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GS Paper: Money-Laundering & Its Prevention

  • Enforcement Directorate Flags 8 Priority Areas for 2026

    Why in the news?

    The Enforcement Directorate identified eight priority focus areas during its 34th quarterly zonal conference held in Guwahati from February 19 to 21, 2026. The meeting was chaired by ED Director Rahul Navin.

    8 Priority Focus Areas

    1. Tracing foreign assets parked abroad, especially in Dubai and Singapore
    2. Misuse of Insolvency and Bankruptcy Code and collusion in resolution processes
    3. Trade Based Money Laundering (TBML) through over and under invoicing
    4. Cyber fraud including digital arrest scams
    5. Illegal online gambling and betting networks
    6. Drug trafficking finance and hawala channels
    7. Share market manipulation linked money laundering
    8. Foreign interference through illicit funding

    Legal and Institutional Framework

    • Prevention of Money Laundering Act, 2002: Primary legislation empowering ED to investigate money laundering and attach proceeds of crime.
    • Insolvency and Bankruptcy Code, 2016:Possible misuse through collusion among corporate debtors, resolution professionals, and Committee of Creditors.

    Foreign Exchange Laws

    • Review of pending cases under
    • Foreign Exchange Regulation Act
    • Foreign Exchange Management Act
    • Target: Complete adjudication of all pending FERA cases by March 31, 2026.

    International Cooperation Mechanisms

    ED emphasized stronger global coordination through:

    • Interpol via Bharatpol portal
    • Egmont Group for financial intelligence exchange
    • Asset Recovery Interagency Network Asia Pacific
    • GlobE Network

    Intelligence Platforms Used

    • NATGRID
    • FINNET
    • Financial Intelligence Unit India
    • Indian Cyber Crime Coordination Centre
    • Narcotics Control Bureau
    [2019] Consider the following statements: 1. The United Nations Convention against Corruption (UNCAC) has a ‘Protocol against the Smuggling of Migrants by Land, Sea and Air’. 

    2. The UNCAC is the ever-first legally binding global anti-corruption instrument. 

    3. A highlight of the United Nations Convention against Transnational Organized Crime (UNTOC) is the inclusion of a specific chapter aimed at returning assets to their rightful owners from whom they had been taken illicitly. 

    4. The United Nations Office on Drugs and Crime (UNODC) is mandated by its member States to assist in the implementation of both UNCAC and UNTOC. 

    Which of the statements given above are correct? 

    (a) 1 and 3 only (b) 2, 3 and 4 only (c) 2 and 4 only (d) 1, 2, 3 and 4

  • Growing unchecked, no guardrails: On Cryptocurrency

    INTRODUCTION

    India’s crypto ecosystem is witnessing rapid expansion, with millions of users participating through exchanges that operate in a regulatory grey zone. Even though cryptocurrencies are not recognised as legal tender, trading continues unchecked through global and domestic platforms. Simultaneously, enforcement agencies report increasing difficulty in conducting investigations, seizing digital assets, and identifying crypto flows due to lack of disclosure norms, anonymous digital wallets, and absence of a comprehensive cryptocurrency law.
    As the RBI continues to caution against private crypto assets on grounds of financial instability, the mismatch between rapid adoption and weak regulatory architecture is emerging as a major economic and governance challenge.

    WHY IN THE NEWS? 

    The Indian crypto industry is projected to grow from $2.6 billion in 2024 to $15 billion by 2035, showing unprecedented expansion despite lack of regulatory oversight. This contrast, booming investments vs. near-absence of guardrails, has placed the industry at the centre of policy debate. Law-enforcement agencies have flagged that crypto-linked frauds, pump-and-dump schemes, and money-laundering networks are rising, while agencies lack legal backing and technical capability to tackle cases, making the issue urgent and nationally significant.

    Understanding Cryptocurrencies and Exchanges

    What are cryptocurrencies?

    • Decentralised Digital Assets: Built on blockchain, enabling encrypted, irreversible peer-to-peer transactions.
    • No Government Backing: Value based purely on demand-supply and market sentiment.
    • Popular Coins: Bitcoin, Ethereum; Indian users largely rely on global exchanges.
    • Not Legal Tender in India: Cannot be used for officially recognised payment obligations.

