Introduction
The Indian Penal Code (IPC) and the Prevention of Money Laundering Act (PMLA) are two vital pieces of legislation that deal with crime in India. The IPC, being a comprehensive code, deals with an expansive range of offences such as murder, theft, and robbery. The PMLA, on the other hand, is a specialized law that deals with money laundering.
Money laundering involves the concealment of the sources of the money which has been obtained from illegal sources and conversion of the same under the garb of a clean source, with an objective to avoid prosecution, conviction, and confiscation of such wrongfully acquired funds. In layman's terms, it can be understood as an illegal exercise that converts black money into white money.1
PMLA and Money Laundering
While money laundering was initially associated with terrorist organizations and drug traffickers, in recent times, many corrupt government officials have been increasingly engaging in this illicit activity, using it to conceal the proceeds from their corrupt practices.2 The repercussions of money laundering ripple through society, wreaking havoc on economies, fostering crime, and widening the gap between the affluent and the poor.3
Money laundering is a serious financial crime and can be done through various methods, such as bank deposits, investments, and the purchase of property. The PMLA makes the activity of laundering money a crime and further confers upon the authorities wide-ranging powers to investigate and prosecute money laundering offences. In some cases, a conspiracy to commit an offence under the IPC may also be an offence under the PMLA, since money laundering is often part of a larger criminal scheme; let us consider a scenario wherein an individual is accused of committing a financial crime under the Indian Penal Code, such as embezzlement under Section 403 IPC, where they fraudulently misappropriate funds from a company. If, subsequently, this person engages in money laundering activities to conceal the illicit origin of those embezzled funds, perhaps by transferring money through a complex web of transactions and shell companies, then the PMLA can be invoked. For example, if someone conspires to commit murder, they may also be guilty of money laundering in the event the said conspirator made use of the proceeds obtained from the murder to purchase a new car. The precise circumstances in which a conspiracy to commit an offence under the IPC is also an offence under the PMLA can be complex. It will depend on the specific facts of the case and the nature of the conspiracy. However, the general principle is that a conspiracy to commit an offence under the IPC may also be an offence under the PMLA if it is part of a larger criminal scheme that involves money laundering.
Solicitor General Tushar Mehta at the Supreme Court argued that the offence of money laundering is highly sophisticated as it is committed with a premeditated mind, and unlike the various offences in the Indian Penal Code [IPC], it ends up becoming a continuous offence.4
To understand the intricacies of the PMLA and IPC, it is pertinent to understand the key provisions of the PMLA. The Prevention of Money Laundering Act (PMLA) of 2002 contains several key provisions to prevent and control money laundering. Some of these provisions are mentioned below:
1. Reporting obligation: The PMLA 2002 imposes reporting obligations on various entities, including banks, financial institutions, and intermediaries. These entities are required to keep transaction records, report suspicious transactions to the Financial Intelligence Unit (FIU), and follow KYC (Know Your Customer) guidelines.5
2. Money laundering punishment: The PMLA 2002 provides for rigorous imprisonment for a term ranging from three to seven years, as well as a fine, for committing the offence of money laundering.
3. Property attachment and confiscation: The PMLA 2002 allows for the attachment and confiscation of property used in money laundering. The attachment can be made at any point during the investigation, and the government can sell the confiscated property.
4. International cooperation: The Money Laundering Act of 2002 calls for international cooperation in investigating and prosecuting money laundering offences. The government can negotiate with other countries for mutual legal assistance and information exchange.
Conspiracy under IPC
According to the Collins Dictionary, a conspiracy is an agreement between a group of people that other people think is wrong or is likely to be harmful.6 Under IPC, the term 'conspiracy' refers to the joining of at least two people who jointly intend to commit a crime. This is when at least two people agree to do something illegal together. Criminal conspiracy is a severe offence under the Indian Penal Code (IPC) of 1860. Regardless of whether a meaningful allegation under the IPC or another regulation exists, the accused is blamed for illegal tricks. Criminal conspiracy is governed by Chapter V-A of the IPC, added in 1913.7
Criminal conspiracy is defined in Section 120A of the IPC as an agreement between at least two people to attempt something illegal, i.e., a criminal offence. A demonstration that is not restricted by law but is carried out illegally.
Section 43 of the IPC defines 'unlawful' as 'whatever establishes an offence, is illegal by regulation, or leads to a common activity'.
The stipulation to Section 120A states that simply agreeing to carry out an illegal activity constitutes criminal conspiracy, and that no unmistakable demonstration or unlawful exclusion should be shown. Such an unmistakable demonstration becomes crucial when the conspiracy is likely to lead to something illegal but does not establish a crime. It makes no difference whether the illegal conduct is the primary or secondary goal of the arrangement.
In Major E. G. Barsay vs The State of Bombay, it was held that participation of every person in every act of the series is not necessary for constituting the offence of criminal conspiracy; any person would be held liable if he did any act in such act of series.8
Conspiracy under PMLA
According to a recent judgement, The Supreme court has clarified the complex relationship between the Indian Penal Code (IPC) and the Prevention of Money Laundering Act (PMLA). The decision delves into when conspiracy becomes an offence under the PMLA, demonstrating a significant shift in the legal landscape surrounding financial crimes in the country.
