Legal experts and practitioners have said enforcement under the Prevention of Money Laundering Act, 2002 (PMLA) and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 is increasingly characterised by a stronger evidentiary burden on accused persons, alongside wider investigative reach by authorities.
Speaking at a PHD Chamber of Commerce and Industry (PHDCCI) conference, Rakesh Gupta, Co-chair, Direct Tax Committee, said both laws play a critical role in addressing financial crime, but their application has raised concerns regarding selective enforcement. He noted that once a default is established, the burden of proof becomes significantly more stringent, effectively shifting the responsibility onto the accused to demonstrate compliance and legitimacy of assets.
Arun Kumar Agarwal, Former Member and Acting Chairperson of the Appellate Tribunal under PMLA, explained that money laundering offences extend to any direct or indirect involvement with “proceeds of crime”. This includes concealment, possession, acquisition, use, or projection of such proceeds as legitimate assets.
He further said that “proceeds of crime” covers any property derived from criminal activity or its equivalent value, and pointed out that amendments to PMLA, including major changes introduced in 2019, have strengthened enforcement provisions and expanded investigative powers available to authorities.
Kanhaiya Singhal, Advocate, Supreme Court of India, highlighted the legal shift introduced by the reverse burden of proof under PMLA. He said that while general legal principles under the Indian Evidence Act place the burden of proof on the person making a claim, PMLA reverses this position once allegations are made.
“The concept of burden of proof is not limited to law; it is part of our everyday lives. As per the fundamental principle under Section 101 of the Indian Evidence Act, 1872, the person who asserts a fact must prove it,” he said.
He added that under PMLA, an accused person must demonstrate that assets alleged to be proceeds of crime were acquired through legitimate means. Singhal also referred to complexities arising from the retrospective application of the Black Money Act.
Separately, experts pointed to broader concerns emerging from enforcement trends. Suyash Raj Nahata, Co-chair, Direct Tax Committee, PHDCCI, said several legal and practical issues are surfacing around the interpretation of enforcement provisions and evidentiary expectations, adding that a clearer understanding of these frameworks is increasingly necessary for stakeholders.
Gagan Kumar, Partner at Khaitan Legal Associates, said courts treat white-collar crimes with seriousness due to their deliberate and structured nature. He added that Section 50 of PMLA has a wide reach and may bring professionals within its ambit depending on their involvement in financial transactions under scrutiny.
On the issue of historical legal frameworks, Rohit Jain, Partner at Vaish Associates, said benami transactions before 1988 involved property being held in another person’s name without beneficial ownership. He explained that such arrangements were broadly classified into Tripartite and Bipartite structures based on how ownership and control were distributed.
Overall, experts indicated that enforcement under PMLA and related laws is moving towards a more stringent compliance regime, marked by expanded investigative powers and a heavier burden of justification placed on individuals and entities under scrutiny. |