    What are crypto exchanges?

    • Online Trading Platforms: Allow users to buy, sell, hold crypto.
    • Wide Accessibility: Millions of Indians use both domestic and offshore exchanges.
    • India’s Absence of Recognition: Exchanges operate as digital intermediaries without formal regulatory status.

    How Crypto Scams Proliferate in India

    What mechanisms drive frauds?

    1. Pump-and-Dump Rackets: Influencers artificially inflate coin prices before exiting.
    2. Social Media-Driven Scams: Fraudsters lure users through WhatsApp/Telegram channels promising unrealistic returns.
    3. Disappearing Exchanges: Operators collect deposits and shut down overnight.
    4. Lack of Investor Awareness: Complex technology makes retail investors vulnerable.

    Magnitude of India’s Crypto Adoption

    How large is the user base?

    • 11 Million Global Crypto Holders: India hosts one of the world’s largest user bases.
    • 7 Million Indian Users (approx. 7%): Indicating wide penetration despite lack of backing.
    • ₹45,000 Crore Transaction Volume: Public adoption remains high regardless of regulatory uncertainty.
    • Young Demography: Primarily 18-35 age group investing through mobile apps.

    Why Does RBI Oppose Private Crypto Assets?

    What risks concern the central bank?

    1. Threat to Monetary Stability: Crypto bypasses sovereign currency systems, undermining control.
    2. Capital Flight Risks: Easy cross-border transferability allows funds to move outside the formal system.
    3. Volatility Concerns: Extreme price swings harm financial stability and investor protection.
    4. IMF FSR Context: RBI flags that widespread crypto usage could weaken monetary transmission and destabilise macroeconomic foundations.

    Why Crypto Investigations Are a Minefield in India

    What obstructs law-enforcement agencies?

    1. Disclosing Data
      1. Opaquely Stored User Data: Off-shore exchanges hide ownership/trade history.
      2. No Mandatory Registration: Agencies struggle to compel disclosure.
      3. Jurisdictional Challenges: Crypto platforms operate globally.
    2. Wallet Complexities
      1. Self-Custody Wallets: Google/MetaMask wallets controlled solely by users; agencies cannot freeze.
      2. Unregulated Cross-Border Flows: Enable illegal transfers with no paper trail.
    3. Seizing Digital Assets
      1. Technical Restrictions: Investigators require passphrases; non-cooperation prevents seizure.
      2. Custodial Limitations: No authorised secure government platform for holding crypto.
      3. High-Risk Volatility: Digital assets fluctuate, affecting value during investigations.
    4. Legal Blocks
      1. No Comprehensive Law: India lacks a crypto-specific statute.
      2. Ambiguity for Officers: Enforcement provisions unclear; actions challenged in court.
      3. Regulatory Vacuum: Agencies rely on IT Act, PMLA,insufficient for decentralised tech.
    5. Technical Snag
      1. Privacy Coins (e.g., Monero): High anonymity and advanced obfuscation algorithms.
      2. Untraceable Transactions: Blockchain mixers complicate forensic trails.

    Should Individuals Invest in Crypto?

    What risks do investors face?

    1. High Market Volatility: No asset backing; price fluctuations extreme.
    2. Unregulated Exchanges: Shutdowns lead to permanent loss of funds.
    3. Cyberattacks and Hacks: Wallets vulnerable to phishing and malware attacks.
    4. RBI and Global Position: Institutions including the IMF, RBI, European regulators warn of structural risks.

    CONCLUSION

    India’s crypto sector is expanding rapidly without an accompanying regulatory architecture. While blockchain offers transformative potential, the risks of fraud, volatility, and money-laundering remain high. Strengthening legal frameworks, mandating registration of exchanges, and improving cross-border cooperation will be essential before mainstreaming digital assets. Balancing innovation with stability remains the core policy challenge.

    PYQ Relevance

    [UPSC 2021] Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels.

    Linkage: This PYQ fits because the article shows how crypto and global digital platforms enable anonymous cross-border laundering. It also matches the article’s focus on legal gaps and enforcement challenges in tackling such flows.

