned’ through any institution as it is the best option available. 

In simple words, money laundering means disguising illegal money as legal money. Such amounts are usually obtained by illegal means like corruption, fraud, cheating, tax evasion, etc. Generally, money laundering cases are influenced by politics, with their roots going all the way down to corruption. 

Interesting fact: As per UNODC, around 2-5% of the global GDP is laundered every year. That amounts to approximately $800 billion to $2 trillion laundered annually.

The process of money laundering 

Below is a brief discussion of the most common steps followed for such an activity.  

Illicit activity

The first and foremost step to money laundering is to have some illicit financial activity. 

Initial placement

This is the start of the money laundering process; here, illegal funds are transferred to a legitimate establishment or institution, say a bank. This process is carried out in such a way that there is no way any traces of such fraud occurring can be detected. Even though the number of scams is large, these funds are entered into these institutions in smaller batches to avoid any sort of suspicion. 

Next comes the process of layering. Here, any signs of criminal activity are eliminated via some complicated financial transactions. It may also involve transferring funds to banks or institutions of foreign origin that have confidentiality laws in place. As a result, the source of money is hidden behind the counterfeit transactions. This procedure assists in removing information about how and where these funds came from.

Final integration 

Lastly, the illegal amount thus converted is now legally available for use since the conversion is legitimate in the eyes of the law. Here, laundered funds enter the banking system again and are then used freely by fraudsters. Simply put, the laundered money is readded into the economy in a manner that allows it to be used and withdrawn in a manner that appears to be legal.

Pictorial representation of the process of money laundering 

Interesting fact: Around 90% of global money laundering cases go undetected each year. 

Forms of money laundering

Money laundering can take up several forms, some of them, inter alia , are as follows:

• Structuring, also referred to as smurfing,
• Cash-intensive businesses,
• Bulk cash smuggling,
• Trade-based laundering,
• Shell companies,
• Round tripping,
• Black salaries,
• Tax amnesties,
• Transaction laundering.

Stats on money laundering cases 

In the last decade, the Enforcement Directorate (commonly known as the ED) has registered the highest number of money laundering cases, with the number rising as high as 1,180. Further, during the financial years between 2012–13 and 2021–22, the ED received a total of 3,985 complaints under the Prevention of Money Laundering Act (PMLA), 2002 , and 24,893 under the civil law of the Foreign Exchange Management Act (FEMA), 1999 .

Furthermore, the ED registered the following number of money laundering cases in the respective fiscal years-

• 221 cases in 2012-13,
• 209 cases in 2013-14, 
• 178 cases in 2014-15, 
• 111 cases in 2015-16, 
• 200 cases in 2016-17, 
• 148 cases in 2017-18, 
• 195 cases in 2018-19, 
• 562 cases in 2019-20, 
• 981 cases in 2020-21, and 
• 1,180 cases in 2021-22.

Interesting fact: 25 people have been held guilty by courts in India in matters related to money laundering, whereas more than 400 individuals have been arrested since the ED was empowered to investigate serious financial crimes that took place about 17 years ago.

Now that we know what money laundering is, let us take a look at some legendary scams in India that everyone has heard of! 

Infamous money laundering cases in India

Commonwealth games (cwg) scam, year of scam- 2010, amount of money involved- 70,000 crore .

Delhi, in 2010, saw one of the most notorious scams addressed as the Commonwealth Games (CWG) scam. Here, it was discovered that only half the amount received was used for Indian sportspersons, whereas, the other half was deposited in the accounts of individuals who had the power to do so. With this scandal, the Government of India is said to have incurred a loss of 70,000 crores. Under the CWG scam, the authorities hired companies that had overquoted the estimated budgets as opposed to those that had great offerings at great prices in addition to better services and equipment. Moreover, after the discovery of the scam, it was discovered that several suspicious transactions were carried on with non-existing partners, while the actual workers did not receive any timely payment, thus causing the misappropriation of funds.  

This scam can be said to be a planned act of corruption. Moreover, not only Mr. Suresh Kalmadia and two of his close associates, Mr. Lalit Bhanot and V.K. Verma, but also Sheila Dixit, were part of this scandal. 

The trial of all those accused in the Commonwealth Games (CWG) scam

Suresh Kalamdi was detained by the CBI and served around 10 months of imprisonment. He, along with his associates, was held guilty under several sections of the IPC and the Corruption Act. The most important sections of the IPC they were charged with are as follows:

• Section 120 (b) (criminal conspiracy),
• Section 420 (cheating), 
• Section 468 (forgery), and
• Section 471 (Using as genuine a forged document or electronic record).

Saradha Group financial scandal

Year of scandal – 2013, amount of money involved- 2500 crores .

The Saradha scam, commonly known as the Saradha Group financial scandal, was a major financial scandal that took place in 2013. This scam occurred in 2013 when a Ponzi scheme by the name of Saradha Group, which was an umbrella company with a cluster of 200 private companies, broke down. In this case , a scheme was launched in the early 2000s by Sudipto Sen, promising high returns, and the amount was collected from several small investors. Agents who helped the company were paid a commission of over 25–40% , apart from other lucrative gifts. This scheme became popular because it promised high returns in a short period of time. It raised capital of around 2500 crores within a span of a few years, and the total number of investors rose as high as 1.7 million. The company, in order to gain fame and build up its brand value, used several marketing techniques, like celebrity endorsements. Further, in order to attract more investors, the company used to sponsor cultural events such as Durga Puja and invest in popular football clubs. The scheme, in no span of time, expanded to Odisha, Assam, Jharkhand, Chhattisgarh, and Tripura, and with this expansion, the number of investors increased noticeably. 

The investors in Saradha were rarely enlightened about the true nature of the investments. This scam worked in the form of a  Ponzi scheme where one investor’s principal and interest were paid to another investor as interest.

However, it was later discovered that the company’s inflow was lower than its outflow, after which the Supreme Court of India transferred all investigations related to the case and other Ponzi schemes to the Central Bureau of Investigation (CBI) in 2014. The investigation into this multi-crore Ponzi scheme has been ongoing since it came to light in 2013. 

Trial of the accused in the Saradha scam 

Several West Bengal residents, including Kunal Ghosh, Sudipto Sen, and Madan Mitra, are accused of participating in this Ponzi scheme. In 2013, in an 18-page confession, the founder and CEO of this scheme, Sudipto Sen, mentioned the involvement of TMC politicians in this scheme, including Mamata Banerjee. The police authorities filed several FIRs against the Saradha group, and several properties were confiscated and seized. A special SIT (Special Investigation Team) was set up by the West Bengal government for speedy investigation. Later, this case was moved to the CBI as ordered by the Hon’ble Supreme Court. 

Sudipto Sen has around 98 cases pending against him and has served more than 8 years in jail. Currently, Sudipto Sen and his close associate, Debjani Mukherjee, are in the custody of the CBI. 

Indian coal allocation scam or the Coalgate scam 

Year of scandal – 2012-13, amount of money involved- 185,591 crores .

The coal allocation scam, commonly known as the “Coalgate scam,” was a political scam that included the illegitimate allocation of the nation’s coal to public sector entities (PSEs) and private sector companies that were not a part of Coal India Ltd. and Singareni Collieries Company Limited’s (SCCL) production plans by the then Prime Minister Manmohan Singh. 

This scam is one of the long-standing cases taken up by the CBI. It was a political scandal that engulfed the UPA (United Progressive Alliance) Government in 2012. Around 14 cases were lodged against individuals and companies, including  Naveen Jindal and his company JSPL, Kumaramangalam Birla, Congress MP Vijay Darda and his brother Rajendra Darda, JLD Yavatmal Energy Limited, AMR Iron & Steel Private Limited, and Vini Iron & Steel Udyog, inter alia . 

This scam became apparent when the Comptroller and Auditor General of India (CAG) made a statement that the Government of India allocated 194 coal blocks to public and private enterprises in an illegitimate manner between 2004 and 2009. However, these blocks were just allocated and not auctioned, causing a loss of 185,591 crores. The Supreme Court of India annulled the allocation of all 214 coal blocks given since 1993, and these blocks are to be reallocated now. 

Trial of the accused in the Indian coal allocation scam

The special CBI judge took cognizance of the offence under the following sections:

• Sections 120-B (criminal conspiracy), and 
• Secti on 409 (Criminal breach of trust by a public servant, or by banker, merchant or agent).
• Prevention of Corruption Act, 1988-
• Sections 13(1)(c) and
• Section 13(1)(d) (iii). 

The Court then issued summons to all the accused in this case, out of whom the two accused approached the Supreme Court, which granted interim bail against further proceedings. 

The 2G scam

Year of scandal – 2008, amount of money involved- 176,000 crores .

One of the greatest scams in the history of independent India is the 2G scam . It has also been affirmed by the Times Magazine to be the second biggest example of the abuse of executive power- just a notch below Richard Nixon’s Watergate scandal. 

The 2G scam was discovered when the Comptroller and Auditor General (CAG) of India, in one of its reports, estimated a loss of 176,000 crores in issuing licences and allocating 2G spectrum by the Department of Telecom. 

CAG claimed that the government lost 176,000 crores because telecom operators were granted 2G licences at extremely low prices instead of conducting free and fair auctions. Further, the licences were granted to ineligible applicants who had repressed facts, divulged incomplete information, submitted forged documents, and used deceitful means to obtain licences and thereby gain access to the spectrum. 

In this scam, A Raja, along with 14 other individuals and three companies, namely, Swan Telecom, Reliance Telecommunications, and Uninor, were the prime accused. The primary accused, A. Raja, was said to have allocated airwaves and licences for mobile phone networks in exchange for bribes. In 2012, the Supreme Court annulled all 122 licences that were awarded in 2008, asserting that such licences must be allocated via auctions and fair bidding processes alone. The Court said this process of allotment was “ unconstitutional and arbitrary .” 

Trial of the accused in the 2G scam

In 2012, the Supreme Court, in this case , levied a fine of 5 crores on each of the three companies—Unitech Wireless, Swan Telecom, and Tata Teleservices. However, in 2017, all the accused in this scam were declared not guilty , including the lead accused, A. Raja, by a special CBI Court. Moreover, a point must be taken into consideration that the appeal by the CBI against this judgment is pending in the Delhi High Court.

The Kingfisher Airlines case 

Year of scandal – 2007-2017, amount of money involved- 9,900 crores .

This scam started in 2007 when Vijal Mallya’s company, titled Kingfisher’s Airlines, purchased a low-cost carrier, Air Deccan, that had been in the state of destitute for a long time. Unfortunately, Air Deccan faced major financial losses because of the ever-increasing oil prices. So, to keep his business in the market, Vijay Mallya borrowed huge amounts of money from multiple banks; sadly, in two years, the company was in debt for around 50% of its net worth. Kingfisher Airlines faced several losses, and Mallya defaulted on loans worth 9000 crores from several banks around 2013. Further, the  Serious Fraud Investigation Office (SFIO) found out that Kingfisher Airlines violated serious corporate ethics during its merger with Air Deccan. 

Moreover, it was found that the loans taken by Vijay Mallya were laundered overseas to various “ tax havens. ” He would transfer the amount of the loan received to inactive companies and would appoint dummy directors to serve this purpose. These companies were in seven countries, namely:

• United Kingdom,
• France, inter alia. 

Furthermore, it was alleged that Vijay Mallya diverted some loan money to fund his IPL cricket team- The Royal Challengers Bangalore (RCB), and his F1 racing team- Force India. All this occurred when the employees at  Kingfisher were not paid their remuneration for a whopping period of over 15 months. In March 2016, Mallya escaped to the UK from India. In February 2017, an extradition request was sent to India. 

Trial of the accused in the Kingfisher Airlines case

In 2022, a four-month prison sentence was awarded to Vijay Mallya by the Supreme Court of India for his bank loan default case. The bench, headed by Justice U. U. Lalit, also imposed a fine of ₹2000. Now, Mallya is living in the United Kingdom and is on a bail extradition warrant, which is executed by Scotland Yard. 

India’s biggest corporate scam

Satyam scan (satyam computers scam), year of scandal – 2009, amount of money involved- 7,000 crores .

Satyam scam, commonly addressed as India’s largest corporate scam or “ India’s Enron Scandal, ” revolves around B. Ramalinga Raju and his company titled “Satyam Computer Ltd.”, which was the fourth largest IT software exporter in the industry after companies like TCS, Wipro, and Infosys. Satyam Computers Ltd. was founded in 1987 by two brothers- Rama Raju and Ramalinga Raju. The company started with 20 employees and later hired around 50,000 and operated in more than 60 countries. The net worth of this company was as high as one billion dollars in 2003 and went on to cross two billion dollars in 2008. The promoters of the company, in order to attract more investors, manipulated several figures relating to revenues, operating profits, interest liabilities, and cash balances. Mr. Raju, the founder, would also create a number of bank statements to exaggerate the balance sheet with cash that had no existence whatsoever. 

This case or scam was exposed as early as 2009, when India was already in the middle of a recession. The company and its founder confessed to misrepresenting and manipulating accounts worth 7,000 crores in front of its board, stock exchanges, investors, and other stakeholders. 

Trial of the accused in the Satyam scam 

After Raju confessed to this scam, he was imprisoned and was further charged with the following offences:

• Criminal conspiracy, 
• Breach of trust, and 
• Forgery. 

Moreover, the auditor of the company- PwC, was held guilty of such a conspiracy, and his licence was cancelled for 2 years.  

Biggest money laundering cases in the banking sector in India

Punjab national bank fraud case , amount of money involved- around 11,400-13,500 crores .

This is one of the most publicised and controversial money laundering cases in the history of India which shook the entire nation. It is by far the biggest fraud ever detected by an Indian bank. This scam was orchestrated by diamantaires Mehul Choksi and his nephew Nirav Modi, who conducted such a huge scam with the assistance of over 50 employees from the Punjab National Bank of the Brady House branch in Fort, Mumbai. 

Here, bankers used fake Letters of Undertaking (LoUs) worth more than 10,000 crores, which were opened in branches of Indian banks for the purpose of importing pearls for a span of one year. The employees issued fake bank guarantees to help them secure billions in foreign credit. Nirav Modi and Mehul Choksi managed to get their first fraudulent guarantee in 2011, and from there, they got around 1200 more such fake guarantees in the next 74 months without anyone suspecting any fraudulent activity. As per these LoUs, banks were to be held liable in matters of default. In 2018, PNB filed a suit with the CBI on the charges that Nirav Modi obtained these LoUs from PNB without paying up the margin amount against the loans. Simply put, in case any of the companies failed to pay the debt, PNB would be liable to compensate for the same. 

Trial of the accused in the Punjab National Bank Fraud case 

The Indian authorities are trying incessantly to extradite Nirav Modi and Mehul Choksi in the money laundering case , to bring back to India these businessmen who were declared fugitive economic offenders. In March 2019, Nirav Modi was spotted in London, and Choksi was seen in Cuba. Nirav Modi is said to be in south-west London awaiting his extradition trial. Currently, in December 2022, Nirav Modi is said to have lost his appeal against extradition to India. He may also return to India to face a trial for the charges of fraud and money laundering. However, he can now appeal to the Supreme Court against the High Court’s decision in London. 

ABG Shipyard case

Year of scandal – 2012-2017, amount of money involved- 22,842 crores .

In this case , a Gujarat-based firm, titled ABG Shipyard Ltd. (ABG SL.), was alleged to have defrauded a bank of 22,842 crores, which roughly comes to $3 billion. Around 28 banks were defrauded by this company, including the State Bank of India (SBI) and ICICI Bank. 

According to the CBI, ABG SL borrowed money from banks and used it for other purposes, such as investing in overseas subsidiaries and bringing assets into the name of affiliated companies. They also transferred money to numerous parties related to them or the company. However, with a forensic audit held by SBI with the assistance of Ernst and Young, it was discovered that there was a huge issue of money being laundered. They also found that such a scam took place over a period of five years, i.e., from 2012 to 2017. 

As per the investigation conducted by the CBI, ABG Shipyards primarily took loans from several banks and managed to divert funds that were used for other purposes, as mentioned above. Moreover, as per the audit report by the SBI, it was uncovered that the fraud took place through “ diversion of funds, misappropriation, and criminal breach of trust, with an objective to gain unlawfully at the cost of the bank’s funds.”

In the FIR filed by the CBI in 2022, ABG Shipyard and ABG International Private Ltd. were charged with owning the following amounts of money:

ICICI Bank – 7,089 crores,

SBI – 2,925 crores,

IDBI Bank – 3,639 crores,

Bank of Baroda – 1,614 crores,

Punjab National Bank 1,244 crores, 

Exim Bank 1,327 crores, 

Indian Overseas Bank 1,244 crores, and 

Bank of India 719 crores, inter alia .

Trial of the accused in the ABG Shipyard case

While the fraud came to light in June 2019 after an investigation conducted by the Fraud Identification Committee of the SBI, it was not until November 2019 that the first complaint was made to the CBI. Later, in 2022, a charge sheet was filed against Rishi Agarwal and five other accused, along with 19 companies, including three based in Singapore. Rishi Agarwal, the former promoter of ABG Shipyard Ltd., was arrested by the CBI. But he was soon granted bail , considering the charge sheet was incomplete. 

ICICI Bank- Videocon case

Year of scandal – 2016-2022, amount of money involved- 1,875 crores .

This case revolves around Chanda Kochhar, the former MD and CEO of the ICICI Bank and her husband Deepak Kochhar. A charge sheet was filed in November 2020 by the ED for transactions between Videocon Group and NuPower Renewables Pvt. Ltd., both of which were operated by Deepak Kochhar.

This fraudulent activity was discovered in 2016 when an investor named Arvind Gupta, who had invested funds in both ICICI Bank and Videocon Group, pointed out some suspicious activity between the two companies. He wrote letters to various authorities, including the Prime Minister and the Governor of the Reserve Bank of India, requesting an investigation into the conflict of interest; however, the case was not pursued until 2018, when another whistleblower raised similar allegations against Chanda Kochhar. A detailed investigation started then, and several authorities were involved in investigating the matter further. 

After a thorough investigation, the investigating authorities found out Chanda Kochhar had sanctioned loans worth 1,875 crores (which comes to an estimated $243 million) from ICICI Bank to Videocon Group. This was done to receive some sort of bribe from her husband’s business organisations. 

In September 2020, Chanda Kochhar and her husband, Deepak Kochhar, were arrested under the PMLA Act. Furthermore, the ED had attached movable and immovable assets worth Rs 78 crore as part of the recovery process. 

Trial of the accused in the Videocon case

In February 2021,  bail was granted to Chanda Kochhar by a special court in Mumbai; after this incident, Deepak Kochhar, too, was granted bail in March 2021 by the Bombay High Court. The CBI then arrested Videocon Group chairman Venugopal Dhoot for allegedly bribing Chanda Kochhar and her husband, Deepak Kochhar, in this scam. In addition, the Kochhars were arrested and questioned in connection with this fraud. In addition, the Kochhars were arrested and questioned in connection with this fraud. They are currently in the custody of the CBI. 

Yes Bank- DHFL case

Amount of money involved- 5,050 crore .

