Money laundering can be appropriately described as an activity, deemed illegal as per the law of the land, which involves the intentional covering-up of the money and its forging, which has been obtained from illicit activities like corruption, trafficking of drugs, gambling, illegal trading, prostitution rings, sale of arms and weapons etc. The individuals involved in money laundering try to portray the origin of such money from a legal and a legitimate source. A variety of techniques are employed by such launders to make the money appear clean like transferring the money to a place/source to make it less conspicuous or changing the form of the money.
The Prevention of Money Laundering Act, 2002 was a major step by the Government of India towards the implementation of its anti money laundering measures. The objectives stated in the act provide for the prevention as well as the control of the illegal money gained from laundering of money and the proceeds obtained from a crime. The act also contains provisions for the confiscation of the property which is obtained from the laundered money or through the proceeds of a crime. It also contains provisions for dealing with any other issues in connection to money laundering.
Attachment as per this act refers to the placing of prohibition on movement if property and its transfer and conversion due to an order under the provisions of the Prevention of Money Laundering Act, 2002. Also, the act has bestowed the authority for investigation upon the Directorate of Enforcement(ED). Though the scheduled offenses are investigated by other agencies but these agencies provide information to the ED which holds the power to attach, freeze or seize the property and proceeds of crime.
As per Section 3 of the Prevention of Money Laundering Act, 2002, the proceeds of crime includes within its definition all the property, irrespective of whether it has been obtained directly or indirectly owing to an illegal activity of an offence scheduled under the act. Section 2(1)(u) expands the scope of the term property, by including the value of the said property as well as the property held outside India, in which case the property equivalent in value to the said property will be considered proceeds of crime.
For the commencement of an investigation or an action against an accused individual, the crime committed by him should fall under the category of a predicate offense which refers to the scheduled offenses under the Prevention of Money Laundering Act.
According to Section 5 of the Prevention of the Money Laundering Act, 2002, the property which has been found to be involved in money laundering can be provisionally attached by the order of the authority which is appointed under this act. The authority may refer to either a Director, Joint Director or a Deputy Director. If the authority for good reason believes that an individual is in possession of proceeds of crime and such proceeds are under the threat of being either transferred or hidden by the accused individual which will act as a hindrance to their confiscation , then the authority may provisionally attach the property for a period of 180 days. These reasons, as per Section 5(2) have to be preserved in a written form and then be given to the adjudicating authority with a copy of the order of the attachment.
However, it is to be noted that an order for the attachment cannot be made until a report with regards to the scheduled offense has been sent to the Magistrate in accordance with Section 173 of the Code of Criminal Procedure. The property can, however, be attached in case the investigating authority believes that urgent attaching of property is required or otherwise the money laundering proceedings under the act will be frustrated or hindered. The Directorate of Enforcement is required to file a complaint before the adjudicating authority, citing the reasons for attachment within a period of thirty days of the order of the attachment of the property.
The provisional attachment order shall fail to have effect after a period of 180 days if the adjudicating authority fails to pass an order that the property attached has been involved in money laundering. The case of M.Saraswathy v. Registrar laid down the five conditions for the attachment of property and the validity of the second proviso to section 5 of the Prevention of Money Laundering Act was upheld in the case of J Sekar v. Union of India.
As for searching and seizure of property, Section 17 of the act lays down the rules for the same. According to this section, if the authority which can either mean Director, a Joint Director or a Deputy Director (not below the rank of a Deputy Director) has sufficient reason to believe that an individual is involved in activities which involve the laundering of money or the individual is retaining the possession of proceeds from a crime which he has obtained through money laundering or has and is keeping hold of records which relate to money laundering, then the aforementioned authority may authorize his subordinate to enter and search any place where the authority suspects such records are being held or where the suspected individual has stored his proceeds from crimes. The subordinate officer may also be authorized to break open any safe, locker, box etc., for the purpose of searching in case he is not in possession of a key for opening the above-mentioned items.
The officer has the power to bring under seizure any record or property which he deems to be suspicious and he shall make it known by visibly marking it with identification marks. He may also produce copies of the records. In case, due to any circumstances involving the suspicious property, its seizure is not possible, the officer may in that case freeze the property which would prohibit the property from being transferred. Further, the Directorate of Enforcement is required to file an application for either the continuation of the freezing of the property in question or for the retaining of the records or the property that has been seized, before the adjudicating authority within a time period of thirty days from the action of either seizure or freezing.
Section 20 of the act states that the property or the records in question will remain under seizure or would remain frozen for a period of time which cannot exceed one hundred and eighty days from the day when the action was taken. The details of the records seized or the property that has been frozen has to be properly submitted to the adjudicating authority. Unless the adjudicating authority permits the continued freezing/seizure, the property/records will be returned to the owner after the specified period of time. An appeal is permitted to be filed before the appellate tribunal by the individual who is aggrieved by the decision of the adjudicating authority as per Section 26 of the Prevention of Money Laundering Act, 2002.
Sources/References:
- Prevention of Money Laundering Act, 2002: https://www.indiacode.nic.in/bitstream/123456789/2036/1/A2003-15.pdf
- https://enforcementdirectorate.gov.in/confirmed-attached-properties
- Prevention of Money Laundering Act- Search, Seizure, Impounding of Records: https://www.taxmann.com/post/blog/6786/prevention-of-money-laundering-act-search-seizure-impounding-of-records/
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