  • FATF on India: Effective Money Laundering system, low prosecution

    Why in the News?

    The FATF placed India in the “regular follow-up” category for having an “effective” anti-money laundering and counter-terror financing system but highlighted the need for significant improvements in prosecuting such cases.

    Key Highlights of the FATF Mutual Evaluation Report on India:

    • “Regular Follow-up” Category: India has been placed in the “regular follow-up” category, signifying that its system for combating money laundering and terror financing is effective.
      • Financial institutions need better risk profiling of customers, and the Ministry of Corporate Affairs (MCA) registry needs improved monitoring for accurate ownership information.
    • Money Laundering Risks: The primary sources of money laundering in India come from fraud, cyber-enabled fraud, corruption, and drug trafficking.
      • Terror threats are mainly linked to Islamic State or al-Qaeda groups in Jammu and Kashmir.
    • Non-Profit Organisations (NPOs): India should strengthen measures to prevent abuse of the NPO sector for terror financing, and enhance outreach to NPOs at risk.
    • Improvements in Sanctions Framework: India needs to improve its targeted financial sanctions framework to ensure the timely freezing of funds and assets related to terror financing.
    • Domestic Politically Exposed Persons (PEPs): The report urged India to define domestic PEPs under its anti-money laundering laws and improve identification and risk-based measures related to them.
    • Delay in prosecution: The report noted delays in prosecution due to review petitions are still pending, which delays the resolution of cases under the PMLA.

    Challenges faced by the Indian Government:

    • Prosecution and Conviction Delays: Despite an increase in investigations, the number of prosecutions and convictions remains low, with significant delays in concluding trials, especially under the PMLA.
    • Constitutionality Issues: Legal challenges to the constitutionality of the PMLA between 2014-2022 disrupted the momentum in terror financing and money laundering prosecutions.
    • Risk Profiling of Financial Customers: There is a need for better risk profiling of customers in financial institutions to address money laundering more effectively.
    • Inaccurate Ownership Information: Ensuring accurate owner information in the Ministry of Corporate Affairs (MCA) registry remains a challenge, especially concerning investments from tax havens.
    • Non-Profit Organisations: Ensuring that non-profits are not abused for terror financing requires better coordination and focused outreach by authorities.
    • Lack of Definition for Domestic PEPs: While India has defined foreign PEPs, the absence of a clear definition for domestic PEPs under PMLA creates a gap in the anti-money laundering framework.
    • Fast-Tracking Trials: The need to fast-track trials in money laundering and terror financing cases is recognized, but progress in addressing this challenge remains slow.

    Way Forward: 

    • Strengthen Legal and Institutional Framework: India should establish clear definitions for domestic Politically Exposed Persons (PEPs) under anti-money laundering laws and enhance targeted financial sanctions to ensure timely asset freezing.
    • Enhance Risk Management and Monitoring: Financial institutions should improve risk profiling and implement stricter Know Your Customer (KYC) processes, while the Ministry of Corporate Affairs should ensure accurate ownership data, especially for investments from tax havens.

    Mains PYQ:

    Q Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (UPSC IAS/2021)

  • [2 April 2024] The Hindu Op-ed: The PMLA — a law that has lost its way

    [2 April 2024] The Hindu Op-ed: The PMLA — a law that has lost its way

    PYQ Relevance:Mains: 

    Q) Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (UPSC CSE/2021) 

    Q) Analyze the complexity and intensity of terrorism, its causes, linkages and obnoxious nexus. Also suggest measures required to be taken to eradicate the menace of terrorism. (UPSC CSE/2021) 

    Q) Money laundering poses a serious security threat to a country’s economic sovereignty. What is its significance for India and what steps are required to be taken to control this menace?  (UPSC CSE/2013) 

    Note4Students: 

    Prelims: Polity; Prevention of Money Laundering Act  of 2002;

    Mains: Polity; Internal Security; Prevention of Money Laundering Act  of 2002;

    Mentor comments: The Enormous volume of black money generated through International Drug Trafficking poses a grave threat to our Indian economy as well as many other countries too. We all are awared that the black money is generated through the flourishing of the drug trade and then it is  integrated with the legitimate and domestic economy that can destabilize the world and endanger the integrity and sovereignty of various Nations. Hence, today we are going to discuss some major ongoing issue which is aligned with same context – the issue with the Prevention of Money Laundering Act  of 2002.