This case is centred around Rana Kapoor, the founder and former CEO of Yes Bank, and the credit facilities provided to Dewan Housing Finance Limited (DHFL) during his tenure at Yes Bank. Moreover, DHFL promoters- Kapil Wadhawan and Dheeraj Wadhawan, amongst others, were also involved in this criminal conspiracy. While working at the bank, Rana Kapoor allegedly provided multiple credit facilities to DHFL Bank for his own economic gain. The benefits he would receive in return for this favour, inter alia , included:

• Receiving bribes worth 900 crores (approximately USD 116 million) from the promoter of DHFL in the form of loans to a company wholly owned by Rana Kapoor’s daughters.
• A purchase of a bungalow in Delhi from the promoter of Avantha Group at a grossly undervalued price.

After this scam came to light, an extensive investigation was carried out, during which several abnormalities were noticed in the loans sanctioned by Kapoor for DHFL Bank. The ED affirmed that Yes Bank had bought debentures worth 3,700 crores between April 2018 and June 2018 from DHFL Bank, and the amount was transferred to DHFL. Further, DHFL sanctioned a loan of 600 crores to DOIT Urban Ventures Pvt. Ltd. (DUVPL), which was owned by Rana Kapoor and his family. This was done without adequate collateral. It was also discovered that just before sanctioning this loan, Yes Bank made investments in DHFL Bank. This clearly indicated there was a criminal conspiracy between Rana Kapoor, Kapil Wadhawan, and Dheeraj Wadhawan for receiving credit by pledging highly overvalued assets, as per the chargesheet. It was further revealed that there was no ongoing business in the DUVPL while the loan was proposed. On further investigation, it was disclosed that the entire amount was syphoned off by the Wadhawans without spending a single penny on the actual reason the loan was taken. Also, it was revealed that a major amount of money was syphoned by Rana Kapoor, who used this money to invest overseas. 

Consequently, in 2020, the ED attached Kapoor’s properties, which were worth 2203 crores, which comes to approximately $286 million. These properties also included the personal property of the Kapoor family. Rana Kapoor and his family have been arrested several times for further investigation into this case.

Trial of the accused in the DHFL case

All the accused in this scam were charged under various sections of the PMLA Act. In 2022, Rana Kapoor and his wife were granted bail, along with Gautam Thappar, the promoter of Avantha Group. Furthermore, two builders, Avinash Bhosale and Sanjay Chhabria, who had links with this case, were taken into police custody, and their assets, worth 415 crores , were attached in this bank-loan fraud case. Presently, they are in judicial custody.

Biggest money laundering cases in India that made headlines in 2022

The national herald case.

In the National Herald case, the interim president of Congress, Sonia Gandhi, and party leader, Rahul Gandhi, among others, were accused of some economic irregularities. The ED carried out raids in 12 places in the national capital and other places in matters relating to this case. 

In 2012, a complaint was filed before the trial court by a leader of the Bharatiya Janata Party (BJP) and advocate, Subramanian Swamy, on the pretext that some of the leaders of the Congress party were involved in some fraud and breach of trust in the acquisition of Association Journals Ltd. by Young Indian Ltd. (YIL) and that YIL took over the assets of the National Herald in a “ malicious way ”. Rahul Gandhi and Sonia Gandhi were summoned by the ED in a probe in relation to this case. The ED is carrying out an investigation into this case. Furthermore, in 2015 in relation to Swamy’s case, the Patiala House Court gave a prima facie finding on their guilt and they even had to sign a bail bond along with Motilal Vohra and Oscar Fernandes.

Sand mining case

In this infamous sand mining case, the ED conducted a raid on the property owned by Bhupinder Singh, alias Honey, the nephew of the former CM of Punjab, Charanjit Singh Channi. Honey was arrested under several sections, including Sections 3 (Offence of money laundering) and 4 (Punishment for money laundering) of the PMLA. They were brought into 14-day judicial custody in February 2022 from Jalandhar, Punjab. The ED confiscated more than 10 crores, gold worth more than 21 lakhs, and a Rolex watch worth 12 lakhs from his residence. This was one of the biggest raids in 2022. His uncle, Charanjit Channi, was also questioned by the ED in relation to the illegal sand mining case. Moreover, Bhupinder Singh, aka Honey, had already confessed that the money seized by the ED belonged to him and that he used to accept bribes from officials in exchange for choosing their place of transfer and postings.

Jharkhand mining case

In the infamous Jharkhand mining case, IAS officer Pooja Singhal, the secretary of the Department of Mines and Geology and the Managing Director of Jharkhand State Mineral Development Corporation Limited (JSMDC), who is also an aide to the CM of Jharkhand, Hemant Soren, had her property raided in a money laundering case linked to the alleged embezzlement of MGNREGA funds in the state’s Khunti and Chatra districts. An amount of nearly 20 crores was recovered from the officer and her Chartered Accountant, and an arrest was made against her in May 2022. Further, the ED also carried out a raid on Ranchi’s Pulse Hospital, owned by her husband, Abhishek Jha. 

School Service Commission (SSC) Recruitment scam 

While carrying out an investigation, the ED recovered around 50 crores in cash, along with some jewellery, from the residence of Arpita Mukherjee, the associate of former Bengal Minister Partha Chatterjee. Following Partha Chatterjee’s arrest, 21 crores in cash and jewellery were recovered from Arpita Mukherjee’s home. The investigation is still being carried on in this matter, and the ED is still looking out for properties related to both the accused. Upon further investigation, Chatterjee denied his involvement in the SSC scam and affirmed that the “ money does not belong to him “. 

Chinese Visa case 

In the Chinese Visa case, Congress MP, Karti Chidambaram, was booked by the ED for several charges relating to money laundering. This case came to light after a nationwide search was conducted by the CBI at several premises linked to P. Chidambaram and his son Karti. 

An FIR was lodged against them and is based on the charges that Karti accepted a bribe if 50 lakhs were accepted from Vedanta Group to facilitate visas for 300 nationals of Chinese origin for a company working together with the Vedanta subsidiary on a power project in Punjab. 

Patra Chawl scam 

In the infamous Patra Chawl scam, Shiv Sena’s MP Sanjay Raut was alleged to be guilty of economic irregularities. He has been in the custody of the ED in this money laundering case. The ED raided Raut’s bungalow in Bhandup and seized approximately 11.5 lakhs from there. Further, a discovery of multiple documents and records that proved Raut paid 3 crores in cash to the seller for 10 plots of land in Alibaug was also made. The ED also alleged that Raut had tried to tamper with the evidence and influence the key witnesses in this case. 

Nawab Malik and Dawood Ibrahim’s scam

Nawab Malik, Maharashtra’s Minister and Nationalist Congress Party (NCP) leader, was the primary suspect in this infamous money laundering case. He was alleged to have links with fugitive gangster Dawood Ibrahim’s D Company. The investigation was carried on by the ED, and a chargesheet was filed before the Special PMLA Court in Mumbai. In the complaint, the ED made mention of Malik’s involvement with the D Company and affirmed he wanted to “ usurp ” the Goawala building compound in Kurla West in 1996. Malik is currently in the custody of the ED. 

Jammu & Kashmir Cricket Association Fund scam

In this scam, a supplementary chargesheet was filed by the ED against the former Chief Minister of Jammu and Kashmir, Farooq Abdullah. Here, there was some sort of syphoning-off of funds from the J & K Cricket Association (JKCA). This scam was carried out through multiple transactions to unidentified parties, including JKCA office bearers. These amounts were withdrawn without any reasonable justification. The ED launched an investigation based on a chargesheet filed against JKCA office bearers in 2018. After further investigations. The scam is said to be worth around 51.90 crores; however, the ED has already attached assets worth 21.55 crores.

Top money laundering case laws  

Chidambaram v. directorate of enforcement (2019), background of the case.

This case , commonly referred to as the INX Media case, refers to one of the most notorious high-profile money laundering cases. The case revolves around the economic irregularities in the foreign exchange clearance granted to INX Media Group for receiving overseas investment in 2007.

Facts of the case

In March 2007, INX Media, founded by Indrani Mukherjee and Peter Mukherjee, tried to approach the Chairman of the Foreign Investment Promotion Board (FIPB) for permission for foreign direct investment (FDI) from three non-resident investors located in Mauritius. Two proposals were made, namely:

• To issue by way of preferential interest, non-cumulative, equitable and convertible for engaging in business for operating, creating some television channels. 
• Moreover, the Company also required permission to make a downstream investment to the limit of 26% as well as the outstanding equity capital of M/s. INX News Private Limited.

Out of these proposals, one was approved by the FIPB, and the other was denied; however, the company fraudulently carried out the other transaction, as well. This issue came to light when the income tax department asked for justification in 2008 from INX Media, after which they approached Karti Chidambaram to leverage his family name to avoid any penalty, thus entering into a criminal conspiracy. Karti Chidambaram was said to have an economic interest worth around Rs 3.5 crore. A case known as the ECIR case, under Section 3 of the PMLA, which is punishable under Section 4 of the PMLA, was lodged by the ED.  P. Chidambaram was arrested, and a bail application for the case was filed.

Issue 

• Whether bail should be granted to the appelant or not?
• Whether the Court, having found the merits of the case, consider the application filed for granting bail or not?

After overturning the Delhi High Court’s order, the Supreme Court granted Chidambaram bail and ordered him to pay a surety bond of Rs 2 lakh along with two other securities. 

Union of India v. Hassan Ali Khan & Ors. (2011)

In this case , Hassan Ali Khan, a Pune-based businessman, was held guilty of charges of money laundering and depositing huge amounts of black money in banks of foreign origin. He was accused and arrested for having deposited around $8 billion in the Union Bank of Switzerland, amongst other Swiss banks. He was also facing allegations of owning five passports under distinct names each. He was also under the radar for any alleged terror links, as it is suspected that he had laundered money from an international arms trader Adnan Khashoggi. He filed several bail applications in several courts, including the Bombay High Court, the Hon’ble Supreme Court and the Special Court under the PMLA, but all of them were rejected. He has rejected all the allegations imposed upon him, further affirming he has no Swiss bank accounts and that some of his rivals could be behind the charges. However, he is currently in jail, considering the rejected bail applications. 

Laws that govern money laundering cases in India

In order to safeguard the integrity of the market and prevent such cases of money laundering, the Indian authorities have enacted multiple laws and regulations. Some of the acts are as follows:

Prevention of Money Laundering Act (PMLA)

Prevention of money laundering act (pmla), 2002.

The PMLA Act, 2002, was enacted to discourage money laundering and provide for the confiscation of property in such cases. An individual found guilty under this Act shall have to face a prison sentence; further, his/her property can also be confiscated and seized in such matters.

The three main purposes of this act are as follows:

• Prevent and control the issue of money laundering.
• Confiscate and seize away the property of individuals involved in money laundering.
• Combat other issues related to money laundering in India.

Furthermore, the Act has provisions for punishment that can be rigorous in nature and can range from three to seven years behind bars. 

Prevention of Money Laundering (Amendment) Act, 2012

With this Amendment , the concept of “ reporting entity ,” which would incorporate a banking company, financial institution, intermediary, etc., has been added. Furthermore, the 2002 Act set a maximum fine of 5 lakhs for economic fraud, but the amendment removes that limit. Moreover, it contains a provision for the provisional attachment and confiscation of any individual involved in such illegal activities.

FEMA and FERA

The Foreign Exchange Management Act, 1999 , and Foreign Exchange Regulation Act, 1973 ,  have been enacted with the motive of laying down some elaborative restrictions on the hawala market to preclude its usage as a means for money laundering activities and terrorism financing. The main motive for enacting these acts was to improvise on surveillance and preemptive measures instead of relying solely on rules and regulations for preventing money laundering.

Indian Customs Act, 1962

The Indian Customs Act, 1962 , too, plays a crucial role in preventing money laundering by inflicting stringent punishments, including imprisonment, for offences under this Act, such as smuggling, inappropriate imports or exports, and wrong declaration of exports. 

The Income Tax (IT) Act, 1961

The Income Tax Act, 1961 , establishes a framework for combating money laundering by penalising tax evasion. 

Criminal Law Amendment Ordinance, 1944

The Criminal Law Amendment Ordinance, 1944 , has provisions related to certain crimes like that of corruption, breach of trust, and cheating; however, not all the crimes, like those in the Indian Penal Code, 1860 , are covered in this Ordinance. 

Narcotics Drugs and Psychotropic Substance (NDPS) Act, 1985

The Narcotics Drugs and Psychotropic Substance (NDPS) Act, 1985 , has provisions for the punishment of property or funds obtained from or utilised in the illegitimate trafficking of narcotic drugs. 

The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 

Under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 , there is a penalty for smugglers and foreign exchange manipulators for property obtained illegitimately and for similar matters.  

Other anti-money laundering policies 

Since banking channels seriously suspect money laundering activities, the Indian Banking Association (IBI) has taken the initiative to play the lead role in developing a code that is self-regulated. This code is enacted with the objective of preventing money laundering activities, especially in the banking sector. Most of these organisations have anti-money laundering (AML) policies to determine and prevent any activity involving money laundering.

Authorities responsible for investigating money laundering cases 

Authorities responsible for investigating money laundering cases in india .

There are several authorities responsible for carrying out investigations on matters relating to money laundering, namely: 

Financial Action Task Force (FATF)

The issue of money laundering is not confined to one nation, thus, it is a global issue. The G-7 formed the Financial Action Task Force ( FATF ) on money laundering to produce effective financial regulations and anti-laundering laws. It was established by the governments of the G-7 countries at their 1989 Economic Summit to monitor the progress of its members in implementing steps towards fighting money laundering. India is also a full-fledged member of the FATF and follows guidelines laid down by force. 

Interesting fact: The famous Forty Recommendations are given by the FATF.

Enforcement Directorate (ED)

The Directorate of Enforcement in the Department of Revenue, Ministry of Finance, is in charge of investigating offences involving money laundering. It is responsible for implementing laws related to finance and combating financial crimes in India. One of its main features include investigating offences of money laundering under the provisions laid down in the PMLA Act. 

Authorities responsible for investigating money laundering cases : a global perspective 

The vienna convention.

Under the Vienna Convention , an object of creating an obligation for signatory states to prosecute money laundering from drug trafficking. 

The 1990 Council of Europe Convention

The 1990 Council of Europe Convention lays down a common criminal policy on money laundering. 

G-10’s Basel Committee statement of principles

The G-10’s Basel Committee statement of principles issued a document called “statement of principles” with which all the international banks of member states are obliged to comply. 

The International Organization of Securities Commissions (IOSCO)

The International Organization of Securities Commissions ( IOSCO ) motivates its members to take the requisite measures to fight the issue of money laundering in the securities and fund markets. 

The United Nations Office on Drugs and Crime

The United Nations Office on Drugs and Crime ( UNODC )  proactively tries to detect and end money laundering.

The impact of money laundering : an economic, social and political scenario 

Economic impacts.

Money laundering can have a dire effect on the economy of a country; some of the impacts, inter alia , are as follows: 

• It compromises with the legality of the private sector.
• It compromises the integrity of financial markets.
• There is economic distortion and unsteadiness.
• There is a loss of control of economic policy. 
• There is also a loss of revenue. 
• There is inconsistency in the exchange and interest rates due to out-of-the-blue transfers of funds.
• A detrimental effect is caused on the trade and international capital flows. 

Social impact 

The social impacts of money laundering, inter alia , are as follows:

• There is an upsurge in crime rates.
• It causes a decline in the process of human development. 
• The resources get misallocated.
• Money laundering affects the trust of the general public in their domestic financial institution. 
• Money laundering also weakens the moral and social position of society by exposing it to illicit activities like drug trafficking, smuggling, and corruption, amongst other criminal activities.

Political impact 

• It initiates political distrust and volatility.
• There is criminalisation of politics. 

The way forward 

There are several provisions laid down by the government for ceasing the illegal activity of money laundering. Individuals, organisations, and businesses involved in money laundering rely heavily on fraudulent exports to carry out such fictitious economic transactions. Such frauds are always carried on by spending on expensive art and paintings, stock markets, etc. Below are some of the major steps that can be followed to efficiently combat the issue of money laundering:

Collaboration

With the advancement of technology in matters related to money laundering, there is a dire need to address this issue with equally advanced anti-money laundering mechanisms like big data and artificial intelligence. Furthermore, both international and domestic stakeholders must work together to effectively strengthen data-sharing mechanisms in order to combat the issue of money laundering. 

Coordination 

Moreover, the investigation, prosecution, and conviction under the PMLA need several distinct elements to be successful. Also, for an accurate investigation, coordination and collaboration between the CBI, the Narcotics Control Bureau, the serious fraud investigation officer, and the ED are of utmost importance. 

Mutual legal aid treaties 

Furthermore, in cases of matters relating to cross-border money laundering, one of the most important ways to detect such fraud is via the provision of mutual legal assistance treaties with other states and the proper implementation of such treaties. It is noteworthy that India has such mutual legal treaties, especially for the purpose of asset recovery, with the United States of America, the United Kingdom, and the United Arab Emirates. 

Some other steps to combat the issue of money laundering 

• The issue of money laundering may especially be seen in markets that are not well-organised or developed. Hence, such economic markets need to have robust controls and checks. 
• The government of a country must develop and enforce policies that demotivate tax evasion by companies. 
• The department of finance responsible for preventing such frauds (ED in India) must track and monitor all the money transactions or any activity they think is illegitimate, irrespective of whether it is related to production or consumption, to prevent any kind of illegal activity. 
•  Improved due diligence by banks is yet another method to detect money laundering cases. 

The two root causes of the aforementioned economic scams and money laundering cases are corruption and greed. Greed can be a powerful tool for disrupting economies in matters related to money laundering. It not only harms economies by causing a lopsided demand for money, but it also destroys the private sector by encouraging cutthroat competition or the stagnation of thriving businesses that serve as fronts for money laundering.  

Even though our country has specific laws to address this issue, the aforementioned cases involved millions of dollars, indicating that our laws must be more stringent. Moreover, due to the complex technological improvements in the banking sector, there are even more complex methods adopted by fraudsters to indulge in fraudulent activities like that of money laundering. 

In this article, we looked at some of the biggest money laundering scams that shook the markets. As an investor, it is always advisable to stay vigilant of any such activities happening around you! Happy reading! 

Frequently Asked Questions (FAQs) 

What is pmla .

The Prevention of Money Laundering Act, 2002, commonly known as PMLA, is said to be a law helping combat the issue of money laundering in India. Moreover, there are multiple specialised government agencies, inter alia, that deal with the issue of money laundering like-

• The Reserve Bank of India (RBI), 
• The Securities and Exchange Board (SEBI),
• The Development Authority of India. 

What role does the SEBI play in preventing cases of money laundering? 

SEBI plays a major role in combating the issue of money laundering in India. SEBI introduced “ Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries .” These guidelines are in accordance with the principles laid down under the PMLA. 

What sort of activities are considered as an offence of money laundering under the PMLA? 

Under the PMLA, any person who makes an attempt to engage in any activity that is related to the proceeds of a crime will be deemed guilty of committing a money laundering offence. 

Is there any penalty for any activity involving money laundering under the PMLA? If yes, what and how much? 

The punishment for money laundering ranges from three to seven years of rigorous imprisonment along with a fine. Furthermore, if an organisation or a corporation is found guilty of committing such an activity, every person in charge of the business will be held accountable for the activity and will be penalised by the Enforcement Directorate (ED) by way of legal proceedings. 

What role does the Enforcement Directorate play in the cases of money laundering? 

