June 11, 2016
The Indian prosecution network for anti-money laundering has all the elements in place, except the criminal. In 11 years since July 2005, when the Enforcement Directorate, or ED, was asked to operate the Prevention of Money Laundering Act (PMLA), no one has been convicted for the crime. India’s lead prosecuting agency against money laundering and illegal use of foreign exchange has tried hard but it has not managed to crack through a stretched out judicial process, the lack of inter-agency coordination among the prosecution agencies and a crippling shortage of staff.
Money laundering is a crime with wide ramifications that finances even more serious ones like terrorism and drug running. India sits at a vulnerable geographical position, flanked by two of the most prolific drug producing regions of the world. It has battled terrorism for decades and now as the fastest growing economy in the world, its financial sector is a huge attraction for anyone wanting to clean up the money they have made from any crime by investing in it. At one stage, Pakistan, Afghanistan, Nepal and Bangladesh were classified as high risk and uncooperative countries by FATF. So the Indian economy has plenty of stake in how the ED performs.
The problem emerges in making the charges stick. ED officials, speaking strictly on the condition of anonymity, say they are quite successful in collecting evidence of wrong-doing from the records of financial agencies in India, but are stymied in gathering those from abroad. A money laundering charge has to be agreed upon as one both within India and abroad. If a court abroad decides the case can be settled with a rap on the knuckles and lets go off the defendant, any case made out in India too falls apart. Under PMLA, the ED cannot produce the primary charge sheet; it is for the others, like the income tax or the CBI, to make out the first case. “If the judge looks bleakly at the first one, it becomes difficult for us to convince the court that the subsequent money laundering charge should stick,” says an ED officer.