Political party to be booked for money laundering

15-05-2024

1 min read

Mains GS-II: Governance

Political party to be booked for money laundering Blog Image

What’s in today’s article?

Why in News?
What is Prevention of Money Laundering Act (PMLA), 2002?
Laws under which a political party can be booked for money laundering
Has a political party ever been booked for money laundering?
Challenges faced by Election Commission if a political party is accused of money laundering

Why in News?

The Enforcement Directorate (ED) has informed the Delhi high court that it will name the Aam Aadmi Party (AAP) an accused in the ongoing money laundering investigation related to alleged irregularities in the Delhi excise policy scam.

ED said that it is planning to invoke Section 70 of the Prevention of Money Laundering Act to probe the role of AAP in this regard.

Main allegation of the ED is that AAP was the recipient of the proceeds of crime in the excise scam.

What is Prevention of Money Laundering Act (PMLA), 2002?

The Prevention of Money Laundering Act (PMLA), 2002 was enacted in January, 2003.
The Act seeks to combat money laundering in India and has three main objectives –
- To prevent and control money laundering
- To confiscate and seize the property obtained from the laundered money; and
- To deal with any other issue connected with money laundering in India.
Sec. 3 of the Act defines offence of money laundering as –

Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.

The Act was amended by the Prevention of Money Laundering (Amendment) Act, 2009 and by the Prevention of Money Laundering (Amendment) Act, 2012.
Most recently, the PMLA was amended through the -
- Finance Act, 2015 (2015 Amendment)
- Finance Act, 2018 (2018 Amendment)
- Finance Act, 2019 (2019 Amendment)

Laws under which a political party can be booked for money laundering

Section 70 of the PMLA
- Section 70 of the PMLA 2002 deals with offences by companies.
- It states that if a company commits a contravention of any provision of the Act, every person who was in charge of the company's business at the time of the contravention is also liable.
- The proviso to Section 70 states that the person in charge of the company's business can defend themselves by proving that the contravention took place without their knowledge or despite all due diligence.
Is political party a company?
- The political party is not a ‘company’ incorporated under the Companies Act 2013.
- However, the provision of PMLA under Section 70 has crucial explanation that could bring political party under the ambit of the anti-money laundering law.
- Explanation 1[1] --For the purposes of this section (i.e., Section 70 of PMLA) says that company means any body corporate and includes a firm or other association of individuals.
The phrase ‘association of individuals’ can include political parties.
- A party, according to Section 29A of The Representation of the People Act, is any association or body of individual citizens of India registered with the EC and calling itself a political party.

Has a political party ever been booked for money laundering?

If AAP is directly named as an accused in the excise scam under the PMLA, it would be the first instance of political party being accused in money laundering.
However, political parties have been booked and investigated under the Income Tax act.

Challenges faced by Election Commission if a political party is accused of money laundering

Suspend or withdraw a party’s recognition under The Election Symbols (Reservation and Allotment) Order
- If a political party is made an accused in money laundering, it will place the Election Commission (EC) in uncharted territory.
- This is because there is no prescription in the electoral rules and laws on what should be done when a political party is accused of any illegality.
- As per experts, the EC is, at best, empowered to suspend or withdraw a party’s recognition under The Election Symbols (Reservation and Allotment) Order.
- However, even then, Para 16A of the Symbols Order clearly outlines the grounds on which the Commission can take such action against a party.
- It is when the party fails to observe the Model Code of Conduct or does not follow the orders and instructions of the Commission.
- There is nothing on what should happen if the party is accused of illegality.
De-register a party
- The second punitive option before the Commission is to de-register a party. But this is an extremely limited option.
- While Section 29A of The Representation of the People Act, 1951, empowers the EC to register a party, it can review its decision only under three exceptions.
  - First, if the party has obtained its registration by fraud.
  - Second, if the party informs the EC that it has ceased to have faith and allegiance to the Constitution of India or to the principles of socialism, secularism and democracy or it will not uphold the sovereignty, unity and integrity of India.
  - Third, if the party is declared unlawful by the Union Government under the provision of the Unlawful Activities (Prevention) Act, 1967 or any other similar law.

So, analysts believe, if a political party were to be named or even convicted under the PMLA, the Representation of the People Act has no provision to deal with it.

Q.1. What is Enforcement Directorate (ED)?

The Enforcement Directorate (ED) is a law enforcement and economic intelligence agency in India. The ED is responsible for: Enforcing economic laws; Fighting economic crime, such as money laundering and foreign exchange violations.

Q.2. What is Unlawful Activities (Prevention) Act, 1967?

The Unlawful Activities (Prevention) Act, 1967 (UAPA) is an Indian law that aims to prevent unlawful activities that disrupt India's territorial integrity and sovereignty. The act gives the police the power to detain anyone engaging in unlawful activities, such as: Aiding and abetting terrorists; Funding terrorists; Inciting anti-national feeling in the masses.