The Enforcement Directorate, commonly known as the ED, is an organisation of the Government of India that was created for enforcing economic laws and handling the issue of economic offences or monetary frauds. ED uses economic intelligence to enforce significant laws that are known to govern the fiscal development of India. 

References  

• https://tradebrains.in/what-is-money-laundering/  
• https://insider.finology.in/economy/money-laundering-scams-india   
• https://www.drishtiias.com/to-the-points/paper3/money-laundering-1  
• https://www.legalbites.in/top-controversial-cases-of-money-laundering-in-india/?infinitescroll=1
• https://shuftipro.com/blog/40-surprising-facts-and-statistics-about-money-laundering-2021-update/  
• https://www.fisdom.com/what-is-money-laundering-how-does-it-work-definition-legal-aspect-famous-cases/  
• https://www.mondaq.com/india/money-laundering/1169784/the-rise-of-money-laundering-in-banking-sector-in-india-how-unsafe-is-the-public-m  
• https://timesofindia.indiatimes.com/india/10-high-profile-ed-cases-of-2022-that-made-headlines/articleshow/93344039.cms  

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The FEOA, 2018: A New Frontier In India's Economic Defense Mechanism

Contributor.

The Fugitive Economic Offenders Act, 2018 ('FEOA') represents a pivotal shift in India's approach to combating economic crimes, specifically targeting offenders evading the legal system by absconding overseas. Aimed at safeguarding the banking sector and reinforcing legal integrity, the FEOA empowers authorities to confiscate assets of economic offenders pre-emptively, a significant deterrent to financial frauds impacting the economy. Highlighting its efficacy, the FEOA's application to high-profile cases highlights its role in compelling offenders to comply with legal proceedings. While the FEOA marks a substantial advancement in legal frameworks against economic offenses, ongoing adaptations are vital for addressing emerging challenges and ensuring comprehensive enforcement against all economic crimes, thereby fortifying India's economic and legal landscape.

As India's population has grown steadily in recent years, so too has the number and variety of crimes committed, particularly economic crimes involving non-payment of bank loans. These activities have significantly impacted the stability of the banking sector in India. The FEOA was enacted with the primary aim of addressing the issues of economic offenders fleeing the country to evade the Indian legal process and avoid criminal prosecution, ensuring that these offenders face legal consequences in India. The FEOA targets individuals who have absconded or refuse to return to India to face criminal charges. A key feature of the FEOA is that it is for the confiscation of crime proceeds, property, and benami properties acquired by Fugitive Economic Offenders ( 'FEOs' ), whether located within India or abroad. The FEOA serves to reinforce the integrity of the Indian judicial system by preventing economic offenders from escaping its reach.

Summary of FEOA

The primary objective of the FEOA is to uphold and strengthen the rule of law within the country. The FEOA acts as a deterrent by ensuring that individuals who commit economic crimes cannot avoid legal proceedings by staying outside of India's jurisdiction. It aims to maintain the integrity and effectiveness of India's legal framework while dealing with economic offences.

A quick bulletized summary of the FEOA is as follows:

Chapter 1: Preliminary

This chapter of the FEOA lays the foundation for the Act, covering basic provisions across three sections. These sections define the short title, extent and commencement, definitions, and outline its application.

• S. 2 of the FEOA interalia provides definitions for key terms such as 'Benami Property' and 'Benami Transaction', 'Contracting State', 'Fugitive Economic Offender', 'Proceeds of Crime', and 'Scheduled Offence'.
• S. 2(b) of the FEOA states that the terms 'benami property' and 'benami transaction' shall have the same meaning as provided in clauses (8) and (9) of s. 2 of the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988).
• S. 2(c) of the FEOA defines a 'contracting state' as any country or territory outside India for which the Central Government has established arrangements with the respective government through a treaty or other means.
• S. 2(f) of the FEOA defines FEO as an individual against whom a warrant for arrest related to a scheduled offence has been issued by any court in India. It applies to individuals who have either left India to avoid criminal prosecution or are abroad and refuse to return to India to face criminal prosecution.
• S. 2(k) of the FEOA defines 'proceeds of crime' as any property derived or obtained, either directly or indirectly by any person because of engaging in criminal activity relating to a scheduled offence. This includes the value of such property. In cases where the property is situated or held outside the country, the equivalent value of the property held within the country or abroad is also considered.
• S. 2(m) of the FEOA defines a 'Scheduled Offence' as an offence listed in the schedule, provided that the total value associated with such offence, or multiple offences amounts to one hundred crore rupees or more.
• The applicability of FEOA is provided under s. 3 which provides that it is applicable to individuals who are or become an FEO on or after the 21st day of April.

Chapter 2: Declaration of FEO and Confiscation of Property

This chapter in the FEOA focuses on the process for formally declaring an individual as an FEO and the subsequent actions regarding their property.

• S. 4 of the FEOA outlines the procedure to declare an individual as FEO. The Director ( 'D' ) or Deputy Director ( 'DD' ), with reasonable belief and evidence that the individual is a fugitive, can file an application to a Special Court ( 'SC' ) for such a declaration. This application must include the reasons for such belief, the whereabouts of the individual, list of his properties including benami properties, if any. and the details of persons who may have an interest in these properties. Additionally, it also provides that the authorities which are appointed under the Prevention of Money Laundering Act, 2002 (' PMLA ') are designated for the FEOA.
• Under s. 5 of the FEOA, the D or DD is authorized, with the court's permission, to attach any property listed in the application. This power can be exercised before or after the application under s. 4 is filed provided that if this power has to be exercised before the filing of the application, certain conditions must be fulfilled: first, if there is a reasonable belief that the property is either proceeds of crime or is owned by an individual who is a FEO; and second, if there is a concern that the property might be dealt with in a manner that would make it unavailable for confiscation. However, it is mandated that the Director or the authorized officer must file an application under s. 4 before the SC within thirty days from the date of such attachment if they provisionally attach any property under this subsection.
• The D or DD have powers akin to a civil court under the Civil Procedure Code, 1908 ( 'CPC' ).
• Upon receiving an application under s. 4, the SC issues notice to the concerned individual and other interested parties. This notice requires them to appear at a specified place and time, set at a minimum of six weeks from the date of issue of the notice.
• If the individual fails to appear as required and is subsequently declared an FEO by the SC, their property becomes liable for confiscation by the SC. If an individual appears at a specified place and time the SC may terminate the proceeding against him.
• However, if an individual fails to appear either in person or through legal counsel, the SC may proceed with the hearing. After hearing the application, the SC may declare the individual a FEO.
• If the case where new properties are identified after filing the initial application the D or DD may file a supplementary application to include these assets.
• Once an individual is declared an FEO, they along with other associated entities are barred from filing any civil claims in any court or tribunal.

Chapter 3: Miscellaneous

This chapter of the FEOA encompasses a range of miscellaneous provisions that relate to the burden of proof, appeals, jurisdiction, legal protections, and the powers vested in the Central Government ( 'CG' ).

• S. 16 of the FEOA the responsibility for proving an individual's status as an FEO rests with the D or any person authorized by the D. This shifts the burden of proof onto the authorities responsible for enforcing the FEOA. Regarding appeals, any party seeking to challenge a judgment or order of the SC must do so at the High Court ( 'HC' ) within thirty days from the issuance of that judgment or order. The jurisdiction of civil courts is explicitly excluded in matters covered by the FEOA. These courts are neither authorized to try suits or proceedings related to the FEOA nor to issue injunctions in these cases. It also offers legal protection to the CG, the Presiding Officer of the SC D or DD They are shielded from any suit, prosecution, or legal proceeding if their actions under the FEOA are done in good faith.
• The CG is granted the authority to make alterations to the schedule of offences. It can either remove offences from the list or add new ones, depending on what it deems necessary or expedient. The provisions of the FEOA are designed to complement, not replace, other legal frameworks. This ensures that the FEOA works in harmony with existing laws, reinforcing the legal system without causing any jurisdictional conflicts or redundancies.

Critical Analysis - Issues in the FEOA

This chapter of the FEOA encompasses a range of miscellaneous provisions that relate to the burden of proof, The constitutionality of the FEOA has been subject to critical analysis, raising concerns regarding its adherence to constitutional principles and legal standards.

One key issue pertains to the confiscation of property before formally declaring an individual as a FEO. S. 5(2) of the FEOA allows for property confiscation based on suspicion, without affording the individual an opportunity to defend themselves. This provision appears to contravene the constitutional guarantee of equality before the law and the principle of natural justice, which presumes innocence until proven guilty.

Another constitutional concern arises from the restriction imposed on FEOs regarding their ability to put forward or defend civil claims. S. 14 of the FEOA limits access to justice by preventing FEOs from pursuing or defending civil claims, potentially infringing upon the fundamental right enshrined in Article 21 of the Constitution. The absence of a specified time frame for hearing applications under s. 4 of the FEOA poses a legal challenge, as it could lead to delays in court proceedings, allowing suspected offenders to evade justice.

Furthermore, the selective applicability of the FEOA, targeting only economic offenders involved in high-value crimes exceeding Rs. 100 crores, raises questions about its comprehensiveness.

However, the FEOA's unique features distinguish it from other laws in addressing economic offences. Its global reach enables the confiscation of properties, including those abroad, preventing offenders from evading legal processes. Moreover, the FEOA's proactive approach, allowing pre-emptive property confiscation before formal declaration as an FEO, reflects a strong intent to combat economic crimes effectively.

The pictorial representation below analyses the practical impact of FEOA and showcases its tangible success in combatting economic offences.

The enactment of the FEOA emphasizes a significant evolution in India's strategy to combat economic offences, affirming the government's dedication to preserving economic stability and fostering investor trust. Distinct from preceding laws, which were entangled in procedural delays and complexities, the FEOA establishes a vigorous framework for prompt action against perpetrators of high-value economic crimes. This legislation empowers authorities to pre-emptively secure assets, closing legal gaps previously exploited by offenders to dodge accountability.

However, the path forward demands careful navigation of obstacles similar to those faced by laws like the PMLA which have not entirely succeeded in curtailing the transfer of large sums to offshore accounts. The FEOA's continued success will depend on its flexibility and the government's commitment to refining this legislative tool, thereby enhancing India's economic resilience and legal robustness in countering economic crimes

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Money laundering: 25 people convicted in India so far

Those convicted, according to officials, include accused in cases of drug trafficking, sending fraudulent remittances abroad, terrorist financing and corruption in government funds among others.

• Updated Jun 09, 2022, 6:00 PM IST

 A total of 25 people have been convicted by courts in the country for the offence of money laundering while more than 400 arrests have been made since the ED was empowered to investigate serious financial crimes about 17 years back.

According to official data accessed by PTI, the Enforcement Directorate (ED) has filed as many as 5,422 cases or Enforcement Case Information Reports (ECIRs) under the criminal sections of the Prevention of Money Laundering Act (PMLA) while it attached (provisionally) assets worth a whopping Rs 1,04,702 crore as part of 1,739 orders issued till March 2022.

The ED was entrusted to enforce the stringent provisions of the PMLA, enacted in 2002, from July 1, 2005.

The law empowers the agency to summon, arrest, attach the assets of the accused at the investigation stage and prosecute the offenders before a court of law.

The data said the federal agency also filed a total of 992 chargesheets or prosecution complaints before the courts during the same period.

A total of 25 people have been convicted for the offence of money laundering while 400 arrests have been made by the agency during the 17-year period since the PMLA came into force.

The data said of the 1,739 provisional attachment of assets orders issued by it, 1,369 have been confirmed by the Adjudicating Authority of the PMLA while it also confirmed the attachment of properties worth Rs 5,8591 crore out of the total 1,04,702 crore.

The agency has been investigating some high-profile people, including top politicians, bureaucrats, business groups, corporates, foreign nationals and others, under the anti-money laundering law.

Talking about the second law that the ED enforces nationally -- the Foreign Exchange Management Act (FEMA)-- the data showed that the agency initiated a probe in 30,716 cases till March 31.

The FEMA, a law with civil proceedings, was enacted in 1999 after repealing the Foreign Exchange Regulation Act (FERA) of 1973.

Investigation was disposed of in 15,495 FEMA cases while show cause notices, post completion of probe, was issued in 8,109 cases. Of these, 6,472 show cause notices were adjudicated or finalised, the data said.

The agency has also got declared nine people, out of 14 applied for, as fugitive economic offenders (FEOs) by the courts, under the Fugitive Economic Offenders Act of 2018.

Businessmen accused in multi-crore bank fraud cases, including Vijay Mallya and Nirav Modi, are among those declared FEOs by the courts.

The agency also has attached assets worth Rs 433 crore under the law that was enacted by the Narendra Modi government to cripple those who are charged with high-value economic frauds and abscond from the country to evade the law.  

Also Read:  Tamil Nadu CM launches work to lay OFC for BharatNet project

Also Read:  Presidential election to be held on 18 July, counting on 21 July: EC

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Anti-Money Laundering Laws and Regulations India 2023-2024

ICLG - Anti-Money Laundering Laws and Regulations - India Chapter covers issues including criminal enforcement, regulatory and administrative enforcement and requirements for financial institutions and other designated businesses.

Chapter Content Free Access

1. the crime of money laundering and criminal enforcement, 2. anti-money laundering regulatory/administrative requirements and enforcement, 3. anti-money laundering requirements for financial institutions and other designated businesses.

1.1        What is the legal authority to prosecute money laundering at the national level?

The Prevention of Money Laundering Act, 2002 (“ PMLA ”), and the rules issued thereunder (“ PML Rules ”), provides the key legislative framework for the prosecution of money laundering.  The primary legal authority responsible for investigating and prosecuting money laundering offences under the PMLA at the national level is the Directorate of Enforcement (“ ED ”), under the aegis of the Department of Revenue, Ministry of Finance.

In addition to the above, regulators such as the Reserve Bank of India (“ RBI ”), Securities and Exchange Board of India (“ SEBI ”) and the Insurance Regulatory and Development Authority of India (“ IRDAI ”) are empowered to deal with issues relating to money laundering activities and lay down guidelines on anti-money laundering (“ AML ”) standards.  These guidelines, read with the PMLA and PML Rules, form the core of the legal framework for AML laws and enforcement in India.

1.2        What must be proven by the government to establish money laundering as a criminal offence? What money laundering predicate offences are included? Is tax evasion a predicate offence for money laundering?

Under the PMLA, the offence of money laundering arises from the commission of any offence mentioned in the PMLA schedule of offences, and proceeds of crime arising thereof.  “Money laundering” is defined as any act where a person directly or indirectly attempts to indulge, knowingly assists, or knowingly is a party to or is actually involved in any process or activity connected to the proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as untainted property; such acts are covered under the scope of a money laundering offence.  Further, where any property is derived or obtained directly or indirectly by any person as a result of a criminal activity relating to an offence specified in the schedule to the PMLA, including the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad, also amounts to proceeds of crime and hence, amounts to money laundering.  Therefore, by the very nature of its definition, money laundering involves obtaining/deriving proceeds arising from the commission of a criminal offence.  Section 4 of the PMLA criminalises the offence of money laundering.  To proceed against a person accused of offences under the PMLA, a predicate offence, i.e. an offence based on which the proceeds of the crime were generated, should have been registered with the jurisdictional police or before the competent forum.  In this regard, the Supreme Court held in its decision in Vijay Madanlal Choudhary and Others v. Union of India and Ors. (2022 SCC Online SC 929), that for initiating an action for the provisional attachment of properties, registration of the predicate offence is not mandatory.

As specified in Parts A–C of the PMLA schedule, the commission of a Scheduled Offence attracts the provisions of the PMLA.  Examples of Scheduled Offences are enumerated below:

• Part A enlists offences under various pieces of legislation, including the: Indian Penal Code, 1860 (“ IPC ”); Narcotics Drugs and Psychotropic Substances Act, 1985 (“ NDPSA ”); Explosive Substances Act, 1908; Unlawful Activities (Prevention) Act, 1967; Prevention of Corruption Act, 1988 (“ PCA ”); SEBI Act, 1992; Customs Act, 1962; Foreigners Act, 1946; Arms Act, 1959; Antiquities and Art Treasures Act, 1972; Copyright Act, 1957; Trademark Act, 1999; Information Technology Act, 2000; Companies Act, 2013 (“ CA 2013 ”); Wild Life (Protection) Act, 1972; Immoral Traffic (Prevention) Act, 1956; Explosives Act, 1884; Customs Act, 1962; Bonded Labour System (Abolition) Act, 1976; Child Labour (Prohibition and Regulation) Act, 1986; Transplantation of Human Organs Act, 1994; Juvenile Justice (Care and Protection of Children) Act, 2000; Emigration Act, 1983; Passports Act, 1967; Foreigners Act, 1946; Biological Diversity Act, 2002; Protection of Plant Varieties and Farmers’ Rights Act, 2001; Environment Protection Act, 1986; Water (Prevention and Control of Pollution) Act, 1974; Air (Prevention and Control of Pollution) Act, 1981; and Suppression of Unlawful Acts against Safety of Maritime Navigation and Fixed Platforms on Continental Shelf Act, 2002.
• Part B offence (offence under Section 132 of the Customs Act, 1962), where the total value involved in such offence is INR 1 crore or more.
• Part C deals with transborder crimes and reflects the commitment to tackle money laundering across international boundaries.

A wilful attempt to evade any tax, penalty or interest as referred to in Section 51 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“ Black Money Act ”) qualifies as a Scheduled Offence under Part C of the schedule to the PMLA.

1.3        Is there extraterritorial jurisdiction for the crime of money laundering? Is money laundering of the proceeds of foreign crimes punishable?

Yes, the PMLA confers extraterritorial jurisdiction to the authorities constituted thereunder where the offence has cross-border implications:

• where any proceeds of crime arising out of a Scheduled Offence committed in India have been remitted or attempted to be remitted outside India; or
• where any conduct by a person at a place outside India which constitutes an offence at that place and which would have qualified as a Scheduled Offence had it been committed in India, and where any proceeds arising out of such conduct thereafter may have been remitted to India.

The PMLA empowers the relevant authorities to attach and confiscate assets of equivalent value in India or abroad where the asset constituting the proceeds of crime is taken and held abroad and cannot be forfeited.

In addition to the above, the Black Money Act provided for a three-month window from July 1, 2015 to September 30, 2015 for any person to make a declaration in relation to his undisclosed assets located outside India, and avail of the option of paying the prescribed tax and penalty on their foreign assets on or before December 31, 2015, failing which they were subject to penalties and prosecution under the Black Money Act.  The offence of a wilful attempt to evade tax under Section 51 of the Black Money Act is a Scheduled Offence under Part C of the PMLA schedule and, accordingly, the PMLA may apply to such offences.

1.4        Which government authorities are responsible for investigating and prosecuting money laundering criminal offences?

The ED is the primary authority responsible for investigating and prosecuting money laundering.  Established under the aegis of the Department of Revenue, Ministry of Finance, the ED is empowered to initiate proceedings for attachment of property and launch proceedings in the designated Special Court for the offence of money laundering.  The Financial Intelligence Unit – India (“ FIU ”) under the Department of Revenue, Ministry of Finance is the central national agency responsible for receiving, processing, analysing, and disseminating information relating to suspect financial transactions to enforcement agencies and foreign FIUs.

