Money Laundering and Public Servants
Context:
Recently, the Supreme Court ruled that Section 197(1) of the Code of Criminal Procedure (CrPC), which requires prior government sanction to take cognisance of an offence against public servants, also applies to cases under the Prevention of Money Laundering Act (PMLA).
Section 197(1) of the CrPC states, “When any person who is or was a judge or magistrate or a public servant not removable from his office save by or with the sanction of the government, is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duty, no court shall take cognisance of such offence except with the previous sanction.”
More on News:
- The bench upheld the Telangana High Court’s decision that set aside a trial court order which had taken cognisance of a complaint against IAS officers Bibhu Prasad Acharya and Adityanath Das, who face money laundering charges along with former Andhra Pradesh Chief Minister Jagan Mohan Reddy.
- The Enforcement Directorate (ED) had appealed the High Court decision, arguing that Acharya was not a public servant as defined by Section 197(1) of CrPC, as his position was not one requiring government sanction for removal.
- The ED further argued that Section 71 of the PMLA gives its provisions overriding authority over those of other laws, including the CrPC.
- The court found no inconsistencies between Section 197(1) CrPC and the PMLA provisions, including those under Section 44(1)(b) of the PMLA.
About PMLA:
The Prevention of Money Laundering Act (PMLA), enacted in 2002, serves as the cornerstone of India’s legal framework aimed at combating money laundering and related financial crimes.
Key Provisions of PMLA:
- Definition of Money Laundering: PMLA defines money laundering as any process or activity aimed at concealing the origins of illegally obtained money, typically by passing it through a complex sequence of banking transfers or commercial transactions.
- Reporting Entities: The act mandates that various entities, including banks, financial institutions, and intermediaries, report suspicious transactions to the Financial Intelligence Unit (FIU).
- Recent amendments have expanded the scope to include non-governmental organisations (NGOs) and cryptocurrency exchanges, which are now classified as reporting entities under the PMLA.
- KYC Requirements: The act emphasises Know Your Customer (KYC) norms, requiring reporting entities to verify the identity of clients and maintain records of transactions.
- This includes maintaining documentation for a minimum of five years after the transaction.
- Maintenance of Records: The PMLA (Maintenance of Records) Rules establish guidelines for how reporting entities should maintain records related to their clients and transactions.
- This includes detailed documentation requirements for various types of transactions, particularly those exceeding specified monetary thresholds.
- Politically Exposed Persons (PEPs): The act includes provisions for identifying and monitoring transactions involving PEPs—individuals who hold prominent public positions—due to their higher risk for involvement in corruption and money laundering.
- Enforcement and Penalties: The act empowers authorities to attach properties involved in money laundering activities and impose penalties on individuals and organisations that fail to comply with its provisions.
Pooja Singhal, a former IAS officer, faces a major legal case under the Prevention of Money Laundering Act (PMLA) for alleged corruption and misuse of public funds. Born in 1978, she joined the IAS at 21 and held key roles, including Jharkhand’s Mines Secretary. In May 2022, the Enforcement Directorate (ED) arrested her in connection with embezzled MGNREGA funds, with ED raids uncovering ₹174.9 million linked to her and her husband. In April 2023, a PMLA court formally charged her. Although she was granted interim bail to care for her daughter, the Supreme Court denied further bail due to the seriousness of the allegations.
