India should aim to reduce the number of pending trials in money laundering cases by making major changes to increase the capacity of the court system, and potentially the capability of the Enforcement Directorate (ED), as per the Financial Action Task Force (FATF) mutual assessment report of India. Major changes to address delays relating to the prosecution of terror financing (TF) cases have also been suggested.
“Although the conviction rate stands at almost 97%, there are a number of factors that may explain the low number of prosecutions over the evaluation period. One important reason relates to a constitutional challenge through 121 petitions to PMLA [Prevention of Money Laundering Act] provisions since 2018, which put on hold a number of trials and was only disposed of by the Supreme Court (Vijay Madanlal Chowdhary vs. Union of India) in July 2022,” it said.
During the check period, 4,163 investigations were initiated and 132 dropped later, prosecution complaints filed in 864 cases, while 28 convictions were secured by the ED. The agency faced only one acquittal.
The FATF observed that the challenges were made to several powers of the ED under the PMLA that would have impacted their investigations and prosecutions over the period. “The issues under challenge were ultimately decided in favour of ED and the provisions of PMLA were upheld. Although there are still legal challenges relating to the PMLA which are waiting decision in the Supreme Court, this has not impacted PMLA prosecutions since the 2022 decision,” said the report.
“However, there were a significant number of money laundering [ML] cases that could not be prosecuted during this period. The courts have taken several initiatives to fast-track trials since 2022, such as courts cutting shorter dates for sessions, using video conferencing facilities for suspects and witnesses, and the use of remote points for video conferencing in Indian embassies and consulates around the world. Although the number of ML prosecutions and convictions have started to increase over the period of 2022-23, as reflected by the statistics, the backlog remains considerable,” it said.
Saturation of system
The report said the limited number of specialised prosecutors in ED and special court judges had also contributed to a saturation of the judicial system “i.e., inability to prosecute additional cases due to reaching prosecutors and courts’ full capacity”. “The authorities recognise the importance of addressing the shortage in human resourcing and have plans to address this partly through increases to the number of ED prosecutors from 173 to 300 over the coming years...an additional 171 prosecution complaints are not progressing on account of pending international assistance based on requests made by India”.
The other priority actions suggested to India include that it should undertake more comprehensive financial network analysis, especially on ML techniques linked to human trafficking and migrant smuggling; enhance capacity of State-level agencies for more effective parallel financial investigations; and improve its framework for implementing Targeted Financial Sanctions so that all reporting entities receive updates on relevant transactions without delay.
India should ensure that anti-TF measures aimed at preventing the non-profit organisation (NPO) sector from being abused are implemented in line with “risk-based” approach. “Outreach should be conducted in a more focused coordinated and risk-based manner...ensuring NPOs. at risk of TF abuse enhance their understanding of TF risks...,” it said.
A technical shortcoming underlined by the FATF is non-inclusion of definition for politically exposed persons (PEPs) in PMLA rules. Besides, India should enhance the capacity of newly incorporated Designated Non-Financial Businesses and Professions (DNFBP) supervisors and increase suspicious transactions report in high-risk sectors; prioritise risk-based supervision of Money or Value Transfer Services sector; and enhance steps to prevent criminals or their aides from participating in gems & jewellery business. India has included these points as part of its National Risk Assessment Exercise for 2025, said a senior government official.
Published - September 19, 2024 10:38 pm IST