Apart from the ED and FIU, other regulators are empowered to enforce AML guidelines, including:

• The SEBI : SEBI has issued detailed know your customer (“ KYC ”) norms and requirements for financial intermediaries and investors in the securities market.
• The RBI : Similarly, RBI has prescribed KYC and AML guidelines for banks and other financial institutions regulated by it.
• IRDAI : IRDAI has prescribed certain AML guidelines on combating the financing of terrorism (“ CFT ”), applicable to certain categories of insurers.  It has also recently released Draft Master Guidelines on AML/CFT, and final master guidelines consolidating and updating the guidelines on AML/CFT, covering provisions of the PMLA and PML Rules, and other applicable norms.
• Economic Offences Wing, Central Bureau of Investigation (“ CBI ”): CBI is a specialised police establishment established for the investigation of specific types of crimes such as corruption by public servants, serious economic offences, fraud and crime with inter-state/all-India ramifications.
• Income Tax Department : This department is empowered to take steps to prevent the offence of money laundering by imposing tax on undisclosed foreign income and assets of Indian residents.
• Registrar of Companies (“ RoC ”): As per the new requirement under the CA 2013, every Indian company, both private and public, is mandated to file with the RoC a record of the company’s significant beneficial owners (in eForm MGT-6).

1.5        Is there corporate criminal liability or only liability for natural persons?

Under the PMLA, both natural and legal persons may be prosecuted for the offence of money laundering.  Section 70 of the PMLA recognises corporate criminal liability; it states that where a company contravenes the PMLA or its rules, every person who was in charge of or responsible for the actions/business of the company at the time the contravention was committed, as well as the company, shall be deemed guilty and liable to be proceeded against under the PMLA.  Hence, in addition to the liability accruing on natural persons for contravention of the PMLA and the rules thereunder, other legal entities may also attract liability and can be fined for such contraventions.

However, as per the proviso to Section 70, the person who was in charge of or responsible for the actions/business of the company at the time the contravention was committed may contend in their defence, and prove that such contravention took place without their knowledge/despite all due diligence.

Additionally, “Politically Exposed Persons” (“ PEPs ”) have also now been defined as “individuals who have been entrusted with prominent public functions by a foreign country, including the heads of States or Governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials”.  Notably, under the Prevention of Money Laundering Amendment Rules, 2023, vide Notification No. S.O. 1074(E), dated March 7, 2023 – only foreign PEPs have been covered by the present definition, and domestic PEPs still remain excluded from its purview.  The inclusion of PEP’s definition in the principal rules has now brought the definition under PMLA at par with the RBI Master Directions on KYC, 2016 (“ RBI MD ”), and also in line with the Financial Action Task Force (“ FATF ”) norms.  Now, Reporting Entities are required to maintain records and monitor financial transactions pertaining to foreign PEPs under the PMLA.

A company may be prosecuted irrespective of whether the prosecution/conviction is contingent on the prosecution or conviction of any individual.

1.6        What are the maximum penalties applicable to individuals and legal entities convicted of money laundering?

The maximum penalty for commission of money laundering is rigorous imprisonment for a minimum period of three years, which may extend up to seven years with a fine.

It is worth noting that where the proceeds of crime involved in the money laundering relate to any of the offences under the NDPSA (see the PMLA Schedule Part A, Para. 2), the maximum penalty is rigorous imprisonment for a minimum period of three years, which may extend up to 10 years with a fine.

Under the PMLA, fines ranging from INR 10,000 to 100,000 for each failure can be imposed on legal entities who qualify as Reporting Entities (please see question 2.1) if they fail to maintain records or supply relevant information in the prescribed manner under the PMLA and PML Rules.  Although the PMLA and PML Rules do not provide for the revocation of licences of Reporting Entities, regulators such as the RBI and the SEBI regulating the Reporting Entities may take such actions based on their circulars relating to KYC and AML.

1.7        What is the statute of limitations for money laundering crimes?

The PMLA does not specifically provide for a limitation period with respect to the offences therein.  In absence thereof, the provisions of the Code of Criminal Procedure, 1973 (“ CrPC ”) apply.  Section 468 does not prescribe any limitation period for offences punishable with imprisonment of more than three years.  In the case of Hari Narayan Rai v. Union Of India , 2010 (94) AIC 908, it was observed by the Jharkhand High Court that the offence under Sections 3 and 4 of the PMLA would continue as long as the accused continues to hold the proceeds of crime, and as long as he is involved in the activity connected with the proceeds of crime projecting the same as untainted property.

Furthermore, the amendments brought to the PMLA through the Finance Act, 2019 offer clarification to Section 3 of the PMLA, setting out that it would be incorrect to interpret money laundering as a one-time, instantaneous offence that ceases with the concealment, possession, acquisition, use or projection of the proceeds of crime as untainted property or through claiming it as untainted.  A person shall be liable to be prosecuted for the offence of money laundering for as long as the said person is enjoying the “proceeds of crime” – thus, making the offence of money laundering a continuous offence.   Accordingly, for offences punishable under the PMLA, there does not appear to be a specific limitation period.

1.8        Is enforcement only at national level? Are there parallel state or provincial criminal offences?

Under the Indian AML framework, there are no parallel state or provincial criminal offences.  The offence of money laundering as recognised under the PMLA is applicable throughout India, and the enforcement actions are taken by the ED/FIU at national level.

1.9        Are there related forfeiture/confiscation authorities? What property is subject to confiscation? Under what circumstances can there be confiscation against funds or property if there has been no criminal conviction, i.e., non-criminal confiscation or civil forfeiture?

The ED is empowered to initiate proceedings for attachment of property and to launch proceedings in a criminal court or a Special Court set up for the trial of the offence of money laundering.

Properties that are derived or obtained, directly or indirectly, by any person as a result of criminal activities relating to a Scheduled Offence are subject to attachment/confiscation under the PMLA.  Under the PMLA, the term “property”: means any property or assets of any description, whether corporeal or incorporeal, movable or immovable, tangible or intangible; includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located; and covers property of any kind used in the commission of an offence under the PMLA or any of the Scheduled Offences.

The PMLA does not make a separate provision for non-conviction-based forfeitures.  On the contrary, Sections 5 and 8 of the PMLA deal with pre-trial attachment/confiscation of properties , wherein the confiscation is crystallised upon order of conviction from the designated Special Court and that such property is proceeds of crime.  Nevertheless, it may be possible to initiate such forfeiture proceedings against an accused where the accused assisted/indulged in the money laundering offence alone, without having participated in the Scheduled Offence.  This was highlighted in the case of B. Rama Raju v. Union of India [(2011) 164 Comp Cases 149 AP], wherein the division bench of the Andhra Pradesh High Court observed:

       “ On the afore-stated scheme the provisions of the Act, the prosecution under the Act; and attachment and eventual confiscation proceedings are distinct proceedings.  These two sets of proceedings may be initiated against the same person if he is accused of the offence of money-laundering.  Even when a person is not so accused, the property in his possession may be proceeded against for attachment and confiscation, on a satisfaction by the appropriate and competent authority that such property constitutes proceeds of crime .”

In its decision in Vijay Madanlal Choudhary and Others v. Union of India and Ors . (2022 SCC Online SC 929), the Supreme Court held that “proceeds of crime” includes “any property”, including that which has derived from abroad or has been obtained directly or indirectly.  It also includes property derived or obtained from the sale proceeds, or in a given case in lieu of or in exchange of the “property”, which had been directly derived or obtained as a result of criminal activity relating to a scheduled offence.

The Supreme Court also held that properties can also be attached provisionally, and in such scenarios it is not mandatory that the predicate offence should be registered.  However, provisional attachment of property can only be initiated based on the material, in possession of the authorised officer, which indicates that the person is in possession of proceeds of crime.  Moreover, not all properties of the accused person can be attached, and only those properties that appear to be the proceeds of crime, based on the material in possession of the authorised officer, can be attached.

1.10      Have banks or other regulated financial institutions or their directors, officers or employees been convicted of money laundering?

While we have not come across any successful case of conviction of any bank/regulated financial institution or their directors, officers or employees, the ED has carried out investigations in respect of the affairs of financial institutions.  The ED recently filed a money laundering case against the erstwhile Managing Director of a major private Indian bank in December 2021 for accepting illegal gratification in the form of a property in return for a loan and concessions in existing credit facilities from the bank.

In a separate instance, the RBI imposed a monetary penalty of INR 50 million on Federal Bank Limited for non-compliance with, inter alia , the RBI’s guidelines/directions on KYC and AML requirements.  Where a bank/regulated financial institution is in non-compliance with RBI directions, the RBI is empowered to revoke the banking licence of the banking company as provided under Section 35A read with Section 22 of the Banking Regulation Act, 1949 (“ BR Act ”).  Furthermore, the RBI may also impose penalties in the exercise of its powers under Section 47A(1)(c) read with Section 46(4)(i) of the BR Act.

1.11      How are criminal actions resolved or settled if not through the judicial process? Are records of the fact and terms of such settlements public?

Under Sections 265A to Section 265L, Chapter XXIA of the CrPC, Indian law recognises the concept of plea bargaining as available to the accused; however, it is not applicable for:

• offences that have been notified by the government as affecting the “socio-economic condition of the country”; or
• life imprisonment; or
• imprisonment for a term in excess of seven years.

Under Section 65 of the PMLA the provisions of CrPC apply to PMLA-related proceedings so far as they are not inconsistent with the provisions of the PMLA.  The provisions of the PMLA do not contain any explicit references to the option of plea bargaining.

The offence of money laundering is non-compoundable as the PMLA does not contain any explicit provisions for the settlement of offences; therefore, there are as of yet no Indian law precedents observing settlement of PMLA offences.

1.12      Describe anti-money laundering enforcement priorities or areas of particular focus for enforcement.

Under the PMLA, all cases of money laundering are prosecuted with equal severity.  The primary function of the ED is to investigate money laundering offences under the provisions of the PMLA and to take actions of attachment and confiscation of property if the same is determined to be proceeds of crime derived from a Scheduled Offence under the PMLA, and to prosecute the persons involved in the money laundering offence.  The Supreme Court of India has further expanded on this notion in its judgment of Vijay Madanlal Choudhary and Others v. Union of India and Ors . (2022 SCC Online SC 929) and connected matters, wherein it held that even “projecting” or “claiming” the proceeds of the crime as an untainted property would be considered to be an independent act of money laundering, and it does not necessarily have to be accompanied with concealment, possession, acquisition, or use of proceeds of crime.  Thus, projecting or claiming the proceeds of crime as an untainted property has also now been brought under the ambit of particular focus for enforcement. 

It is important to note that regulatory bodies are empowered to ensure compliance with PMLA provisions by persons, body corporates, and financial institutions.

2.1        What are the legal or administrative authorities for imposing anti-money laundering requirements on financial institutions and other businesses? Please provide the details of such anti-money laundering requirements.

The PMLA lays down the broad framework for AML compliance requirements applicable to banking companies, financial institutions, intermediaries, and persons carrying out a designated business or profession (collectively, “ Reporting Entities ”).

Pursuant to the PMLA and PML Rules, Reporting Entities are required to undertake certain AML measures that include, inter alia , customer identification, enhanced client due diligence (“ CDD ”), customer acceptance, maintenance of records, and tracking and reporting of certain types of transactions.  Reporting Entities must ensure implementation of PMLA provisions, including operational instructions issued from time to time.

Through the Prevention of Money Laundering Amendment Rules, 2023, the definition of non-profit organisation (“ NPO ”) has been inserted in the PMLA.  If the clients are NPOs, then the financial institutions shall register the client’s information on the Darpan portal of the Niti Aayog.  After ending the business relationship between a client and themselves or closing the accounts, the Reporting Entity must maintain records for five years.

According to this recent amendment, banks and financial institutions are not only required to maintain records of financial transactions of PEPs and non-governmental organisations (“ NGO ”), but are also required to share the information with the Enforcement Directorate as and when they require it.

In addition to NPOs, as detailed in question 1.5, the definition of PEPs has been added through the aforementioned amendment.  It covers the individuals who have been entrusted with prominent public functions by a foreign country, including the heads of states or governments, senior politicians or judicial or military officers, senior executives of state-owned corporations and important political party officials.

The government has also amended the due diligence documentation requirement under PMLA Rules to include the documents of officers who have the authority to act on their behalf.  The information required now also includes the names of the person holding senior management positions, partners, beneficiaries, etc.  Additionally, clients are required to submit details of their registered address and principal place of business of the banks.

PMLA provisions are further supplemented by various rules along with guidelines issued by supervisory regulators such as the SEBI, RBI, and IRDAI, providing the framework for imposing AML and compliance requirements.  The RBI MD regulate financial institutions, whereas SEBI Guidelines on AML Standards/CFT/Obligations of Intermediaries (“ SEBI AML Guidelines ”) regulate the intermediaries registered with it.  Breach of these regulations can lead to regulatory enforcement action against violators.

RBI-regulated entities, including financial institutions, are required to verify and maintain records evidencing the identity of all clients including beneficial owners, all transactions and furnish information to the FIU, among other mandates.  Reporting Entities must have a board-approved KYC policy, including four key elements: customer acceptance policy; risk management; customer identification policy; and monitoring of transactions.

Similarly, the SEBI AML Guidelines provide, inter alia , principles concerning AML and CFT procedures and obligations to be followed by all registered intermediaries to ensure compliance with AML and CFT, CDD processes, risk assessment, recordkeeping and retention, and monitoring of transactions and suspicious transactions.

Further, India is a member of FATF, an international organisation tasked with combating money laundering and terrorist financing.  As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.  It has developed the FATF recommendations, or FATF standards, to ensure a coordinated global response towards preventing organised crime, corruption and terrorism.  The FATF monitors countries to ensure they implement the FATF standards fully and effectively, and holds countries that do not comply to account.

2.2        Are there any anti-money laundering requirements imposed by self-regulatory organisations or professional associations?

The RBI, SEBI and IRDA have detailed frameworks regulating the “persons” and “Reporting Entities”, as defined under the PMLA.  These regulatory guidelines along with the PMLA and PML Rules, regulate the AML regime in India.  Furthermore, the Indian Bank’s Association, an association of Indian banks and financial institutions, has issued a guidance note on KYC norms and AML standards for its members.

Through Notification No. S.O. 2036(E), dated May 3, 2023, practicing professionals in the field of Chartered Accountancy, Company Secretaries and Cost and Works Accountants are now brought under the ambit of the PMLA as a Reporting Entity if they execute some specific listed financial transactions on behalf of their clients in the course of their profession.  While no rules have yet been notified in this regard, the Institute of Chartered Accountants of India (“ ICAI ”) has stated that it will cooperate with the Centre and raise awareness among all its members about the obligations they have under the PMLA.

Although there are no specific legal obligations for the non-regulated sector to have AML measures, it is prudent to implement measures to mitigate AML risks.

2.3        Are self-regulatory organisations or professional associations responsible for anti-money laundering compliance and enforcement against their members?

The RBI, SEBI, and IRDAI are specialised regulators empowered to deal with issues relating to money laundering activities across India.  Civil and criminal actions can be initiated by the regulators for violations of the PMLA, PML Rules or regulatory rules/guidelines issued therein, as well as failure to take AML measures, etc.

The Central Government may empower officers from various state/provincial governments to assist in PMLA enforcement.

2.4        Are there requirements only at national level?

Yes, the AML/compliance requirements under the PMLA and PML Rules apply to all persons and body corporates, including financial institutions operating/ carrying out business in India.

2.5        Which government agencies/competent authorities are responsible for examination for compliance and enforcement of anti-money laundering requirements? Are the criteria for examination publicly available?

The ED is a specialised investigative agency under the Ministry of Finance, Government of India, tasked with enforcement and prosecution of the PMLA.  The FIU is the central national agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions.  It is also responsible for coordinating and strengthening efforts of national and international intelligence, investigations, and enforcement agencies in pursuing global efforts against money laundering and related crimes.  Moreover, the RBI in its regulatory capacity works to ensure the compliance of the standards laid down by it in line with the FATF’s recommendations.

These agencies are required to act as per the criteria laid down under extant AML laws applicable in India.

2.6        Is there a government Financial Intelligence Unit (“FIU”) responsible for analysing information reported by financial institutions and businesses subject to anti-money laundering requirements?

The FIU was established in 2004 to perform the functions described in question 2.7 below.

2.7        What is the applicable statute of limitations for competent authorities to bring enforcement actions?

The FIU is an independent body accountable to the Economic Intelligence Council, headed by the Union Finance Minister of India.  The FIU’s primary functions are to receive cash/suspicious transaction reports (“ STRs ”), analyse them and, as appropriate, disseminate valuable financial information to intelligence/enforcement agencies and regulatory authorities.  Other functions include, inter alia :

• Collection of Information: Act as the central reception point for receiving cash transaction reports, NPO transaction reports, cross-border wire transfer reports, reports on the purchase or sale of immovable property and STRs from various Reporting Entities.
• Analysis of Information: Analyse information received to uncover transaction patterns suggesting potential money laundering and related crimes.
• Sharing of Information: Share information with national intelligence/law enforcement agencies, national regulatory authorities and foreign FIUs.
• Act as Central Repository: Establish and maintain a national database of reports received from Reporting Entities.
• Coordination: Coordinate and strengthen the collection and sharing of financial intelligence through an effective national, regional, and global network to combat money laundering and related crimes.
• Research and Analysis: Monitor and identify strategic key areas on money laundering trends, typologies and development.

The PMLA does not specifically provide any limitation period in which the FIU must bring an enforcement action for non-compliance with AML law.

2.8        What are the maximum penalties for failure to comply with the regulatory/administrative anti-money laundering requirements and what failures are subject to the penalty provisions?

The Director of the FIU, pursuant to an inquiry into the obligations of a Reporting Entity, may impose on such Entity, its designated director on the board or any of its employees a monetary penalty of up to INR 100,000 for each failure.

Non-compliance with AML requirements, i.e. customer identification, CDD, customer acceptance, and tracking and reporting of certain types of transactions under the PMLA, is subject to penalty provisions.

2.9        What other types of sanction can be imposed on individuals and legal entities besides monetary fines and penalties?

The PMLA is primarily a criminal statute and sanctions thereunder include:

• imprisonment of persons;
• imposition of monetary fines and penalties;
• attachment of property involved in money laundering;
• seizure, freezing or retention of properties; and
• freezing funds, financial assets or economic resources or related services.

2.10      Are the penalties only administrative/civil? Are violations of anti-money laundering obligations also subject to criminal sanctions?

The offence of money laundering is punishable with rigorous imprisonment for a term of three to seven years.  Where the offence of money laundering is related to an offence under the NDPSA, imprisonment may extend up to 10 years.

In some instances, the authorities are empowered to issue warnings or directions mandating specific compliance, or by an order impose a monetary penalty on Reporting Entities or their designated board director or any of their employees.  Except for the powers given above, the PMLA specifically bars any civil or criminal proceedings against Reporting Entities, their directors and employees for furnishing information under the PMLA.

The RBI is empowered to revoke the licence of a banking company should it fail to comply with RBI directions, including the RBI MD.  Similarly, the SEBI is empowered to take appropriate measures and to cancel the licence of an intermediary for non-compliance with SEBI directions, including SEBI AML Guidelines.

2.11      What is the process for assessment and collection of sanctions and appeal of administrative decisions? a) Are all resolutions of penalty actions by competent authorities public? b) Have financial institutions challenged penalty assessments in judicial or administrative proceedings?

