Sambhav-2025

Approach In introduction briefly introduce financial crimes and their impact on the economy. Mention the role of PMLA and FEOA in addressing these challenges. Suggest some way forward. Conclude suitably

Introduction

Financial crimes, including money laundering, fraud, and economic offenses, undermine economic stability and national security. The Prevention of Money Laundering Act (PMLA), 2002, and the Fugitive Economic Offenders Act (FEOA), 2018, were enacted to tackle illicit financial activities and prevent criminals from escaping justice. Their effectiveness in achieving these goals remains a subject of evaluation.

Body

Prevention of Money Laundering Act (PMLA):

• Key Provisions:
  • Defines money laundering as concealment, possession, acquisition, or use of proceeds from crime, projecting them as legitimate assets.
  • Empowers the Enforcement Directorate (ED) to investigate offenses, conduct raids, and attach proceeds of crime.
  • Mandates financial institutions to report suspicious transactions to the Financial Intelligence Unit – India (FIU-IND) for scrutiny.
  • Establishes Special Courts to expedite trials of money laundering cases, ensuring legal deterrence.
  • Includes a wide range of predicate offenses under the Schedule of Offenses, covering economic offenses, corruption, drug trafficking, and terrorism.
• Effectiveness:
  • Stronger deterrence: The PMLA deters financial crimes through strict investigation, prosecution, and asset confiscation in major fraud and economic offenses.
  • Enhanced international cooperation: India collaborates with Interpol and FATF (Financial Action Task Force) to track illicit funds.
  • Better financial monitoring: Banks and financial institutions are obligated to implement Know Your Customer (KYC) norms, reducing money laundering risks.

Fugitive Economic Offenders Act (FEOA):

• Key Provisions:
  • Applies to economic offenders who flee India to evade prosecution for offenses exceeding ₹100 crore.
  • Allows attachment and confiscation of assets both in India and abroad, even without conviction.
  • Bars FEOs from defending civil claims in Indian courts to prevent them from benefiting from their crimes.
  • Fast-tracks the legal process by enabling Special Courts to declare individuals as FEOs based on evidence from investigative agencies.
• Effectiveness:
  • Legal deterrence: High-profile economic offenders like Nirav Modi and Vijay Mallya have been declared FEOs, strengthening India’s legal stance.
  • Stronger asset recovery mechanisms: The government has seized assets worth ₹15,113 crore under the Act, helping recover defrauded funds.
  • Reduced impunity for white-collar crimes: The fear of asset confiscation has discouraged some economic offenders from fleeing India.

Challenges in Implementation:

• Judicial delays: Money laundering trials under PMLA often drag on for years, reducing deterrence.
• Burden of proof: Under PMLA, accused individuals must prove their innocence, leading to debates over due process violations.
• Complex extradition procedures: Many FEOs exploit legal loopholes in foreign jurisdictions, delaying extradition (e.g., Vijay Mallya’s case in the UK).
• Allegations of misuse: PMLA provisions are sometimes seen as arbitrarily enforced, leading to concerns over selective prosecution.
• Limited enforcement capacity: Despite strict laws, the low conviction rate highlights enforcement gaps.

Way Forward

• Fast-track courts: Speedy trials and efficient case disposal under dedicated financial crime courts can improve conviction rates.
• Stronger international coordination: Strengthening extradition treaties and working closely with agencies like Interpol can aid offender repatriation.
• Enhanced financial regulation: Strengthening anti-money laundering compliance in banking and corporate sectors can prevent illicit financial flows.
• Judicial reforms: Streamlining legal procedures under PMLA and FEOA can prevent delays and improve enforcement efficiency.
• Independent oversight: A regulatory body to prevent misuse of these laws can ensure transparency and fairness in their application.

Conclusion

PMLA and FEOA are vital in tackling financial crimes, but judicial delays, extradition hurdles, and enforcement gaps hinder effectiveness. Strengthening enforcement, global cooperation, and judicial efficiency is key to ensuring economic integrity.