    Let’s learn. 

    —

    Why in the News?

    The Prevention of Money Laundering Act (2002),  includes a large number of offenses in its schedule that have nothing to do with the original purpose of this law. So, there is an urgent need to have an effective law with the rising of newer challenges in Drug Money Laundering offenses.

    The Background of the Law:

    • Since the mid-1980s, there has been global concern over the proceeds of criminal activities such as drug trafficking being ‘laundered’ or used in financing terrorism. 
    • The UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances adopted in the Vienna Convention (1988) was the first treaty that called upon nations to adopt domestic laws to combat drug trafficking. As part of these laws, countries were asked to prohibit the conversion or transfer of property gained through dealing in narcotics to conceal its illicit origin. 
    • The Financial Action Task Force (FATF) was established at the G-7 Summit in Paris in 1989 in response to mounting concern over money laundering. The Task Force made recommendations from time to time to strengthen laws on the subject. 
    • The UN Convention against Transnational Organized Crime of 2000 (Palermo Convention) also advocated legislative and other measures to combat organized crime, and specifically called for ‘criminalizing the laundering of proceeds of crime’

    About the Prevention of Money Laundering Act (PMLA), 2002:

    • Enactment of PMLA in India:
      • Article 253: This gave the Union Parliament the exclusive power to make laws for any part of India’s territory to implement any treaty, agreement or convention involving one or more countries.
      • Seventh Schedule: Item 13 (Communication which is subject to provisions in List I and III) in the Union list of the Seventh Schedule of the Constitution is specific on this point. 
    • It was enacted in January 2003 and seeks to combat money laundering in India under three major domains:
      • Preventing and controlling Money Laundering
      • Confiscating and seizing the property obtained from the laundered money
      • Issues that are directly connected with Money Laundering in India.
    • Section 3 of the PMLA defines the offense of money laundering as whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of the offense of money-laundering.
    • The Act was amended by the Prevention of Money Laundering (Amendment) Act, 2009 and by the Prevention of Money Laundering (Amendment) Act, 2012. Recently, the PMLA was amended through the Finance Act, 2015, Finance Act, 2018 and Finance Act, 2019.

    Why PMLA has lost its way? 

    • Draconian Nature: The provisions contained are now being used in other scheduled offenses too without mitigating their rigor. 
    • Redundant Law: The various amendments made in this Act at different times bloated the schedule offenses which now contain such offenses that are either ordinary offenses listed in the IPC or for which there are special laws in force.
      • For Example, the Prevention of Corruption Act, 1988 which is aimed at curbing corruption among public servants. This Act was added to the schedule of offenses in 2009. The PMLA now applies with all its rigor to public servants also. Thus, a public servant charged with corruption and a hard-core drug trafficker are treated alike.
    • Non-aligned with Fundamental Principles: A very disturbing thing about the PMLA is that an accused under this law is presumed to be guilty until proven innocent. A fundamental principle of Anglo-Saxon jurisprudence is that a person is presumed innocent until proven guilty. 
    • Stringent Bail Provisions: An accused will be denied bail by the entire hierarchy of courts because the bail provision contained in section 45 of the PMLA says that a judge can give bail only when he is satisfied that the accused is innocent. 
    • Legislative vs. Judiciary Nexus: The bail provision is invested with a lot of political significance in present-day India. The Act originally aimed to curb the laundering of black money and to save the economy from being destabilized. But the less serious offenses are also under purview of PMLA. The learned judges nearly said that the inclusion of a particular offense in the schedule comes within the domain of the legislative policy.
    Judicial Stand on the Bail Provisions:

    Gudikanti Narasimhulu And Ors vs Public Prosecutor (1978): The judicial perspective on bail was laid out by Justice V.R. Krishna Iyer (Andhra Pradesh HC) where it said that “Personal liberty is deprived when bail is refused, which is too precious value of our constitutional system recognized under Article 21”.