Section 25 of the PMLA designates an appellate tribunal constituted under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, as an appellate tribunal where an appeal can be filed against the orders of the adjudicating authorities or any other authorities constituted under the PMLA.  The orders of the appellate tribunal can be further appealed to the High Court.

In India, court judgments are public records and generally published unless specifically barred by court or law.  However, ED actions including passing of attachment orders or lodging enforcement case information reports are not publicly available.

The assessment of penalties by the ED/adjudicating authority have been challenged by financial institutions at appellate, High Court and Supreme Court levels.

3.1        What financial institutions and non-financial businesses and professions are subject to anti-money laundering requirements? Describe any differences in the anti-money laundering requirements that each of them are subject to.

The PMLA, along with the PML Rules framed thereunder, prescribes certain compliance and reporting requirements of reporting entities that include, inter alia , banking companies and financial institutions registered with Reporting Entities such as the RBI ( viz. non-banking finance companies (“ NBFCs ”), payment system operators, etc.), intermediaries ( viz. entities registered with securities market regulators, pension fund regulators, etc.) or persons carrying out a designated business or profession as may be prescribed ( viz. a person carrying out activities for playing games of chance such as casinos, dealers in precious metals, precious stones and other high-value goods, and persons engaged in the safekeeping and administration of cash and liquid securities on behalf of other persons).  Further to Notification No S.O. 2036(E) dated May 3, 2023, practicing professionals in the field of Chartered Accountancy, Company Secretaries and Cost and Works Accountants are now brought under the ambit of the PMLA if any financial transactions are executed on behalf of clients.  As a result of the Notification No. S.O. 2135(E), dated May 9, 2023, Reporting Entities would also include, “persons carrying on designated business or profession” when they carry out the following activities:

• acting as a formation agent of companies and Limited Liability Partnerships (“ LLPs ”);
• acting as or arranging for another person to act as a director or secretary of a company, a partner of a firm or a similar position in relation to other companies and LLPs;
• providing a registered office, business address or accommodation, correspondence or administrative address for a company, LLP or trust;
• acting as or arranging for another person to act as a trustee of an express trust or performing the equivalent function for another type of trust; and
• acting as or arranging for another person to act as a nominee shareholder for another person.

The scope of the definition of a “money laundering offence” covers within its ambit any activity or transaction connected to the proceeds of crime.  The PMLA may be invoked in case of offences that have been listed in the PMLA, which includes criminal offences (such as conspiracy, cheating, fraudulent removal or concealment of property to prevent distribution among creditors, forgery, counterfeiting seals, currency or bank notes), offences pertaining to the illegal import and export of narcotic drugs and psychotropic substances, etc.

The PMLA and the PML Rules subject all Reporting Entities to AML requirements such as customer identification, CDD, customer acceptance, and the tracking and reporting of some prescribed transactions that may qualify as proceeds of crime under the PMLA.  In terms of the PML Rules, financial regulators such as the RBI, SEBI and IRDAI are empowered to issue guidelines and directions in connection with the compliance that the respective Reporting Entities must adhere to.  

For the purposes of this note on the overview of applicable regulatory framework, we have restricted our inputs to the regulatory framework applicable to entities that are regulated by the RBI and SEBI only.

In terms of the RBI MD, the term “regulated entities” includes banks, All India Financial Institutions, NBFCs, payment system providers and prepaid payment instrument issuers, etc.

Payment system providers are also subject to AML requirements, and therefore businesses engaged in offering new payment technologies or alternative currencies may also be subject to these requirements.  In 2021, PayPal, a digital financial services entity, was charged by the FIU with a penalty of INR 96 lakhs for its failure to register itself as a Reporting Entity with the FIU, and to comply with the applicable AML requirements.  PayPal is contesting this, and the matter is currently sub judice before the Delhi High Court.

Similarly, the SEBI Master Circular on Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) (“ SEBI Master Circular ”) applies to all intermediaries registered with the SEBI, which includes stockbrokers, investment advisers, merchant bankers, depository participants, etc.  The RBI MD and the SEBI Master Circular have laid down specific enhanced procedures for the respective entities supervised by them to undertake CDD in relation to their clients, as well as the procedures and manner of maintaining records of certain prescribed transactions.

3.2        Describe the types of payments or money transmission activities that are subject to anti-money laundering requirements, including any exceptions.

Under PMLA provisions, there is no minimum investment threshold or category exemption for Reporting Entities carrying out CDD measures.  However, the PML Rules mandate Reporting Entities to maintain records of certain transactions, including: all cash transactions of more than INR 1 million or their equivalent in foreign currency (“ Prescribed Value ”); any series of interconnected transactions that may cumulatively amount to the Prescribed Value; transactions involving receipts by NPOs of an amount greater than the Prescribed Value; all cash transactions involving forged or counterfeit currency notes or bank notes being used as genuine; all cross-border wire transfers of the value of more than INR 5 lakhs; all purchases and sales of immovable property by any person valued at INR 50 lakhs or more; and suspicious transactions, regardless of whether the transactions are effected in cash.

3.3        To what extent have anti-money laundering requirements been applied to the cryptocurrency industry? Describe the types of cryptocurrency-related businesses and activities that are subject to those requirements.

Under the Indian legal framework, there is presently no specific law regulating the interplay between cryptocurrencies and their involvement in the offence of money laundering, or which prescribes AML requirements to be applied to the cryptocurrency industry.  Previously, the RBI, through its Circular dated April 6, 2018, had banned its regulated entities from providing services to any individual or business dealing in digital currencies, including services such as: maintaining accounts; registering, trading, settling, clearing, giving loans against virtual tokens, and accepting virtual tokens as collateral; and opening accounts of exchanges, dealing with them and transferring or receiving money in accounts relating to the purchase/sale of cryptocurrencies or facilitating the same.  However, the Supreme Court of India ruled against the ban in Internet and Mobile Association of India vs. RBI [(2020) 10 SCC 274].  Thereafter, the RBI, through its Notification dated May 31, 2021, set out that banks and financial institutions dealing in cryptocurrencies must follow the KYC, AML and CFT obligations of regulated entities as prescribed under AML law.  Apart from the RBI’s May 2021 Notification, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was tabled before the Indian Parliament to be considered; however, there have been no further updates in this regard.

In the context of tax compliance requirements, the Finance Act, 2022, which received presidential assent as recently as March 30, 2022, stipulates new norms for taxation of cryptocurrencies.  It inserts Section 115BBH to the Income Tax Act, 1961, which deals with taxes on virtual digital assets (“ VDAs ”) and imposes a flat 30% tax on capital gains on VDAs.  This provision disallows set-off of any loss arising from the transfer of VDAs with the gains from the transfer of another VDA.  It suggests inclusion of Section 194S in the Income Tax Act, 1961, which proposes a 1% tax deduction at source on payments towards VDAs beyond INR 10,000 in a year and taxation of such gifts in the hands of the recipient.

The Ministry of Finance through Notification No. S.O. 1072(E) dated March 7, 2023, clarified that “virtual digital asset” shall have the same meaning assigned to it in clause (47A) of Section 2 of the Income-tax Act, 1961 (43 of 1961) Section 2(1)(sa). The Notification has extended the compliance requirements, such as verification of identities, maintenance of records and enhanced due diligence as provided for in the PMLA to the various service providers of VDAs.  The following activities/transactions concerning VDAs have been brought under the definition of “person carrying on designated business or profession”:

• exchange between VDA and fiat currencies;
• exchange between one or more forms of VDA;
• transfer of VDA;
• safekeeping or administration of VDA or instruments enabling control over VDA; and
• participation in and provision of financial services related to an issuer’s offer and sale of a VDA.

3.4        To what extent do anti-money laundering requirements apply to non-fungible tokens (“NFTs”)?

Neither the Indian Government nor the regulators have yet issued any guidelines concerning AML requirements applicable to NFTs.

3.5        Are certain financial institutions or designated businesses required to maintain compliance programmes? What are the required elements of the programmes?

The PMLA read with PML Rules require the Reporting Entities (as defined in the PML Rules and subsequent amendments) to appoint:

• a principal officer, who is responsible for providing the requisite information to the FIU; and
• a designated director, who ensures compliance with the obligations of the Reporting Entities as provided under the PMLA and PML Rules.

All entities regulated pursuant to the SEBI AML Guidelines and the RBI MD are required to implement AML and KYC policies for governing customer acceptance, customer identification procedures, risk management parameters and monitoring of transactions, as well as to perform periodic “Money Laundering and Terrorist Financing Risk Assessment” exercises to assess and mitigate any money laundering/terrorist financing risks for clients, countries or geographic areas, products, services, transactions or delivery channels.  All regulated entities are required to apply a risk-based approach for the mitigation/management of identified risks and must have policies and procedures in place that are duly approved by the board of directors of the entity.

The Reporting Entities must also comply with further recordkeeping and reporting requirements, as detailed in question 3.6 below.

3.6        What are the requirements for recordkeeping or reporting large currency transactions? When must reports be filed and at what thresholds?

The information relating to transactions detailed in question 3.2 above is required to be maintained by Reporting Entities.  Under the PML Rules, the records maintained must contain information including:

• the nature of the transactions;
• the amount of the transaction and the currency in which it was denominated;
• the date on which the transaction was conducted; and
• the parties to the transaction, to enable the Reporting Entity to reconstruct individual transactions.

The PMLA and PML Rules prescribe the manner and period in which Reported Entities are required to maintain records.  Reporting Entities are mandated to maintain the information relating to the transaction for a period of five years from the date of transaction between a client and the Reporting Entity.  Records relating to the identity of clients and beneficial owners, as well as account files and business correspondence, must be maintained for a period of five years after the business relationship between the client and Reporting Entity has ended or the account has been closed, whichever is later.

As per the PML Rules, every Reporting Entity shall maintain a record of all transactions, including the record of:

• all cash transactions of the value of more than INR 1,000,000 or its equivalent in foreign currency;
• all series of cash transactions integrally connected to each other which have been individually valued below INR 1,000,000 or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate exceeds an amount of INR 1,000,000 or its equivalent in foreign currency;
• all transactions involving receipts by NPOs of value more than INR 1,000,000, or its equivalent in foreign currency;
• all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine, or where any forgery of a valuable security or a document has taken place facilitating the transactions;
•  all suspicious transactions whether or not made in cash;
• all cross-border wire transfers of the value of more than INR 5,000,000 or its equivalent in foreign currency where either the origin or destination of the fund is in India; and
• all purchase and sale by any person of immovable property valued at INR 5,000,000 or more that is registered by the Reporting Entity, as the case may be. 

In terms of reporting requirements, every Reporting Entity must, inter alia , ensure the following:

• All client and transaction records and information are made available on a timely basis to the competent investigating authorities.
• The principal officer of a Reporting Entity is under an obligation to supply information relating to suspicious transactions (in the form of STRs) to the office of the director of the FIU no later than seven working days on being satisfied that the transaction is suspicious.
• The RBI MD and SEBI AML Guidelines mandate maintenance of “utmost confidentiality” in the filing of STRs with the FIU, and Reporting Entities are mandated to ensure that there is no tipping-off to the customer at any level.
• The principal officer must also supply information in respect of cash transaction (individual or connected) of the Prescribed Value, receipts by NPOs of more than the Prescribed Value, counterfeit currency transactions and cross-border wire transfers of a value of more than INR 500,000 every month to the FIU by the 15 th day of the following month.
• The principal officer must supply information relating to transactions in immovable property valued at more than INR 5 million every quarter to the FIU by the 15 th day of the month following the quarter (i.e. April, July, October or January).
• Pursuant to the RBI MD and SEBI AML Guidelines, the background, including all documents, office records, memoranda and clarifications, sought pertaining to transactions that deviate from the client’s normal activity and purpose thereof must also be examined, and findings should be recorded in writing.  Such findings, records and related documents should be made available to auditors as well as to the RBI, SEBI, the FIU and other relevant authorities during audit, inspection or as and when required.

The aforesaid records must be preserved for a period of at least five years.

3.7        Are there any requirements to report routinely transactions other than large cash transactions? If so, please describe the types of transactions, where reports should be filed and at what thresholds, and any exceptions.

The reporting requirements are in relation to certain specific type of transactions, which have been highlighted in question 3.6 above.

3.8        Are there cross-border transactions reporting requirements? Who is subject to the requirements and what must be reported under what circumstances?

Yes, the principal officer of Reporting Entities under the PMLA and the PML Rules is mandated to supply information in respect of:

• all cross-border wire transfers of the value of more than INR 5 lakhs or its equivalent in foreign currency where either the origin or destination of the funds is in India;
• payment orders;
• cashier cheques;
• demand drafts;
• telegraphic or wire transfers or electronic remittances or transfers;
• internet transfers;
• Automated Clearing House remittances;
• lockbox-driven transfers or remittances;
• remittances for credit or loading to electronic cards; and
• any other mode of money transfer by whatever name it is called; and
• loans and advances including credit or loan substitutes, investments and contingent liability by way of foreign exchange contracts, currency, interest rates and commodities and any other derivative instrument in whatsoever name it is called,

to the office of the director of the FIU by the 15 th day of the following month for transactions falling under (a), and not later than seven working days on being satisfied that the transaction is suspicious for transactions falling under (b).

There are also several compliances required in this regard under the Foreign Exchange and Management Act, 1999, including:

• Every Indian resident company that has made a Foreign Direct Investment (“ FDI ”) in the preceding year, including the current year, must submit a Foreign Liabilities and Assets Return.
• An Annual Performance Report is to be submitted by a resident individual who has made an Overseas Direct Investment (“ ODI ”).
• An Indian company that receives investment outside India for the issue of shares or other eligible securities under the FDI scheme must report all the details of the amount of consideration to the concerned Regional Office of the RBI through its Authorised Dealer (“ AD ”) category I bank within 30 days from the date the shares were issued.

3.9        Describe the customer identification and due diligence requirements for financial institutions and other businesses subject to the anti-money laundering requirements. Are there any special or enhanced due diligence requirements for certain types of customers?

Reporting Entities are required to verify the client’s identity:

•  at the time of commencement of an account-based relationship with the client (including the beneficial ownership (if applicable));
• while carrying out a transaction of an amount equal to or exceeding INR 50,000, whether conducted as a single transaction or several transactions that appear to be connected; or
• while carrying out any international money transfer operations.

There is no minimum investment threshold or category exemption available for Reporting Entities carrying out CDD measures prescribed under the PMLA and PML Rules.

The Reporting Entities are also required to conduct ongoing diligence of the client, closely examine transactions in order to ensure that they are consistent with their knowledge of the client, the client’s business and risk profile and, where necessary, the source of funds.  Furthermore, the Reporting Entity shall review the due diligence measures, including verifying again the identity of the client and obtaining information on the purpose and intended nature of the business relationship where there are suspicions of money laundering or financing of activities relating to terrorism, or where there are doubts with regard to the adequacy or veracity of previously obtained client identification data.  The reporting requirements (including confidentiality obligations, etc.) in relation to suspicious transactions have been detailed in question 3.6 above, and the criteria for reporting suspicious activity is provided in question 3.11 below.

Furthermore, the nature and extent of CDD depends on parameters such as the customer’s identity, social/financial status, the nature of business activity, and information on the customer’s business and their location, etc., to enable the categorisation of customers into low, medium and high risk.  SEBI-registered intermediaries are generally required to apply enhanced CDD for high-risk customers, i.e. those for whom the sources of funds are not clear.  These include:

• non-resident customers;
• high-net-worth individuals;
• PEPs of foreign origin, customers who are close relatives of PEPs and accounts of which a PEP is the ultimate beneficial owner;
• companies with close family shareholding or beneficial ownership;
• firms with “sleeping partners”;
• trusts, charities, NGOs, NPOs and organisations receiving donations (NPOs and NGOs promoted by the United Nations or its agencies may be classified as low-risk customers); and
• non-face-to-face customers and those with dubious reputations as per publicly available information.

Such enhanced CDD requirements include, inter alia , taking additional steps to verify the client’s identity: examining ownership and financial position, the names of the senior management personnel or partners, and the registered office address and principal place of business; identifying the sources of the client’s funds; and recording the purpose of the transaction and the intended nature of the relationship between the transaction parties.  Clients must update the Reporting Entities with any changes in the information provided.

3.10      Are financial institution accounts for foreign shell banks (banks with no physical presence in the countries where they are licensed and no effective supervision) prohibited? Which types of financial institutions are subject to the prohibition?

Yes, RBI’s KYC MD does not allow banks “ to enter into a correspondent relationship with a shell bank ”.  Shell banks are not permitted to operate in India.  The RBI MD prescribe that the “ correspondent bank should not permit its accounts to be used by shell banks ”.

Such prohibition is applicable to all Scheduled Commercial Banks/Regional Rural Banks/Local Area Banks/all Primary (Urban) Co-operative Banks/State and Central Co-operative Banks and any other entity which has been licensed under Section 22 of the BR Act.

3.11      What is the criteria for reporting suspicious activity?

The PML Rules mandate the reporting of those transactions, including an attempted transaction, whether or not made in cash, which to a person acting in good faith:

• give rise to a reasonable ground of suspicion that the transactions may involve the proceeds of a Scheduled Offence specified in the schedule to the PMLA, regardless of the value involved;
• appear to be made in circumstances of unusual or unjustified complexity;
• appear to have no economic rationale or bona fide purpose; or
• give rise to a reasonable ground of suspicion that the transaction may involve the financing of activities relating to terrorism.

Furthermore, for reporting suspicious transactions, apart from “transactions integrally connected”, “transactions remotely connected or related” must also be considered by the Reporting Entities.

3.12      What mechanisms exist or are under discussion to facilitate information sharing 1) between and among financial institutions and businesses subject to anti-money laundering controls, and/or 2) between government authorities and financial institutions and businesses subject to anti-money laundering controls (public-private information exchange) to assist with identifying and reporting suspicious activity?

Every Reporting Entity (including private businesses and financial institutions covered under the definition of the term) is required to immediately notify any suspicious transaction, whether or not made in cash (in the form of an STR including the details of clients, transactions and the nature of or reason for suspicion) to the designated officer within the Reporting Entity.  The principal officer of the Reporting Entity is under the obligation to supply information relating to suspicious transactions to the office of the director of the FIU no later than seven working days on being satisfied that the transaction is suspicious.  The principal officer must supply information relating to transactions in immovable property valued at more than INR 5 million every quarter to the FIU by the 15 th day of the month following the quarter (i.e. April, July, October or January).  The principal officer must also supply information in respect of cash transactions (individual or connected) of the Prescribed Value, receipts by NPOs of more than the Prescribed Value, counterfeit currency transactions and cross-border wire transfers of a value of more than INR 500,000 every month to the FIU by the 15 th day of the following month.  Furthermore, each Reporting Entity is also under an obligation to gather the KYC information and share it with the Central KYC Records Registry.

Separately, there are inter-regulatory arrangements for supervision and information sharing.  On November 22, 2022, the Ministry of Finance issued a Notification amending the PMLA, allowing the ED to share information about economic offenders with 15 more agencies, in addition to the 10 government agencies (which include the CBI, RBI, SEBI, IRDAI, Intelligence Bureau, and FIU) that were previously permitted.  These additional bodies include:

• National Investigation Agency.
• Serious Fraud Investigation Office.
• State Police Department.
• Regulator, as defined under clause (fa) of rule 2 of the PML Rules.
• Directorate General of Foreign Trade.
• Ministry of External Affairs.
• Competition Commission of India.
• Special Investigation Team constituted, vide Notification of the Government of India, Ministry of Finance, Department of Revenue.
• National Intelligence Grid.
• Central Vigilance Commission.
• Defence Intelligence Agency.
• National Technical Research Organisation.
• Military Intelligence.
• Inquiry authority under Central Civil Services Rules.
• Wildlife Crime Control Bureau.