A Supreme Court bench consisting of Justices Abhay S Oka and Pankaj Mithal rejected an argument made on behalf of the Enforcement Directorate by Additional Solicitor General S V Raju that because Section 120-B of the IPC is included in Part A of the Schedule, even if the allegation is of making a criminal conspiracy to commit an offence that is not on the Schedule, the offence becomes a scheduled offence.
It held that the offence of criminal conspiracy punishable under Section 120-B of the Indian Penal Code will become a scheduled offence only if it is related to an offence which is specifically included in the Schedule of the Prevention of Money Laundering Act.9
According to the decision, conspiracy is only an offence under the PMLA if it is directly related to the commission of a crime listed in the Act. This clarification adds a critical criterion, aligning conspiracy prosecution under the PMLA with specific offences outlined in the legislation.10
It was stated that this cannot be the intention of the legislature, adding that even though the offence is not included in the Schedule, a conspiracy to commit any crime under any penal law that is capable of earning proceeds may be turned into a scheduled offence by applying Section 120-B of the IPC., if the submissions of the Additional Solicitor General are accepted, the Schedule will become meaningless or redundant, maintaining that the penal statutes must be interpreted severely.11
The decision differs from a broader application of conspiracy, this shift is critical for determining when conspiracy allegations fall under the purview of the PMLA. The court's decision refines the legal landscape by requiring a diligent establishment of a direct link between conspiracy and crimes listed in the PMLA.
Conclusion
The interplay between the IPC and the PMLA is a complex legal landscape. However, money laundering, being a serious financial crime, often involves the element of conspiracy. In contrast, the PMLA is designed to combat money laundering and has a unique relationship with criminal conspiracy as defined under the IPC. A recent Supreme Court judgment clarified that a conspiracy becomes an offence under the PMLA only if directly related to a crime listed in the Act.
The ruling in the case of Pavana Dibbur v. Directorate of Enforcement not only sets a precedent for future cases but also strives to consider the evolving nature of financial crime jurisprudence. Merely, by virtue of an act being found punishable under the Indian Penal Code (IPC), liability under the provisions of PMLA does not get activated automatically unless the said act happens to be a specified offence under PMLA. This nuanced interpretation prohibits the PMLA from linking individuals for mere planning and instead reserves its wrath for schemes specifically related to financial crimes. The said judgment commands an unambiguous establishment of a direct nexus between conspiracy and PMLA-listed crimes, influencing legal strategies and the overall dynamics of financial crime prosecutions. This ruling not only shapes the trajectory for future cases but also contributes to the ongoing discourse on the interplay of codified criminal laws and specialized statutes like the PMLA in India.
References:
1. "What is Money Laundering? Definition of Money Laundering, Money Laundering Meaning – The Economic Times." The Economic Times, https://economictimes.indiatimes.com/definition/money-laundering. Accessed 3 December 2023
2. Jojarth, C. (2013) '1. Money Laundering: Motives, methods, impact, and countermeasures', Transnational Organized Crime, pp. 17–34. doi:10.14361/transcript.9783839424957.17.
3. Bardin, P. et al. (2023) Money laundering poses a risk to financial sector stability, IMF. Available at: https://www.imf.org/en/Blogs/Articles/2023/09/04/money-laundering-poses-a-risk-to-financial-sector-stability
4. Bakshi, Gursimran Kaur, et al. "PMLA has better safeguards against arrest in comparison to CrPC, Centre tells Supreme Court." The Leaflet, 3 March 2022, https://theleaflet.in/pmla-is-a-complete-code-in-itself-centre-tells-sc/.
5. Pal, Vijay. "Understanding The Prevention of Money Laundering Act (PMLA) 2002 – Money Laundering – India." Mondaq, 24 April 2023, https://www.mondaq.com/india/money-laundering/1307444/understanding-the-prevention-of-money-laundering-act-pmla-2002.
6. Grenville, JAS. "CONSPIRACY definition and meaning | Collins English Dictionary." Collins Dictionary, https://www.collinsdictionary.com/dictionary/english/conspiracy.
7. "Criminal Conspiracy – Law." Unacademy, https://unacademy.com/content/upsc/study- material/law/criminal-conspiracy/.
8. Major E. G. Barsay vs The State of Bombay Manu/sc/0123/1961
9. Conspiracy to be scheduled offence under PMLA only if offence specifically mentioned: SC." Deccan Herald, 29 November 2023, https://www.deccanherald.com/amp/story/india/conspiracy-to-be-scheduled-offence-under-pmla-only-if-offence-specifically-mentioned-sc-2790002.
10. Supreme Court: Conspiracy an offence under PMLA only if it is to commit a crime scheduled under Act." The Indian Express, 29 November 2023, https://indianexpress.com/article/india/supreme-court-conspiracy-an-offence-under-pmla-only-if-it-is-to-commit-a-crime-scheduled-under-act-9047840/
11. Hazarika, Abhimanyu. "PMLA cannot be invoked citing criminal conspiracy under Section 120B IPC unless conspiracy is for money laundering: Supreme Court." Bar and Bench, 30 November 2023, https://www.barandbench.com/news/pmla-criminal-conspiracy-section-120b-ipc-money-laundering-supremecourt.
Originally published January 20, 2024.
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