SC: Belief Of Commission Of Act Of Money Laundering Has To Be Recorded Before Directing Freezing Of Bank Accounts Under PMLA

OVERVIEW

• The Supreme Court has observed that the authority has to record the belief of commission of the act of money laundering before the bank accounts are freeze under Prevention of Money Laundering Act (PMLA).

• Deputy Director, Directorate of Enforcement has instructed the Anti-Money Laundering Officer of some banks that the accounts maintained by the company should be debit freezed until further orders, with immediate effect. The same was upheld by HC.

WHAT IS PMLA?

• The Prevention of Money Laundering Act, 2002 was implemented to prevent money laundering and to lay down provisions which provide for confiscation of property derived from or involved in money laundering .

• The offence is mainly investigated and prosecuted by the Directorate of Enforcement (ED) agency. The agency also traces and confiscates the proceeds of crime.

• The ED will freeze accounts under Section 17 of PMLA if the funds in bank accounts can be transferred easily.

OBSERVATIONS OF APEX COURT

• The Bench of CJI SA Bobde, Justices AS Bopanna and V. Ramasubramanian referred to Section 17 of PMLA to note the procedure. The Section states that if the Director or such other Authorized Officer has reason to believe that a person has committed money laundering then his property needs to be seized.

• It was also observed that the Act protects the rights of people who will be proceeded against under the Act as the procedure laid is fair.

• The Bench further noted that the communication does not relate to belief of the Officer and only comprises of information that Officer is looking into case and relevant documents.

• Since, there was no material submitted which related to belief of commission of the act of money laundering which can indicate acceptance of Section 17 of PMLA the Bench held that freezing cannot be sustained as it is not in compliance to legal requirement.

• It was ordered that the accounts of the Company should be defreezed.

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