3.13      Is adequate, current, and accurate information about the beneficial ownership and control of legal entities maintained and available to government authorities? Who is responsible for maintaining the information? Is the information available to assist financial institutions with their anti-money laundering customer due diligence responsibilities as well as to government authorities?

The PMLA defines “beneficial owner” as an individual who ultimately owns and controls a Reporting Entity’s client or the person on whose behalf a transaction is being conducted, which includes a person who exercises ultimate effective control over a juridical person.

Per the PML Rules and the Prevention of Money Laundering Amendment Rules, 2023, in order to ascertain controlling interest for the purposes of determining beneficial ownership, the percentage of ownership/control in Foreign Portfolio Investors (“ FPI ”) for companies and trusts is 10%.  For unincorporated associations, bodies of individuals or partnership firms, the percentage for determining BO is 15%.

Under the PMLA and PML Rules, it is the responsibility of a Reporting Entity to identify and maintain records of documents evidencing the identities of its clients and beneficial owners, and to file a copy of the records with the Central KYC Records Registry.  These records must be maintained for a period of five years after the business relationship between a client and the Reporting Entity has ended or the account has been closed, whichever is later.  Additionally, the Reporting Entity is required to take enhanced due diligence steps to examine ownership prior to the commencement of specified transactions.  Pursuant to the RBI MD and SEBI AML Guidelines, all records, memoranda and clarifications sought in relation to relevant transactions should be made available to the auditors, RBI, SEBI, FIU and any other relevant authorities during the audit or inspection, or as and when required.

Further, as per Section 90 of the CA 2013, company shall maintain a register of significant beneficial owners which must be open to inspection by any member of the company.  The competent authorities at the RoC have access to the information recorded.  Further, the CA 2013 also provides that the Central Government may at any time appoint inspectors to investigate a company’s real ownership.

3.14      Is it a requirement that accurate information about originators and beneficiaries be included in payment orders for a funds transfer? Should such information also be included in payment instructions to other financial institutions? Describe any other payment transparency requirements for funds transfers, including any differences depending on role and domestic versus cross-border transactions.

The RBI MD mandates that all cross-border transactions must be accompanied by accurate and meaningful originator information such as name, address, and account number or unique reference number.  Similarly, domestic wire transfers of INR 50,000 or above must be accompanied by originator information.  Reporting Entities are directed to identify customers if a customer is intentionally structuring wire transfers below INR 50,000 to avoid reporting or monitoring.  Further, if customers do not cooperate, efforts must be made to establish his identity, and a STR must be sent to the FIU (available at: [Hyperlink] ;Mode=0 ).

Interbank transfers and settlements where both the originator and beneficiary are banks or financial institutions are exempted from the above requirement.

3.15      Is ownership of legal entities in the form of bearer shares permitted?

Bearer shares are not permitted under the Indian legal framework.

3.16      Are there specific anti-money laundering requirements applied to non-financial institution businesses, e.g., currency reporting?

The PMLA is applicable to a “person” and “Reporting Entities” that include a “person carrying out [a] designated business or profession”.  Further, the Central Government has the power to include other activities by notification, which may include non-financial institution businesses. The following Notifications have been issued in this regard:

As per a Notification issued by the Central Government on May 3, 2023, practicing professionals in the field of Chartered Accountancy, Company Secretaries and Cost and Works Accountants are now brought under the ambit of the PMLA as a Reporting Entity if they execute any of the following financial transactions on behalf of their clients in the course of their profession:

• the buying and selling of any immovable property; 
• the management of client money, securities or other assets;
• the management of bank, savings or securities accounts;
• the organisation of contributions for the creation, operation or management of companies; and
• the creation, operation or management of companies, LLPs or trusts, and buying and selling of business entities. The Central Government through a Notification dated May 9, 2023 has listed additional activities (when carried out in the course of business on behalf of or for another person) that will deem an entity to be a “person carrying on designated business or profession”, and therefore a Reporting Entity under the PMLA.  These activities are:
• acting as a formation agent of companies and LLP;

Further, it was clarified that the following activities will be excluded from the scope:

• any activity that is carried out as part of any agreement of lease, sub-lease, tenancy or any other agreement or arrangement for the use of land, building or any space, and the consideration is subjected to deduction of income tax as defined under Section 194-I of the Income-tax Act, 1961;
• any activity that is carried out by an employee on behalf of his employer in the course of or in relation to his employment;
• any activity that is carried out by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of a company to the extent of filing a declaration as required under Section 7(1)(b) of the CA 2013; or
• any activity of a person which falls within the meaning of an intermediary as defined in Section 2(1)(n) of the PMLA. The Ministry of Finance through Notification No. S.O. 1072(E), dated March 7, 2023, has extended the compliance requirements, such as verification of identities, maintenance of records and enhanced due diligence as provided for in the PMLA to the various service providers of VDAs.  The following activities/transactions concerning VDAs have been brought under the definition of “person carrying on designated business or profession”:

With regard to currency reporting, we understand that Reporting Entities are required to maintain records and furnish reports to the FIU of certain transactions, as specified in question 3.2 above.

3.17      Are there anti-money laundering requirements applicable to certain business sectors, such as persons engaged in international trade or persons in certain geographic areas such as free trade zones?

“Reporting Entities” include “person[s] carrying out [a] designated business or profession”, which are:

• persons carrying on activities for playing games of chance for cash or kind, including activities associated with casinos;
• inspectors general of registration;
• real estate agents, as notified by the Central Government;
• dealers in precious metals, precious stones and other high-value goods, as may be notified by the Central Government;
• persons engaged in the safekeeping and administration of cash and liquid securities on behalf of other persons; and
• persons carrying out such activities, as the Central Government may designate by Notification.

The Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2022, issued on July 13, 2022 to amend the PMLA, included provisions relating to International Financial Services Centre’s Authority (“ IFSCA ”).  IFSCA has notified the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022.  These guidelines shall apply to every entity which is licensed, recognised, registered or authorised by IFSCA.  The primary aim of these guidelines is to enable these entities to adopt an objective, proportional risk-based approach to identify and assess the money laundering and terrorist financing risk to which the entities are exposed.  They are required to review and update the RBA at appropriate intervals.  These entities are also required to develop and implement policies for money laundering and terrorist financing risk, as well as laying down parameters for approving correspondent banking relationships.

As detailed in question 3.16 above, practicing professionals in the field of Chartered Accountancy, Company Secretaries and Cost and Works Accountants are now under the ambit of the PMLA as a Reporting Entity for some specified transactions.  The following activities (excluding some exceptions as listed above in 3.16) when carried out in the course of business on behalf of or for another person will also need to be reported:

• acting as a formation agent of companies and LLPs;
• providing a registered office, business address or accommodation, correspondence or administrative address for a company, LLP or a trust;

There are no specific AML requirements applicable to persons engaged in international trade.

3.18      Are there government initiatives or discussions underway regarding how to modernise the current anti-money laundering regime in the interest of making it more risk-based and effective, including by taking advantage of new technology, and lessening the compliance burden on financial institutions and other businesses subject to anti-money laundering controls?

The Government of India has integrated biometric-based identification technology (Aadhar) to identify customers in order to comply with KYC norms.  Aadhar is a unique 12-digit identification number listed on a document issued by the Indian Government which captures all details, including demographic and biometric information, of every individual resident in India.  Such technological integration has significantly lowered the cost of KYC compliance for financial institutions, and improved the efficiency and accuracy of compliance.

4.1        If not outlined above, what additional anti-money laundering measures are proposed or under consideration?

In addition to the above, various steps have been taken to strengthen the AML regime in India.  Inter alia , these include:

• The enactment of the Fugitive Economic Offenders Act, 2018, whereby all assets of an individual (as against the assets from the proceeds of crime), against whom an arrest warrant has been issued for committal of certain offences of which the value exceeds INR 1 billion, are confiscated.
• The enactment of the Companies (Significant Beneficial Owners) Rules, 2018 by the Companies (Amendment) Act, 2017.  These rules have their origin in the recommendations made by the FATF to its member countries, with regard to making suitable changes to the national legislation in order to identify individuals who ultimately have significant beneficial shareholding in the reporting company.
• In a 2018 amendment, new offences under the PCA were added to the list of Scheduled Offences under the PMLA.
• The amendments brought to the PMLA through the Finance Act, 2019 expanded the scope of “proceeds of crime” to include properties and assets created, derived, or obtained through any criminal activity related to the Scheduled Offence, even if not listed under the PMLA.  Further, the amendment introduces greater and more nuanced reporting obligations for Reporting Entities by insertion of Section 12AA, which mandates authentication of clients undertaking specified transactions.  These include requiring every Reporting Entity to take additional steps to examine a client’s ownership and financial position, including the client’s sources of funds, prior to the commencement of each transaction.  Additionally, proceedings before the ED in relation to summons, production of evidence, etc. have been deemed “judicial proceedings”, thereby making statements before the ED admissible as evidence.
• In consultation with the SEBI, the Central Government has directed that the provisions of rule 9(1A) of the PMLA, i.e. the requirement for Reporting Entities to file the electronic copy of the client’s KYC records with the Central KYC Records Registry within 10 days after the commencement of an account-based relationship with a client, shall not apply to FPIs.
• The Jan Vishwas (Amendment of Provisions) Bill, 2022, introduced in Lok Sabha on December 22, 2022, aims to decriminalise and rationalise certain offences under the PMLA that are currently covered by the PMLA Schedule Part A, such as: Para. 21 (Offences under the Trade Marks Act, 1999); Para. 22 (Offences under the Information Technology Act, 2000); Para. 25 (Offences under the Environment Protection Act, 1986); and Para. 27 (Offences under the Air Prevention and Control of Pollution Act, 1981).
• Recently, in the case of Rana Ayyub v. Directorate of Enforcement (2023 SCC Online SC 109), the Supreme Court held that the area in which the property is derived or obtained, or even held or concealed, will be the area in which the offence of money laundering is committed.
• The Supreme Court held that “investigation” must be regarded as interchangeable with the function of “inquiry” undertaken by the authorities for submitting such evidence before the adjudicating authority.  Therefore, any act done in pursuance of an investigation conducted by the officials under Section 2(na) of the PMLA would not attract the right guaranteed under Articles 20(3) and 21 of the Constitution of India.
• The Supreme Court upheld Section 45 of the PMLA, which provides for bail of the accused.  It noted that the rigours of bail under Section 45 of the PMLA, 2002, even though more expansive while restricting the right of the accused to secure bail, do not impose absolute restraint on the grant of bail.
• The Supreme Court upheld, in regard to Section 3 of the PMLA, held that it is not necessary to demonstrate that the proceeds of crime are untainted for the offence to be prosecuted under the PMLA.  Indulging in or aiding in the activity of obtaining the proceeds of crime is a sufficient and reliable piece of evidence for attracting the crime under the PMLA, and the property need not be shown to be untainted.
• The Supreme Court upheld the validity of Section 5 of the PMLA, observing that even though the second proviso of Section 5 provides the power of provisional attachment without safeguards, it is necessary to view the urgency felt by the competent authority to secure the property, and effectively prevent and regulate the offence of money laundering.
• The Supreme Court stated that the authorised officer cannot resort to the action of provisional attachment of property (proceeds of crime) mechanically, and has to record satisfaction and the reason for his belief in writing on the basis of the material in his possession; if an immediate provisional attachment is foregone, the proceedings may be frustrated.
• The petitioners contended that Section 24 of the PMLA reverses the burden of proof and falls foul of Articles 20 and 21 of the Constitution of India.  The Court further held that Section 24 has reasonable nexus with purposes and objects sought to be achieved by the PMLA, and cannot be regarded as manifestly arbitrary or unconstitutional.
• The Supreme Court held that supply of a copy of ECIR in every case to the person concerned is not mandatory; it is instead enough if the ED at the time of arrest discloses the grounds of such arrest.
•  In Sanjay Pandey v. Directorate of Enforcement (Bail Appl. 2409/2022), the court held that for a bail application in PMLA cases, it is only required to look into scheduled offences, and other offences are irrelevant.
• In K. Shanthamma v. State of Telangana (Criminal Appeal no. 261 of 2022), the Supreme Court of India ruled that in order to establish a case against someone under Section 7 of the PCA, “demand for bribe” and “it’s acceptance by the public servant” is a requirement, and simply recovering money from the accused will not result in his conviction under the Act.
• The Ministry of Finance through a Notification dated March 7, 2023 has extended the compliance requirements, such as verification of identities, maintenance of records and enhanced due diligence as provided for in the PMLA to the various service providers of virtual digital assets.
• On March 7, 2023, the Ministry of Finance issued the Prevention of Money Laundering (Maintenance of Records) Amendment Rules, 2023, to make the existing rules and regulations on client due diligence and recordkeeping more stringent.  The amendments also require implementation of group-wide policies for compliance with provisions of Chapter IV, widening the definition of NPOs and revising thresholds for ascertainment of beneficial ownership (from 25% to 10%), which means more individuals will come under the purview of the regulator.

4.2        Are there any significant ways in which the anti-money laundering regime of your country fails to meet the recommendations of the Financial Action Task Force (“FATF”)? What are the impediments to compliance?

The FATF’s most recent mutual assessment report of India was published in 2010.  The report followed the 2004 methodology agreed by FATF to rate India’s compliance with the FATF recommendations.  There are four levels of compliance: compliant; largely compliant; partially compliant; and non-compliant.

According to the assessment, India was found to be compliant with four and largely compliant with 25 of the FATF’s 49 recommendations.  India was partially compliant or non-compliant with five of the six core recommendations.  The key recommendations included, inter alia , the need to: address technical shortcomings in the criminalisation of money laundering and terrorist financing and loopholes in the domestic framework of confiscation and provisional measures; improve the reliability of identification documents; and enhance the suspicious transaction reporting regime.

In 2013, the FATF concluded that India has reached a satisfactory level of compliance with all core recommendations.  Currently, India is not on the FATF’s list of countries identified as having strategic AML deficiencies.

The FATF has prepared a plan to review India’s CFT and anti-money laundering AML measures.  The review is set to begin in May 2023, with an on-site review of India’s actions scheduled for November 2023.  India’s activities are set to be discussed at the FATF Plenary meeting in June 2024.

4.3        Has your country’s anti-money laundering regime been subject to evaluation by an outside organisation, such as the FATF, regional FATFs, Council of Europe (Moneyval) or IMF? If so, when was the last review?

The FATF’s most recent mutual evaluation report of India was published in June 2010.  As per reliable media reports, India’s next mutual evaluation by FATF is scheduled to be initiated from Summer 2023.

The 2010 mutual evaluation report of India is available at: [Hyperlink]

uments/mutualevaluationofindia.html.

4.4        Please provide information on how to obtain relevant anti-money laundering laws, regulations, administrative decrees and guidance from the Internet. Are the materials publicly available in English?

For useful links, please see below:

• The PMLA and PML Rules are available at: [Hyperlink]
• The RBI MD (updated as of May 10, 2021) are available at: [Hyperlink]
• The SEBI AML Guidelines (updated as of October 15, 2019) are available at:

Guidance and directions from various supervisory authorities, as issued from time to time, are publicly available on their respective websites.

Editor's Note

This chapter has been written by a member of ICLG's international panel of experts, who has been exclusively appointed for this task as a leading professional in their field by Global Legal Group , ICLG's publisher. ICLG's in-house editorial team carefully reviews and edits each chapter, updated annually, and audits each one for originality, relevance and style, including anti-plagiarism and AI-detection tools.

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Home > Cases > Challenges to the Prevention of Money Laundering Act

Challenges to the Prevention of Money Laundering Act

Vijay Madanlal Choudhary v Union of India

The Supreme Court upheld the wide investigative powers of the Directorate of Enforcement and the restrictive bail conditions under the Prevention of Money Laundering Act, 2002.

A.M. Khanwilkar J

Dinesh Maheshwari J

C.T. Ravikumar J

Petitioner: Vijay Madanlal Choudhary

Respondent: Union of India

Case Details

Case Number: SLP (Crl) No. 4634/2014

Next Hearing:

Last Updated: August 29, 2022

TAGS: Bribery , Corruption , Enforcement Directorate , Judicial Review , police , Prevention of Money Laundering Act

Is it necessary to obtain a magistrate’s permission before making arrests under the PMLA?

Do the rules of investigation applicable to police agencies under the Criminal Procedure Code 1973 apply to the enforcement directorate under the PMLA?

Is the 2018 amendment to the bail conditions under the PMLA constitutional? Does it undermine the judgment in Nikesh Tarachand (2017)?

Does the Nikesh Tarachand judgment lay down the correct proposition of law on bail conditions?

Are the accused person’s fundamental rights violated by the burden of proof placed on them by PMLA?

Is the amendment to Section 3 of the PMLA a permissible expansion of the meaning of ‘offence’ under the Act?Is money laundering a standalone offence? Is a complaint about a predicate offence required to arrest under PMLA?

Is money laundering a standalone offence? Is a complaint about a predicate offence required to arrest under PMLA?

Does the ability to use statements of the accused recorded by the Enforcement Directorate during judicial proceedings violate the right against self-incrimination?

Can the PMLA be applied to acts which occurred prior to the addition of the offence under the Act?

Are the amendments to the rules of search and seizure under PMLA unconstitutional?

Is the power of arrest granted to special investigation agencies unconstitutional?

Can a Court bar the ED from taking ‘coercive steps’ in all cases under the PMLA only because the constitutional validity of certain provisions have been challenged?

Do provisions concerning attachment of property under PMLA violate the right to property under article 300A?

Case Description

The Directorate of Enforcement (ED) is a financial investigation agency under the Union Government’s Department of Revenue , responsible for enforcing the provisions of the Prevention of Money Laundering Act, 2002 (PMLA). To conduct investigations, the ED is empowered to issue summons, record statements, make arrests, and search and seize property.

Despite having powers of investigation, the ED has not been classified as a ‘police agency’. This is also true for other specialised bodies, including the Serious Fraud Investigation Office (SFIO) and the Directorate of Revenue Intelligence (DRI), which are empowered to investigate economic offences under other legislations. These bodies are not obliged to follow the Code of Criminal Procedure Code, 1973 (CrPC).

Nearly 200 petitioners challenged the powers of these specialised investigation agencies that deal with economic offences. The earliest petitions were pending since 2014. More than 80 of these petitions dealt with the PMLA. These included petitions filed by several politicians accused of money laundering, such as Lok Sabha Member Karti Chidambaram, former Punjab MP Sarwan Singh Phillaur and former Jammu and Kashmir CM Mehbooba Mufti.

The following provisions of the PMLA were challenged before the Court: 

Sections 5 and 8(4) which grants the ED wide discretionary powers to attach the property of the accused—challenged as arbitrary for violating safeguards meant to protect the accused.

Section 17 which grants the ED wide powers to enter and search suspected property without judicial permission. Along with Section 19 which grants the power of arrest to the ED, and Section 24 which presumes guilt of the accused until it is disproved, these provisions were challenged for exempting the ED from following the rules of criminal procedure.

