The Hindu: Published on 6th August 2025.
Why in News?
The Finance Minister reported in the Rajya Sabha that 5,892 cases have been taken up by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA) 2002 since 2015.
Only 15 convictions have been secured so far, raising concerns over low conviction rates and the rising trend of money laundering cases in India.
Background
PMLA, 2002 was enacted in line with the UN Political Declaration and Global Programme of Action (1990) to prevent money laundering, confiscate property obtained from illegal activities, and penalise offenders.
Under the law, burden of proof lies on the accused, and no FIR is required to start proceedings—an Enforcement Case Information Report (ECIR) is sufficient.
The offence has been linked globally to terror financing, corruption, and tax evasion.
DTAA agreements with ~85 countries aim to curb illegal fund transfers by facilitating exchange of tax and financial data.
Key Issues / Challenges
Low Conviction Rate: Only 15 convictions in nearly 5,900 cases — indicating weak enforcement or ineffective case building.
Rising Cases: Growth in money laundering cases suggests loopholes in prevention and detection.
Potential Misuse of Law: Courts, including the Supreme Court, have observed that provisions are sometimes used for political targeting.
Layered Complexity: Money laundering often involves cross-border transactions, shell companies, and complex layering that is hard to trace.
Implementation Gaps: Despite FATF recommendations, monitoring and prosecution quality remain inconsistent.
How Money Laundering Happens:
Placement: Introducing illegal money into the financial system (e.g., smurfing — breaking large cash into smaller deposits).
Layering: Moving money through multiple transactions or investments to hide its origin.
Integration: Bringing “cleaned” money back into the economy through real estate, businesses, or assets.
Legal Framework & Court Interpretations
P. Chidambaram v. ED (2019): Held that laundering affects sovereignty, financial stability, and trade.
Vir Bhadra Singh v. ED (2017): ECIR sufficient for proceedings; no FIR needed.
Vijay Madanlal Chaudhury v. Union of India (2022): Scheduled offence required for prosecution, but property attachment can proceed without it — often cited in alleged misuse cases.
Way Forward / Recommendations
- Strengthen Investigation Quality: Improve case-building to raise conviction rates.
- Prevent Political Misuse: Establish oversight mechanisms to ensure law is applied fairly.
- International Coordination: Fully utilise DTAA provisions and expand agreements for better cross-border tracking.
- Adopt FATF Guidelines Rigorously: Ensure compliance with global anti-money laundering standards.
- Capacity Building: Train investigators in digital forensics, financial tracing, and international legal cooperation.
- Public-Private Partnerships: Work with banks and fintech firms to identify suspicious transactions faster.
