For representative purposes. | Photo Credit: Itockphoto
The story so far: The report submitted by the Minister of Finance in Rajya Sabha states that the Directorate for enforcement (ED) has been adopted since 2015, since 2015 only 15 convicts have been ordered since 2015. The government claims that the investigation has been initiated in more or less in all cases and that the initial information on the proceedings (Ecir) was issued. However, these numbers increase two important aspects. First, that the number of convicts against overall cases is far from satisfactory, and secondly, that cases of money laundering are growing that the government has not been able to check these financial crimes.
What is the laundry?
The term is said to have come from the use of laundry syndicates of organized crime in the US as covering their crimes and behavior under the table. Laundromat is a universal financial vehicle. It can be established by a bank or other company involved in the provision of financial services. However, it can also help clients to wash the proceeds of crime, hide the ownership of assets, embezzlement funds from companies, avoid tax or currency restrictions and move money at sea.
How is money to wash money?
Money laundering, as defined according to Section 3 of PMLA, is an act through which processes or activities associated with the proceeds of crime are hidden, obsessed, acquired or used and projected as infinite assets or claim that they are property.
In the first phase called location, the washing introduces money into the financial system, which could be made by distributing large amounts of cash into smaller amounts (a process called Smurfing). In the second phase it is layering, the money is moved to other places through investment and transactions. Finally, in the integration phase, money washing is brought into the financial system through real estate, business or assets, etc. The Supreme Court in P. Chidambarama versus law enforcement (2019) decided that hiding an illegal money source affects the financial system and the sovereignty and integrity of the nation. Other impacts of money washing are the expansion of money supply, which could be harmful to the country’s monetary stability, which eventually affects inflation. In addition, according to the FATF working group (FATF), trading may affect.
When about PMLA?
In accordance with the political statement of the UN and the global action program (received by the UN General Assembly in February 1990), the law was made to prevent money washing and seizing or acquired assets. The most important part of the status is that the burden of proof is on the accused. Another feature is that Ecir is sufficient to initiate proceedings, which was also repeated by the Supreme Court in Bhadra Singh Versus ED (2017) – that no fir is required to initiate proceedings under the law. The only requirement, according to the Supreme Court, was that the planned crime (crime against the state) was necessary for the offense of money laundering. However, although such a strict law is, the crime has increased.
What are the problems that need to be solved?
The number of money washing cases is seriously increasing and challenging the effectiveness of the law. In addition, the law was abused on many occasions, which the Supreme Court also saw and referred. In Vijay Madanlal Chaudhury versus the Union India (2022), the Court decided that to start prosecution according to Section 3 of PMLA, registration is according to the plan of the affirmation, but to start attaching assets according to Section 5, there may be no preliminary registered criminal case. This view was very often abused by authorities with politically motivated intentions.
It is important that the authorities follow the FATF recommendations and ensure that the money laundering cases are solved with caution and caution to check the abuse, and the actual cases have been reported and examined properly to increase the condemnation rate. Money washing is a serious crime because it has a direct connection with terrorist activities and is the main source of terrorist financing. Instead of political motifs, the law should be used to solve problems and concern about the real way. Although India has signed an agreement to avoid double taxation (DTAA) with approximately 85 countries, helping to control money washing, things are not yet in the right direction and much need to be done. These agreements support the exchange of financial and tax information among the tax authorities of the countries. This facilitates the recovery of tax regulations and helps prevent illegal activities such as tax evasion and money laundering.
CBP Srivastava is the president of the Center for Applied Research in Administration.
Published – 6. August 2025 08:30