Section 45 of the Act which takes away the presumption of innocence usually afforded to accused persons under criminal law. To be granted bail, the accused must prove prima facie that they were not guilty, and satisfy the Court that they will not commit any further offence. These ‘twin bail conditions’ under PMLA are central to this case. Interestingly, the SC declared this provision unconstitutional in Nikesh Tarachand Shah v Union of India (2017). The Union government then amended the provision in 2018. The ED claimed that this amendment brought the provision in line with Nikesh Tarachand Shah . The petitioners argued that the amendment undermined the Judgment, and re-established the original twin conditions.

Section 50   allows the ED to compel accused to make self-incriminating statements under threat of a fine, was challenged for violating the fundamental rights of the accused under Article 20 of the Constitution. The petitioners contended that the investigation agencies effectively exercise police powers and should be obligated to follow the CrPC while conducting investigations. Crucially, since the ED is not a police agency, statements made by the accused to ED members in the course of an investigation can be used against the accused in judicial proceedings.

On July 27th 2022, a 3-Judge Bench comprising Justices A.M. Khanwilkar , Dinesh Maheshwari , C.T. Ravikumar upheld all the challenged provisions of the Prevention of Money Laundering Act, 2002.

Documents (15)

Order Allowing Review of PMLA Judgment

August 25, 2022

Review Petition on Behalf of Mr. Karti Chidambaram

August 22, 2022

Judgment Upholding All Challenged PMLA Provisions

July 27, 2022

Note on Arrest and Bail by SG Tushar Mehta for UOI

February 22, 2022

Note on the nature of money laundering offence by SG Tushar Meht for UOI

Note Providing Overview of PMLA by SG Tushar Mehta for UOI

Note On International Background of PMLA by SG Tushar Mehta for UOI

Written Submissions by Amit Desai for Mohit Sharma

February 10, 2022

Written Submissions by Vikram Chaudhari for Rajbhushan Dixit

February 9, 2022

Written Submissions by Abhishek Manu Singhvi for Karti Chidambaram

February 7, 2022

Note on Section 50, PMLA by Kapil Sibal for Karti Chidambaram

February 1, 2022

Note on Police Powers of ED by Kapil Sibal for Karti Chidambaram

Note On Money Bills by Kapil Sibal for Karti Chidambaram

January 24, 2022

Opening Proposition Note by Kapil Sibal for Karti Chidambaram

Issues Proposed for Adjudication by Sr. Adv. Kapil Sibal

July 24, 2021

Reports (24)

PMLA Judgment Pronouncement: All Challenged Provisions Upheld

PMLA Arguments Matrix

March 18, 2022

Challenges to the Prevention of Money laundering Act: Money Laundering Is A Continuing Offence Says ASG, PMLA Not Being Applied Retrospectively

March 10, 2022

Challenges to the Prevention of Money laundering Act: Union Defends ED’s Power To Record Statements Of Accused Under S50

March 9, 2022

Challenges to the Prevention of Money laundering Act: Solicitor General Tushar Mehta Argues That Onerous Bail Conditions Are Constitutional

March 8, 2022

Challenges to the Prevention of Money laundering Act #20: Solicitor General Tushar Mehta Defends ED’s Wide Powers of Arrest

Challenges to the Prevention of Money laundering Act #19: SG Tushar Mehta Warns Bench on Dangers of Applying CrPC to PMLA Investigations

March 3, 2022

Challenges to the Prevention of Money laundering Act #18: SG Tushar Mehta Argues Money Laundering Must Be Defined in Wide Terms

March 2, 2022

Challenges to the Prevention of Money laundering Act #17: SG Tushar Mehta Argues ED’s Powers Are Justified

February 24, 2022

Challenges to the Prevention of Money laundering Act #16: SG Tushar Mehta Explains Evolution of Money Laundering

February 23, 2022

Challenges to the Prevention of Money laundering Act #15: Mr. Jethmalani Argues PMLA Bail Conditions are Disproportionate and Unconstitutional

Challenges to the Prevention of Money laundering Act #14: Mr. Ponda Argues PMLA Forces Accused To Be A Witness Against Themselves

February 17, 2022

Challenges to the Prevention of Money laundering Act #13: Dr. Guruswamy Argues ED’s Powers Violate Constitutional Principles

February 16, 2022

Challenges to the Prevention of Money laundering Act #12: Mr. Desai Argues Bail Must Balance Interests of Accused and State

February 15, 2022

Challenges to the Prevention of Money laundering Act #11: Amit Desai Argues Amendments Defeat Purpose of PMLA

Challenges to the Prevention of Money Laundering Act #10: Sr. Adv. A.M. Singhvi Argues Bail Conditions Are Rendered Invalid

Challenges to the Prevention of Money Laundering Act #9: Sr. Adv. A.M. Singhvi Argues PMLA Reverses Burden of Proof

February 8, 2022

Challenges to the Prevention of Money Laundering Act #8: Sr. Adv. A.M. Singhvi Argues Bail Conditions Violate Art. 21

February 3, 2022

Challenges to the Prevention of Money Laundering Act #7: Sr. Adv. Siddharth Luthra Argues for Procedural Checks on the ED

February 2, 2022

Challenges to the Prevention of Money Laundering Act #6: Sr. Adv. Kapil Sibal Argues PMLA Grants ED Police Powers

Challenges to the Prevention of Money Laundering Act #5: Sr. Adv. Kabil Sibal Argues PMLA Amendments Are Arbitrary

January 27, 2022

Challenges to the Prevention of Money Laundering Act #4: Sr. Adv. Kabil Sibal Argues PMLA Violates Fundamental Rights of the Accused

January 25, 2022

Challenges to the Prevention of Money Laundering Act #3: Sr. Adv. Kapil Sibal Discusses Objections to the PMLA

October 27, 2021

Challenges to the Prevention of Money Laundering Act #2: SC Grants Leave to Mr. Chidambaram to Travel Abroad

October 25, 2021

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Critical Operational Risks from Two Indian Bank Cases

The Indian banking sector has made the front page recently due to a steep rise in the instances of fraud. People’s confidence in the country’s banking system, crippled by non-performing assets or bad loans, has been marred by this crisis. Two recent cases of fraud, one at India’s second-largest state-owned Punjab National Bank and the other at the private Yes Bank , highlight how regulatory weakness, coupled with poor implementation and a lack of compliance culture, can manifest in misappropriations, money laundering and other financial crimes. Ultimately, the dual problem of non-adherence and lax governance in India means firms must strengthen their own risk management programs to stay compliant.

Existing regulations

Banks in India are regulated mainly by the Banking Regulation Act ( BR Act ) of 1949, which provides a framework for the supervision and regulation of all banks in India. Additionally, it gives the country’s central bank, the Reserve Bank of India ( RBI ), the power to grant licenses to banks and regulate their business operations.

Established on April 1, 1935, the RBI issues various guidelines, notifications and policies to regulate the banking sector. It has a broad range of responsibility as a primary regulator of the financial sector that includes directions on Know Your Customer (KYC) norms and developing and implementing AML/CFT regulations based on Financial Action Task Force (FATF) standards. Detailed guidelines contain recommendations on customer due diligence (CDD) for banks by the Basel Committee on Banking Supervision (BCBS), which helps banks and other financial institutions know and understand their customers and financial dealings and thus mitigate risks wisely.

An increasing issue

Despite these regulations, reported instances of fraud and money laundering have increased in India. For example, in the fiscal year 2018-19, the RBI reported a significant 15 percent increase in the number of fraud cases compared to the previous fiscal year. The total value involved increased by 74 percent. Another report by the RBI stated that public sector banks (PSBs) accounted for the majority of frauds reported in the fiscal year 2018-19: 55.4 percent of the total cases reported and 90.2 percent of the amount involved . In 2019, the RBI penalized 36 banks for non-compliance related to time-bound implementation and strengthening SWIFT operations. 

The Punjab National Bank and Yes Bank cases reflect the pervasive culture of negligence, corruption and non-adherence in the Indian banking sector:

Punjab National Bank

The Punjab National Bank (PNB) is a public sector bank and is majority-owned by the Indian government. Founded in 1894, PNB is one of the oldest commercial banks in the country but recent fraud cases have tarnished its reputation. The bank made headlines in January 2018 when Indian authorities said that a global jeweler, Nirav Modi, deceitfully obtained letters of undertaking (LoUs), or bank guarantees, and then laundered the proceeds of the funds through a complex set of worldwide transactions using shell or dummy companies. PNB guaranteed the illegal trade-financing loans. Several bank officials were involved in maneuvering the SWIFT interbank messaging system to get the letters through. The fake letters were issued over seven years in exchange for kickbacks. By February 12, 2018, the Central Bureau of Investigation (CBI) uncovered over US$1.6 billion involving LoUs. CBI revealed that from 2015 to 2017, the RBI issued several circulars, notices and questionnaires to the bank but none were acknowledged and no corrective measures were taken by the ( then ) management. As a result, in March 2019, the bank had to pay US$2.67 million as a penalty for non-compliance with regulatory directions. The RBI penalized several other public sector banks for similar violations.

What went wrong? PNB’s internal risk system failed at monitoring the fraudulent transactions involving LoUs materialized by Modi, in collusion with certain low-rank officials. An internal report by PNB found that 54 bank officials—from clerks, foreign exchange managers and auditors to heads of regional offices—failed to prevent the fraud. Eight thereof have been charged by the federal police for their roles. 

On the other side of the fraud, the Enforcement Directorate (ED)—responsible for investigating financial crimes—registered two cases of money laundering against Modi and his associate and seized assets worth INR56.74 billion. Modi, declared a fugitive offender by the Indian government, was arrested in London in March 2019. The government is working on his extradition to India.

Publicly listed Yes Bank Limited was established in 2003. In January 2020, one of the bank’s independent directors, Uttam Prakash Agarwal, resigned from the board citing governance issues. Then, the RBI scrutinized the banks’ impaired loan ratio and non-performing assets (NPA). On March 8, 2020, under provisions of the Prevention of Money Laundering Act (PMLA), the ED arrested the bank’s former managing director and chief executive, Rana Kapoor. The RBI also placed Yes Bank under moratorium and subsequently took over the management. A preliminary assessment by the ED indicated that the NPAs amounted to US$2.6 billion and it identified more than one hundred shell companies floated by the family members of Kapoor. In a charge sheet released by CBI and ED in June 2020, Kapoor is among others who have been accused of cheating, fraud and criminal conspiracy. 

What went wrong? The co-founder allegedly had rejected a ll risk warnings and continued extending credit facilities to different corporate accounts in exchange for various monetary benefits and kickbacks. According to the ongoing probe, the bank’s financial audit conducted by PricewaterhouseCoopers also confirmed the allegations related to payment of kickbacks and money laundering involving several firms. In 2015, UBS, a global financial services company, raised the first red flag about Yes Bank’s asset quality. Its report stated that Yes Bank had loaned more than its net worth to companies that were unlikely to pay it back. The bank ignored the alarm and continued lending aggressively without any due diligence. Negligence and non-adherence lead to accumulating bad debts.

As of March 14, 2020, Yes Bank was bailed out by the State Bank of India (SBI)-led consortium. The state-owned State Bank of India acquired a 48.21 percent stake in the company under the RBI’s Yes Bank reconstruction scheme. The probe against the people involved is ongoing.

Case commonalities

• Lack of compliance culture: In terms of following and adhering to authorities’ directions, both banks were found to be negligent, from the management to lower-level employees. Also, both had weak corporate governance or poor management by the leaders in monitoring any non-compliance, connivance of officials or bad debts. 
• Bribery: At PNB, officials were charging a commission of around two percent on each LoU per year, which was never shown in the bank’s account books. At Yes Bank, the founder was accused of receiving kickbacks from various corporate entities. 
• Role of shell companies: In both cases, a number of shell companies were formed to materialize money laundering. Shell companies are not illegal but since they can be used illegitimately to disguise business ownership from law enforcement or the public, they require rigorous due diligence.

Government measures to combat financial crimes

The government and authorities are acting to amend the existing rules and laws to effectively manage these risks. Among the key immediate measures, the RBI has:

• Prohibited the issuance of LoUs and letters of comfort (LoCs) for trade credits, the instruments that were used to defraud PNB.
• Issued fresh directions for banks to integrate SWIFT, a payment network, with their core banking solution (CBS) by April 30, 2018.
• Set up a Central Fraud Registry, an online, searchable database of frauds reported by banks on a near real-time basis to help its users detect and evaluate the risks.
• Begun to consider accounting for reporting lapses, following data by RBI that suggests that the frauds reported by banks in 2018-19 actually occurred between 2000 and 2018.

The Indian government also:

• Enacted the Fugitive Economic Offenders Act in 2018 to address cases of high-value economic offenders fleeing the country to avoid prosecution. 
• Enforced the Anti-Black Money Tax Act of 2015 to deal with undisclosed foreign assets and bank accounts.
• Widened the definition of “proceeds of crime” in amendments brought to the PMLA.
• Added new protocols under Financial Intelligence Unit-India (FIU) to better regulate suspicious transactions.

The road ahead

The banking reforms have started but it’s a long road ahead: As authorities review and revise the guidelines to prevent financial crime, the CBI has registered 40 cases of bank fraud in the first six months of 2020 and is investigating non-performing loans worth over INR144 billion.

While relevant authorities take small steps toward the implementation of regulations in the sector, a competent risk management system within organizations themselves is paramount. The onus falls on banks to keep their internal control system healthy and vigilant. As a former RBI governor said , “it is simply infeasible for a banking regulator to be in every nook and corner of banking activity to rule out frauds by ‘being there.’”  

If India wants to witness a tangible difference in the imminent future, the pervasive culture of negligence, corruption and non-adherence cannot continue in its banking sector. Firms need to increase due diligence and risk screening and fortify their governance to help manage risks prudently.

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Money Laundering and its Prevention

Last updated on December 23, 2022 by ClearIAS Team

Money Laundering is a heinous crime that not only affects the social and economic fabric of the country but also tends to promote other serious offenses like terrorism and drug trafficking etc.

It is a growing problem that needs to be addressed and the Prevention of Money Laundering Act was enacted in response to India’s global commitment to combat the menace of money laundering.

Table of Contents

What is Money laundering?

Money laundering is the process of making large amounts of money generated by criminal activity – such as drug trafficking, terrorist funding, corruption, etc – appear to have come from a legitimate source.

The basic money laundering process has three steps:

• Placement: At this point, the launderer deposits the dirty money into a legitimate financial institution. This is frequently in the form of cash as bank deposits. This is the most dangerous stage of the laundering process because large amounts of cash are visible, and banks must report high-value transactions.
• Layering: This entails sending money through various financial transactions in order to alter its form and make it difficult to track. Layering can include several bank-to-bank transfers, wire transfers between different accounts in different names in different countries, making deposits and withdrawals to constantly vary the amount of money in the accounts, changing the currency of the money, and purchasing high-value items (boats, houses, cars, diamonds) to change the form of the money. This is the most complicated step in any laundering scheme, and it all revolves around making the original dirty money as difficult to trace as possible.
• Integration: At the integration stage, the money appears to come from a legal transaction and re-enters the mainstream economy. A final bank transfer into the account of a local business in which the launderer is “investing” in exchange for a cut of the profits, the sale of a yacht purchased during the layering stage, or the purchase of a $10 million screwdriver from a company owned by the launderer are all examples of this. The criminal can now use the money without being caught. If there is no documentation from the previous stages, catching a launderer during the integration stage is extremely difficult.

Some of the common methods of money laundering are:

• Smurfing: This method involves dividing large sums of money into smaller, less suspicious amounts. The money is then deposited into one or more bank accounts over time by multiple people (smurfs) or by a single person.
• Overseas banks: Money launderers frequently transfer funds through various “offshore accounts” in countries with bank secrecy laws. Hundreds of bank transfers to and from offshore banks can be involved in a complex scheme. The Bahamas, Bahrain, the Cayman Islands, Hong Kong, Panama, and Singapore are among the “major offshore centers,” according to the International Monetary Fund.
• Shell companies: These are fake companies that exist solely to launder money. They accept dirty money as “payment” for ostensible goods or services but provide none; they simply create the appearance of legitimate transactions through forged invoices and balance sheets.
• Investing in legitimate businesses: Launderers will sometimes wash dirty money in otherwise legitimate businesses. They may use large businesses, such as brokerage firms, where the dirty money blends in easily, or they may use small, cash-intensive businesses, such as bars, car washes, strip clubs, or check-cashing stores. These companies could be “front companies” that provide a good or service but their true purpose is to clean the launderer’s money. This method typically works in one of two ways: the launderer can combine his dirty money with the company’s clean revenues, in which case the company reports higher revenues from its legitimate business than it actually earns; or the launderer can simply hide his dirty money in the company’s legitimate bank accounts in the hopes that authorities will not compare the bank balance to the company’s financial statements.
• Hawala: A different or parallel remittance system is hawala. It exists and functions independently from or concurrently with “traditional” banking or financial channels. The majority of money-laundering schemes use a combination of these techniques. This crime is challenging to eradicate due to the variety of tools available to money launderers.

Measures for prevention of Money laundering

There are various statutory frameworks to prevent money laundering such as PMLA, SAFEMA, NDPSA, FEMA, COFEPOSA etc. Everything will be discussed below.

Statutory framework

Before the Prevention of Money Laundering Act of 2002 (PMLA) was passed in India, the main statutes that included measures to address the issue of money laundering were:

• The Income Tax Act, 1961
• The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA)
• The Smugglers and Foreign Exchange Manipulators Act, 1976 (SAFEMA)
• The Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPSA)
• The Benami Transactions (Prohibition) Act, 1988
• The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988
• The Foreign Exchange Management Act, 2000, (FEMA)

Prevention of Money Laundering Act (PMLA) 2002

The Prevention of Money Laundering Bill was introduced in 1998 and passed in 2002 in response to the urgent need for the adoption of comprehensive legislation for the prevention of money laundering and related activities, confiscation of proceeds of crime, the establishment of agencies and mechanisms for coordinating measures for combating money laundering, etc. Taking effect on July 1st, 2005, the Act was put into law.

The objective of the Act

• To prevent money laundering.
• To provide for confiscation of property derived from, or involved in, money laundering.
• For matters connected therewith or incidental thereto.
• It forms the core of the legal framework put in place by India to combat money laundering.

Its salient features include:

• Defines Money laundering.
• Expanded the reach of the Act by adding many more crimes under various legislations: It lists specific offenses that would fall under this Act’s purview under the IPC, the Narcotic Drugs and Psychotropic Substances Act , the Arms Act, the Wild Life (Protection) Act, the Immoral Traffic (Prevention) Act, and the Prevention of Corruption Act.
• In instances of cross-border money laundering, it enables the Central Government to implement the UN Convention against Corruption’s provisions by returning the confiscated property to the requesting nation.
• It aims to include certain financial institutions in the Act’s reporting requirements, including Full Fledged Money Changers, Money Transfer Services, and Master Card.

Enforcement apparatus

• Adjudicating Authority: The Act gives the Central Government the authority to establish an adjudicating authority with a chairman and two other members and to specify the authority’s mandate and other terms of service. The Authority has been given independent authority to control its adjudicating process.
• Administrator: The property laundered will be taken care of i.e. managed after confiscation by an Administrator who will act in accordance with the instructions of the Central Government.
• Appellate Tribunal: An Appellate Tribunal established by the Central Government will hear all appeals from decisions made by the Adjudicating Authority. It will have two members, and the chairman will be in charge.
• Special Courts: An Appellate Tribunal established by the Central Government will hear all appeals from decisions made by the Adjudicating Authority. It will have two members, and the chairman will be in charge.
• Banking companies, financial institutions, and intermediaries are required by the PMLA and the rules thereunder to confirm the identity of their clients, keep records, and provide information to FIU-IND.

