India: Do The Offences Mentioned In The Schedule Of Offences Under The PMLA Act Can Be Applied Retrospectively To Attract PMLA?

(i) The Placement Stage: the malfeasant, who is holding the money generated from criminal activities, places the crime money into the normal financial system;

(ii) The Layering Stage: the money introduced into the financial system is layered-spread out into several transactions within the financial system with a view to concealing the origin of the original identity of the money and to make this origin/identity virtually disappear; and

(iii) The Integration Stage: the money is thereafter integrated into the financial system in such a way that its original association with crime is totally obliterated and the money could be used by the malfeasant and/or the accomplices to get it as untainted/clean money.

"The Act was enacted as the international community recognised the threat of money laundering whereby money generated from illegal activities such as trafficking and drugs etc. was finding its way into the economic system of a country and funding further criminal activity. The expression money-laundering would ordinarily imply the conversion and infusion of tainted money into the main stream of economy as legitimate wealth. According to the respondent, there are three stages to a transaction of money-laundering: The first stage is Placement, where the criminals place the proceeds of the crime into normal financial system. The second stage is Layering, where money introduced into the normal financial system is layered or spread into various transactions within the financial system so that any link with the origin of the wealth is lost. And, the third stage is Integration, where the benefit or proceeds of crime are available with the criminals as untainted money. There is much merit in this description of money-laundering and this also indicates that, by its nature, the offence of money-laundering has to be constituted by determinate actions and the process or activity of money-laundering is over once the third stage of integration is complete. Thus, unless such acts have been committed after the Act came into force, an offence of money-laundering punishable under Section 4 would not be made out. The 2013 Amendment to Section 3 of the Act by virtue of which the words "process or activity connected with proceeds of crime and projecting it as untainted property" were substituted by the words "any process or activity connected with proceeds of crime including concealment, possession, acquisition or use and projecting or claiming it as untainted property". The words "concealment, possession, acquisition or use" must be read in the context of the process or activity of money-laundering and this is over once the money is laundered and integrated into the economy. Thus, a person concealing or coming into possession or bringing proceeds of crime to use would have committed the offence of money-laundering when he came into possession or concealed or used the proceeds of crime.

* The findings recorded by the learned Single Judge of the Delhi High Court in the said judgment has been stayed by the Division Bench of the Delhi High Court in the interim order dated 30^th November 2016, passed in LPA 144/2016 filed by Directorate Of Enforcement against the order of the Single Judge.

"It is clear that the essence of the offence of the money-laundering is "projecting of the proceeds of crime as untainted property. It is this 'projecting' that attracts the applicability of the penal provisions of PML Act. Now, where such sale proceeds, or the property derived from a crime, which, at that time, was not a scheduled offence, but was a scheduled offence when such sale proceeds or such property was projected as untainted, there would be no bar to the applicability of the PML Act. If the provisions of Section 3 of the PML Act are interpreted in this manner, it would not amount to giving retrospective effect to the said Legislation. If the proceeds of a crime, which has been declared as a 'scheduled offence' on the day on which the 'projection of such proceeds' as 'untainted' is attempted or undertaken, the provisions of the PML Act would apply. Such a course, cannot be said to be violative of Article 20 of the Constitution.

In other words, the crucial date would be the date on which the projection of the proceeds of crime as 'untainted' takes place, and, if this has taken place before the commencement of the PML Act, then it cannot be suggested that a person can be prosecuted for the offence punishable under Section 4 thereof. In the instant case, most of the transactions, which are the subject matter of the case against the Applicant, have taken place before coming into force of the PML Act. They cannot be the subject matter of prosecution for the offence punishable under the PML Act. It was faintly suggested, to overcome this difficulty, that the offence of money-laundering is a continuing offence. This Dixit contention, -if it is intended thereby to suggest that even the cases where the money-laundering had already been done before the commencement of the PML Act, would give rise to the prosecution under the provisions of the PML Act, -has to be rejected forthwith."