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[April 18, 2006]

Prevention of Money Laundering Act: Old wine in new bottle

(Times of India, The (KRT) Via Thomson Dialog NewsEdge) Apr. 17--NEW DELHI -- The Foreign Exchange Regulation Act (FERA), which was repealed amid complaints that it was "draconian," is back in a different garb.

The new law, the Prevention of Money Laundering Act (PMLA), is designed to deprive terrorists and druglords money to fund their activities. Yet, some of its provisions are phrased to facilitate their use against people accused of other crimes. Even public servants charged with amassing wealth and those who help them conceal the money can be booked under PMLA.


PMLA has been on the statute book since July 1, 2005, but will come into full effect in the next few months when the government appoints adjudicating authorities. It bristles with provisions widely deemed to be more stringent than those of FERA.

PMLA was conceived in the wake of the global clamour post-9/11 to starve terrorists and international criminal syndicates of funds. While it has many provisions which led to the campaign for the repeal of FERA, it has a whole new chapter, equipping Enforcement Directorate with unprecedented powers.

In the new Act, the burden of proof lies with the accused, as was the case in FERA, and penalty prescribed is as severe as in the repealed law. But as criminal lawyer Naveen K Matta points out: "A new chapter has been introduced in PMLA which gives extensive powers to the investigative agency to attach, seize and confiscate properties of an accused not only in India but in other countries with which India has bilateral arrangements."

The law vests, again as under FERA, an ED officer of the rank of special director with almost the same adjudicating powers as a civil court, besides empowering ED to arrest accused in other countries and issue letters of request to authorities there to provide supporting evidence relating to the case. None of the previous legislations had given such teeth to an enforcement agency.

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