Institutional framework

• Enforcement Directorate: Investigation and prosecution of cases under the PMLA have been entrusted to Enforcement Directorate.
• Financial Intelligence Unit – India (FIU-IND): established in 2004 to serve as the primary national organization in charge of gathering, analyzing, and disseminating data about improbable financial transactions. As part of its mission to further the international fight against money laundering and related crimes, FIU-IND is also in charge of coordinating and bolstering the efforts of national and international intelligence, investigation, and enforcement agencies.

International Cooperation

• The Financial Action Task Force (FATF): The G7 summit in Paris in 1989 led to the creation of the FATF, an intergovernmental organization. The Financial Action Task Force (FATF) is a “policy-making body” that works to create the political will needed to bring about national legislative and regulatory reforms in order to combat money laundering, terrorist financing, and other related threats to the integrity of the global financial system.
• The Asia/Pacific Group on Money Laundering (APG) was a self-contained regional anti-money laundering organization. The APG’s mission is to facilitate the adoption, implementation, and enforcement of internationally accepted anti-money laundering and anti-terrorist financing standards outlined in the Financial Action Task Force’s recommendations (FATF).
• The Vienna Convention/ United Nations Convention against Illicit Trafficking in Drugs and Psychotropic Substances: In December 1988, it was the first major initiative in the prevention of money laundering. By requiring member states to criminalize the laundering of money from drug trafficking, this convention laid the groundwork for efforts to combat money laundering.
• The Council of Europe Convention: In 1990, this convention established a common policy on money laundering. It establishes a common definition of money laundering as well as common measures to combat it.
• Basel Committee Minimum standards: The Basel Committee on Banking Regulations and Supervisory Practices is made up of representatives from the central banks and supervisory authorities of eleven major industrialized nations as well as Luxembourg. In 1998, the committee issued a statement of principles aimed at combating money laundering.

Effects of Money Laundering

• Socio-cultural effects: Money laundering success encourages criminals to continue their illegal schemes—more fraud, more drugs on the streets, more drug-related crime, and so on.
• Terrorism: Money laundering is a major source of terrorism financing. Terrorists have demonstrated adaptability and opportunism in meeting their funding needs.
• Organized crime can infiltrate financial institutions, acquire control of large sectors of the economy through investment, or offer bribes to public officials and indeed governments.
• Economic effects
• It’s estimated that money launderers scrub as much as $2 trillion (or 5 per cent of the world’s GDP) every year.
• Massive influxes of dirty cash into particular areas of the economy that are desirable to money launderers create false demand.
• Legitimate small businesses cannot compete with money-laundering front companies that can afford to sell a product at a lower price because their primary goal is to clean money rather than make a profit.

Challenges in the prevention of Money laundering

• Increased use of digital currency: The rise of cryptocurrency allows money launderers to conceal their illicit funds. Estimates suggest that criminals have used the hyper-connected cryptocurrency ecosystem to launder more than $2.5 billion in dirty Bitcoin since 2009.
• Preference for cash over digital payments for transactions: The use of cash will ease the process of “layering”.
• Lack of awareness about the seriousness of crimes of money laundering: Instead of going through lengthy paperwork transactions in banks, the poor and illiterate prefer the Hawala system, which has fewer formalities, little or no documentation, lower rates, and anonymity.
• Lenience from banks : Increasing competition in the financial market is forcing banks to lower their guards, allowing money launderers to use it illicitly in furtherance of their crime.
• Collusion by employees of financial institutions : Financial institutions are supposed to check the source of funds, monitor account activity, and track irregular transactions, but the involvement of financial institution employees makes laundering easier.
• Lack of comprehensive enforcement agencies: Money laundering is no longer limited to a single area of operation, but has broadened to include many different areas of operation. In India, there are separate wings of law enforcement dealing with money laundering, terrorist crimes, economic offenses, and so on, and they lack coordination.
• The widespread act of smuggling: There are a number of black market channels in India for the purpose of selling goods, with many imported consumers buying goods such as food, electronics, and so on. Black merchants conduct cash transactions and avoid customs duties, allowing them to offer lower prices than regular merchants.
• Tax Heaven Countries: Strict financial secrecy laws by tax heaven countries incentivize the creation of anonymous accounts in these countries by launderers.

Way forward

• Measures are needed to address the risk of cryptocurrency in money laundering.
• Tax heavens need to build a balance between financial confidentiality and this confidentiality turning to a money-laundering haven.
• Sensitize the masses about the ill effects of laundering.
• Prior to the launch of new products, business practices, or the use of new or developing technologies, financial institutions should conduct a risk assessment.
• Implement FATF Recommendations which sets out a comprehensive and consistent framework. Some of them are:
• Identify the risks; develop policies and domestic coordination to mitigate money laundering and terrorist financing risks.
• Money laundering should be criminalized in accordance with the Vienna Convention and the Palermo Convention, which ensure that financial institution secrecy laws do not impede the implementation of the FATF Recommendations.
• Apply the crime of money laundering to all serious offenses, with a view to including the widest range of predicate offenses.
• Implement targeted financial sanctions regimes to comply with UN Security Council resolutions on the prevention, suppression, and financing of terrorism.
• Examine the sufficiency of laws and regulations governing non-profit organizations, which the country has identified as vulnerable to terrorist financing abuse.
• Apply preventive measures for the financial sector and other designated sectors.
• Financial institutions should be required to keep all necessary records on domestic and international transactions for at least five years in order to respond quickly to information requests from competent authorities.
• Establish authorities’ powers and responsibilities (e.g., investigative, law enforcement, and supervisory authorities), as well as other institutional measures.
• Countries should have anti-money laundering policies and should designate an authority that is responsible for such policies.
• Provide mutual legal assistance in the case of money laundering and effectively carry out extradition requests in the case of money laundering and terrorist financing.

The threat posed by this scheme necessitates advanced laws to prevent it from occurring, such as the use of AI and large intelligence databases at the government level.

This is not a threat that is limited to national borders but affects the entire world, so both national and international stakeholders must work together to tackle it.

Article Written by: Remya

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Explained: Why has the ED raided Vivo, what was revealed?

The Enforcement Directorate (ED) has raided more than 40 places in a money-laundering case against Chinese smartphone company Vivo. It found that company ‘remitted’ almost 50 per cent of its turnover, which is Rs 62,476 crore, mainly to China in order to avoid paying taxes here

The Enforcement Directorate (ED) raided more than 40 places across India on Tuesday and Wednesday in a money-laundering case against Chinese smartphone company Vivo and its 23 related firms.

According to news agency Reuters, the ED has blocked 119 bank accounts linked to Vivo’s India business which were holding 4.65 billion rupees ($58.76 million).

What is the case against Vivo?

According to News18 , the ED conducted searches at the places related to Vivo and associated companies, including Xiaomi and Oppo, in a money laundering case.

It took cognisance of a recent Delhi Police (economic offences wing) FIR against a distributor of the agency based in Jammu and Kashmir where it was alleged that a few Chinese shareholders in that company forged their identity documents.

The ED suspects this alleged forgery was done to launder illegally generated funds using shell or paper companies and some of these “proceeds of crime" were diverted to stay under the radar of Indian tax and enforcement agencies.

What was revealed in the raids?

The ED on Thursday said the Indian arm of Chinese smartphone maker Vivo “remitted" almost 50 per cent of its turnover, which is Rs 62,476 crore, mainly to China in order to avoid paying taxes here.

The federal probe agency also said it has seized funds worth Rs 465 crore kept in 119 bank accounts by various entities, Rs 73 lakh cash and 2 kg gold bars after its pan-India raids that were launched early this week on July 5 against Vivo Mobile India Pvt. Ltd. and its 23 associated companies.

According to the ED, they have evidence that Vivo officials used forged documents while incorporating the companies.

As per an NDTV report, the ED alleged that “employees of Vivo India, including some Chinese nationals, did not cooperate with the search proceedings and tried to abscond, remove and hide digital devices which were retrieved by the search teams.”

Not the first time Chinese companies have been under the scanner

In April this year, the ED seized deposits worth Rs 5,551 crore of Vivo’s rival Xiaomi India, another Chinese smartphone giant, for allegedly violating foreign exchange rules.

Premises of a number of these Chinese smartphone companies including Xiaomi, Oppo and Vivo, their distributors and linked associates were raided across the country by the I-T department in December last year and it later claimed to have detected alleged unaccounted income worth over Rs 6,500 crore due to violation of the Indian tax law and regulations. With inputs from agencies

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Over Rs 1,100 crore laundered, alleges ED in supplementary charge sheet against K Kavitha

03 june 2024, 09:27 pm ist.

Bharat Rashtra Samithi (BRS) leader K Kavitha leaves from Rouse Avenue Court after the hearing in connection with Delhi excise policy case, in New Delhi on Tuesday. l Photo: ANI

New Delhi: The Enforcement Directorate has alleged in its supplementary charge sheet filed against BRS leader K Kavitha before a court here that more than Rs 1,100 crore was laundered in the alleged Delhi excise scam.

According to the ED, out of Rs 1,100 crore, Kavitha was involved in proceeds of crime (PoC) worth Rs 292.8 crore.

The allegations were made in a supplementary prosecution complaint, ED's equivalent to a charge sheet, filed before Special Judge Kaveri Beweja, who on Monday extended Kavitha's judicial custody till July 3.

The judge extended the custody after Kavitha was produced before the court in pursuance of its earlier order issuing a production warrant against her.

The court had issued the warrants after taking cognisance of a charge sheet against the BRS leader in the case on May 29.

The court also granted bail to three co-accused persons -- Prince, Damodar and Arvind Singh. The three accused were charge-sheeted without being arrested during investigation by the ED.

“As per the investigation so far, the total proceeds of crime identified is Rs 1,100 crore, out of which PoC of Rs 292.8 crore is being dealt with in this Prosecution Complaint. Through activities of the accused persons i.e. Kavitha, Champreet Singh, Prince Kumar, Damodar Sharma and Arvind Singh, huge proceeds of crime have been generated,” the charge sheet alleged.

The charge sheet claimed that Kavitha was involved in PoC (money generated and laundered in crime) of Rs 292.8 crore, out of which kickbacks of Rs 100 crore were given to AAP leaders.

“Kavitha conspired with the members of the South Group and the AAP leaders through accused Vijay Nair (who was acting on behalf of the top leaders of the AAP) to pay kickbacks to the tune of Rs 100 crore and receive undue benefits,” the documents claimed.

Kavitha, by paying kickback to the government functionaries through their middleman, has participated in the generation of PoC of Rs 100 crore, the charge sheet claimed, adding that she then participated in the transfer of this PoC to the government functionaries.

The ED further claimed that Kavitha, by way of conspiracy and formation of IndoSpirits, a company accused in the case, has participated in the generation, acquisition and use of the PoC of Rs 192.8 crore, which was derived as a result of the conspiracy of kickbacks and payment of kickbacks.

By showing IndoSpirits as a genuine business entity and acquiring the PoC of Rs 192.8 crore, she is involved in projecting this PoC as genuine profit from a legitimate business, the ED alleged.

“By way of participating in the conspiracy of formation of IndoSpirits to recoup advance bribes of Rs 100 crore paid, Kavitha is knowingly involved in the generation and transfer of PoC of Rs 100 crore and the generation, acquisition, and possession of PoC Rs 192.8 crore in the guise of profits generated by IndoSpirits during November 2021 to August 2022,” the ED alleged.

Kavitha also received the PoC of Rs 5.5 crore from IndoSpirits in the name of her associate and co-accused in the case, Abhishek Boinpally, the federal agency said.

The report further accused Kavitha of destroying the digital evidence to conceal her role and involvement in the case.

“Kavitha has deleted evidence and contents of her mobile phone. She presented nine phones for examination, which were formatted and had no data. She was evasive and couldn't give any explanation for those formatted phones,” the ED alleged.

It further alleged that Kavitha was also involved in acts of influencing the witnesses.

The 46-year-old BRS leader is in judicial custody in the two cases lodged by the ED and the CBI in the alleged scam.

The "scam" pertains to alleged corruption and money laundering in the formulation and implementation of the Delhi government's excise policy for 2021-22 which was later scrapped.

The ED arrested Kavitha from her Banjara Hills residence in Hyderabad on March 15. The CBI arrested her from Tihar jail. PTI

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Arvind Kejriwal's judicial custody extended till June 19 in Delhi liquor policy scam case

Delhi chief minister arvind kejriwal on sunday surrendered at the tihar jail after his interim bail granted by the supreme court in the excise policy-linked money laundering case ended on june 1..

The court also dismissed the interim bail plea moved by the Aam Aadmi Party chief seeking 7 days bail cited medical reasons, in Excise Policy money laundering case. Meanwhile, the court has directed the concerned authorities to conduct of required medical tests.

Earlier on Sunday, surrendered at the Tihar jail after his interim bail term was over. He was granted the relief by the Supreme Court for campaigning in the Lok Sabha elections. Before surrendering, Kejriwal paid homage to Mahatma Gandhi at the Raj Ghat, offered prayers at the Hanuman temple in Connaught Place and addressed AAP leaders and workers at the party office.

Kejriwal sought extension of interim bail 

Kejriwal had earlier moved the Supreme Court for an extension of interim bail. Last week, the Supreme Court rejected his plea, stating that since he was given liberty to move trial court for regular bail, the plea here is not maintainable. Kejriwal was granted interim bail from Justices Sanjiv Khanna and Dipankar Datta on May 10 and was asked to surrender to Tihar jail on June 2. On May 17, the bench reserved a verdict on his challenge to the validity of his arrest by the ED in the Excise Policy money laundering case. The Supreme Court further clarified that since order is already reserved on challenge to arrest, Kejriwal's plea for extension of interim bail has no relation to the main petition.

Delhi excise policy scam case

The matter relates to alleged corruption and money laundering in the formulation and execution of the Delhi government's now-scrapped excise policy for 2021-22. It is alleged that the Delhi government's excise policy for 2021-22 to grant licences to liquor traders allowed cartelisation and favoured certain dealers who had allegedly paid bribes for it, a charge repeatedly refuted by the AAP. The policy was subsequently scrapped and Delhi Lt Governor VK Saxena recommended a Central Bureau of Investigation probe, following which the ED registered a case under the Prevention of Money Laundering Act (PMLA).

ALSO READ:  Kejriwal surrenders at Tihar Jail, sent to judicial custody till June 5 in Delhi excise policy scam case

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Money laundering gang jailed over £1.2m it fraud.

Five people who helped launder the proceeds of a £1.2m computer scam have been jailed.

The fraud targeted elderly and vulnerable people, tricking them into paying out thousands of pounds each to fix non-existent IT problems.

Between May 2015 and November 2019 the gang transferred £1,289,837 to two brothers based in India, who had been posing as representatives of HP, Microsoft Norton and Epson to defraud their victims.

Amanda Grigg, 66, of Truro, Gena Harrington, 39, of Birmingham, Bindu Devasia, 49, of Kent, Nicholas Alcide, 40, of Birmingham, and Jose Kuriakose, 50, of Kent, were sentenced at Leeds Crown Court on Monday.

The court heard victims were told the fictitious problems could be fixed for a fee and were persuaded into allowing remote access to their computers.

One man paid a total of £4,427.96 to people who he believed worked for HP to resolve a supposed issue with his computer.

The money was then filtered through a series of companies set up by the gang before being transferred to India.

An investigation into the money laundering was led by the National Trading Standards eCrime Team, which is based at City of York Council and North Yorkshire Council.

Lord Michael Bichard, Chair of National Trading Standards, said the gang had “no qualms about enriching themselves off the back of vulnerable and elderly victims”.

“I hope that the sentences handed down today will serve as a powerful reminder to all money launderers that they risk prosecution - regardless of how well-coordinated their operations may seem,” he added.

The investigation was also supported by officers from West Midlands, Staffordshire and Wiltshire police services.

Amy Hogan-Burney, general manager, cybersecurity policy and protection at Microsoft said: "Microsoft welcomes today's verdict and remains committed to working with governments and across industry to combat tech support fraud and hold perpetrators accountable."

Grigg was jailed for three years, Kuriakose was jailed for four years and two months, and Harrington was jailed for two years and six months. All three were disqualified from being a company director for six years.

Devasia was sentenced to eight months’ imprisonment, suspended for two years, and was also disqualified from being a company director for six years and ordered to complete 150 hours of unpaid work.

Alcide was given a 15 month prison sentence, suspended for two years. He was also disqualified from being a company director for two years and ordered to complete 150 hours of unpaid work.

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Excise policy: Delhi court denies interim bail to Arvind Kejriwal on medical grounds in money laundering case

Arvind kejriwal moved the special court for an extension of his interim bail by seven days on health grounds as well as for grant of regular bail in the money laundering case on may 30. the court, however, did not pass any order on saturday and reserved the order for wednesday (june 5)..

New Delhi: A special court on Wednesday denied seven-day interim bail to Delhi Chief Minister Arvind Kejriwal, arrested in the excise policy-linked money laundering case, on medical grounds.

Court extended judicial custody of Kejriwal till June 19

Special Judge Kaveri Baweja, who reserved the order on Saturday, dismissed Kejriwal’s plea seeking interim bail for a week on health grounds.

The special court directed the authorities of Tihar jail to take care of Kejriwal’s medical needs in judicial custody.

The court also extended the judicial remand of Kejriwal in the money laundering case till June 19.

Kejriwal surrendered on June 2 after expiry of his 21-day interim bail

Kejriwal surrendered on June 2 after the expiry of his interim bail granted by the Supreme Court on May 10. The top court granted Kejriwal, who is also the national convenor of the Aam Aadmi Party (AAP), 21-day interim bail till June 1 for election campaigning for the just-concluded Lok Sabha elections and asked him to surrender on June 2.

Kejriwal moved the special court for extension of his interim bail by seven days on health grounds as well as for grant of regular bail in the money laundering case on May 30. The court, however, did not pass any order on Saturday and reserved the order for Wednesday (June 5).

The special court, hearing Kejriwal’s pleas, issued notice to the Enforcement Directorate (ED) seeking its response on Kejriwal’s pleas seeking interim bail on health grounds as well as regular bail.

ED opposed Kejriwal’s plea seeking interim bail on medical grounds

The ED opposed Kejriwal’s plea before the special court seeking extension of his interim bail by a week on health grounds, saying that he is feigning illness and is trying to take the system for a joyride. Solicitor General of India Tushar Mehta and Additional Solicitor General (ASG) SV Raju, who represented the ED, argued that the Delhi Chief Minister has suppressed many fact regarding his medical condition before the court and his assertion that he lost weight during incarceration in Tihar jail was incorrect.

The court is scheduled to hear Kejriwal’s application seeking regular bail in the money laundering case take up on June 7.

Kejriwal earlier also moved the Supreme Court seeking extension of his interim bail by a week on medical grounds, however, the apex court registry refused to list his petition, saying that since he was granted liberty by the apex court to move the trial court for regular bail, the application seeking extension of interim bail is not maintainable.