How FATF Recommendations Led to the Amendment of Section 24 of the PMLA Act, 2002

The Financial Action Task Force (FATF) is an inter-governmental body that develops and promotes policies to combat money laundering and terrorist financing. One of the significant recommendations made by the FATF was regarding the amendment of Section 24 of the Prevention of Money Laundering Act, 2002 (PMLA Act). This amendment has significant implications for both the prosecution and the accused in cases related to money laundering. In this article, we will discuss how FATF recommendations led to the amendment of Section 24 of the PMLA Act, 2002.

Background:

The PMLA Act was enacted in 2002 to prevent money laundering and to provide for the confiscation of property derived from, or involved in, money laundering. Section 24 of the PMLA Act deals with the burden of proof in cases related to money laundering. The original provision placed the burden of proof on the prosecution to prove that the accused had engaged in money laundering beyond a reasonable doubt.

In 2013, an amendment was made to this provision, introducing the concept of “reverse burden of proof.” As a result of this amendment, the burden of proof shifts from the prosecution to the accused. Now, it is the responsibility of the accused to prove that the property in question was acquired through legitimate means and not through money laundering. The motivation behind this amendment was to address the recommendations of the FATF.

FATF Recommendations:

The FATF sets global standards for combating money laundering and terrorist financing. It conducts mutual evaluations of member countries to assess their compliance with these standards. India is a member of the FATF and is subject to these evaluations. In 2010, the FATF evaluated India’s compliance with its recommendations and identified several shortcomings in the PMLA Act.

One of the significant issues identified by the FATF was the burden of proof in cases related to money laundering. The FATF observed that the burden of proof in India was on the prosecution, which made it difficult to prove cases of money laundering. The FATF recommended that India amend its laws to introduce a reverse burden of proof in such cases.

Amendment to Section 24:

In response to the FATF recommendations, the Indian government amended Section 24 of the PMLA Act in 2013 to introduce the concept of reverse burden of proof. This amendment has significant implications for both the prosecution and the accused in cases related to money laundering.

With the amendment in place, if the prosecution can establish that the accused possesses the proceeds of crime, the burden of proof shifts to the accused to demonstrate that they acquired the property through legitimate means. Failing to prove this will result in the presumption that the property is involved in money laundering.

Obligation of the Prosecution:

The amended provision places a significant obligation on the prosecution to establish that the accused is in possession of the proceeds of the crime. The prosecution must produce evidence to show that the accused is in possession of property that is disproportionate to their known sources of income. Once the prosecution has established this, the burden of proof shifts to the accused to prove that the property was acquired through legitimate means.

Obligation of the Accused:

Now, the accused faces the burden of proving that the property in question was obtained through lawful means. It is imperative for the accused to present compelling evidence demonstrating that the acquisition of the property occurred via inheritance, gift, or other legitimate channels. Additionally, it is crucial to establish that the funds used for the purchase originated from legal sources, devoid of any connection to illegal activities.

Conclusion:

In conclusion, the amendment of Section 24 of the PMLA Act, 2002, is a crucial step in India’s efforts to combat money laundering and terrorist financing. The introduction of the concept of reverse burden of proof has made it easier for the prosecution to prove money laundering cases, and the FATF recommendations have played a significant role in this amendment. The implementation of robust AML/CFT compliance programs by companies is now more critical than ever.