The Prevention of Money Laundering Act, 2002 (hereinafter, PMLA) defines Money Laundering as an act where: “someone directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected to proceeds of crime including its concealment, possession, acquisition, or use and projecting or claiming it as untainted property shall be guilty of money-laundering.”
The PMLA and its implementing rules do not specify an Enforcement Case Information Report (‘ECIR’). It is often referred to by the ED as “an internal record of the Directorate of Enforcement for the correct identification of a specific case.” This is the formal report from the ED that initiates the inquiry process under the PMLA. In this regard, it appears to be similar to a First Information Report (‘FIR’) that is typically filed by the police in relation to a cognizable offence under section 154 of the Criminal Procedure Code or a non-cognizable offence under section 155 of the Criminal Procedure Code, despite neither being explicitly described nor mandated by law.
Due to the lack of clarity around the notion of an ECIR, it is unclear at what point an ECIR is registered and at what moment the ECIR should be lodged with the Special Court. Money laundering is the outcome of the washing of criminal funds derived through a scheduled offense. Before a case of money laundering may be commenced, a scheduled offense must have been committed. The registration of an ECIR must consequently follow the registration of a FIR, a complaint, or the submission of a charge sheet relating to the scheduled offense. The FIR is not a secret document, and any individual mentioned in the FIR as an accused has the right to request a copy of the FIR from the police station in question.
The Act proposes to establish a comprehensive structure for the investigation of money laundering offenses, the recording of statements, the search and seizure of property, the temporary attachment and confirmation of the proceeds of crime, confiscation, and prosecution. The basis for initiating proceedings under this statute is the conduct of the scheduled offense, followed by the beginning of an inquiry into the planned offense. Money laundering is not a “sui generis autonomous offense”; rather, it is reliant on the conduct of a predicate offense.
If the FIR finds that a scheduled offense has been committed, the Enforcement Directorate may file an Enforcement Case Information Report (ECIR). The FATF has long advocated that India should alter the PMLA so that the beginning of proceedings under the PMLA is not contingent on the commission of a scheduled offense,6 but India has continuously rejected this proposal. Upon registration of an ECIR, the ED would either approach the Special Court by filing a complaint/charge sheet prior to the commencement of trial for the offence of money-laundering, or it would provisionally attach the alleged proceeds of crime by following the process outlined in sections 5, 17 or 18 of the PMLA to initiate proceedings before the Adjudicating Authority under section 8 of the PMLA.
In addition, a FIR must be immediately submitted to the magistrate having jurisdiction. The practice of not filing an ECIR upon registration before a competent court and handling it differently from a FIR is supported on the grounds that just registering an ECIR against a person does not automatically make him an accused, as it does in the case of a FIR.
Since there is no legal duty to register an ECIR, there is no equivalent obligation for the ED to send a copy of an ECIR to the defendant at the threshold stage.
At the stage of attachment proceedings before the Adjudicating Authority, the accused receives a copy of the ECIR for the first time. The ED provides all Relied Upon Documents (RUD) to the defendant, which includes the ECIR.
Especially at the stage of bail, this sort of circumstance is quite burdensome for the accused. When an accused is arrested on an accusation of an offence under PMLA or when an accused is anticipating arrest for the offence of money laundering, it is very difficult to formulate grounds for bail and to state the prosecution’s allegations against him because he is unaware of the exact allegations.
Even under modern criminal law, the accused receives a copy of the FIR at the stage of document delivery. However, in Youth Bar association v. Union India, 2016 SC 4136, the Supreme Court ruled that the accused is entitled to get a copy of the FIR at the threshold stage itself and that the prosecution must wait until the stage of section 207 CrPC to provide the accused with a copy of the FIR. The ED does not comply with Section 41A of the Criminal Code.
Moreover, presuming that the offenses within the jurisdiction of the ED are non-cognizable, the ED failed to get court approval under Section 155 of the Criminal Procedure Code in order to commence an investigation into the same.
The problem of determining the status of ECIR has often been brought before the courts. Due to the non-validated character of the ECIR, the court has dealt with this matter on a case-by-case basis, but a definitive judgment is necessary to resolve the issues that have arisen as a result.
When a person’s life and freedom are in danger, it is insufficient for the courts to establish simply temporary arrangements, such as the one about receiving a copy of the ECIR. In addition, unless this problem is resolved definitively, we will continue to witness an increase in frivolous lawsuits, which will prolong the delivery of justice.
In a nation where the number of pending cases is a serious problem, the last thing anybody would want is an increase in litigation. If the government and the legislature do not offer an olive branch to the judiciary, it will be impossible to find common ground.
As far as the executive and legislature are concerned, the whole spectrum of concerns pertaining to the legal legitimacy of an ECIR may be handled in three easy steps:
Insertion of new regulations into the PMLA governing the registration of an ECIR, outlining method and manner.
The legislature must establish a separate handbook outlining the investigative norms and procedures to be followed by the ED under the PMLA. Similar to the CBI handbook, an “ED manual” may exist.
A distinct phrase should be included in both the PMLA regulations governing the registration of an ECIR and the ED manual in order to harmonize the construction of their respective sections.