    Nikesh Tarachand Shah vs Union of India (2018): The PMLA Act (Section 45) was held unconstitutional by a two-judge Bench of the Supreme Court of India as it was violating Article 14 and Article 21.  

    Vijay Madanlal Choudhary vs Union of India (2022): Parliament, with great alacrity, restored this provision with certain amendments which was upheld by a three-judge Bench headed by Justice A.M. Khanwilkar in 2022. The top court held that this provision is reasonable and has a direct nexus with the purposes and objects of the PMLA Act. 

  • Section 120B of the Indian Penal Code (IPC)

    Why in the news?

    • The Supreme Court has rejected review petitions challenging its ruling on the initiation of proceedings under the Prevention of Money Laundering Act (PMLA).
    • The judgment clarified that Section 120B of the Indian Penal Code cannot be invoked for PMLA proceedings unless the alleged conspiracy pertains to a scheduled offence.

    Prevention of Money Laundering Act (PMLA), 2002

     

    • The PMLA was enacted in 2002 with the aim of preventing money laundering and providing for confiscation of property derived from money laundering.
    • It applies to all financial institutions, banks (including the RBI), mutual funds, insurance companies, and their financial intermediaries.
    • The Act empowers government authorities to confiscate property and/or assets earned from illegal sources and through money laundering.
    • It has been amended three times, in 2005, 2009, and 2012.
    • Under the PMLA, the burden of proof lies with the accused, who must demonstrate that the suspect property/assets have not been obtained through proceeds of crime.

     

    Penalties under PMLA:

    • Freezing or Seizure of property and records, and/or attachment of property obtained through crime proceeds.
    • Rigorous imprisonment for a minimum of 3 years and a maximum of 7 years. In cases where money laundering is linked with the Narcotic Drugs and Psychotropic Substances Act, 1985, the punishment can extend up to 10 years, along with a fine.
    • Fine imposition.

     

    Authorities for investigation under PMLA:

    1. Enforcement Directorate (ED): It is responsible for investigating offenses under the PMLA.
    2. Financial Intelligence Unit – India (FIU-IND): It is the national agency tasked with receiving, processing, analyzing, and disseminating information related to suspect financial transactions.

    What is Article 120 of Indian Penal Code (IPC)?

    • Section 120 of the Indian Penal Code (IPC) deals with the concept of “Conspiracy to commit an offense”.
    • It states that when two or more persons agree to do, or cause to be done, an illegal act, or an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy.
    • Section 120A defines “criminal conspiracy” as when two or more persons agree to do, or cause to be done, an illegal act or an act which is not illegal by illegal means.
    • Section 120B prescribes the punishment for criminal conspiracy, with death, imprisonment for life, or rigorous imprisonment for a term of two years or upwards, shall be punished in the same manner as if he had abetted such offense.

    Punishment for Criminal Conspiracy

    • Nature of Conspiracy: IPC 120B categorizes conspiracy based on the gravity of the offense and prescribes punishments accordingly.
    • Serious Offenses: Conspiracy to commit serious crimes punishable by death, life imprisonment, or rigorous imprisonment for 2 years or more warrants severe punishment equivalent to the offense committed.
    • Other Offenses: Conspiracy for illegal acts not falling under the serious category incurs imprisonment for up to six months, a fine, or both, as per Section 120B.

    Practice MCQ:

    Which of the following statements are correct regarding ‘Prevention of Money Laundering Act 2002 (PMLA)’?

    1. Enforcement Directorate (ED) is responsible for investigating offences under the PMLA

    2. The Act enables government authorities to confiscate property earned through money laundering.

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

     

  • Virtual Digital Asset Regulation: Global Perspectives and Challenges

    Central Idea

    • The Financial Intelligence Unit India (FIU IND) issued notices to offshore virtual digital asset service providers (VDA SPs) for non-compliance with the Prevention of Money Laundering Act, 2002 (PMLA).
    • A request was made to the Ministry of Electronics and Information Technology to block URLs of these entities.

    About Virtual Digital Assets (VDAs)

    • Digital Value: Virtual Digital Assets are digital forms of value like cryptocurrencies and tokens. They are secured using cryptography and blockchain technology.
    • Intangible and Digital: These assets exist only in digital form and can be used for transactions, investments, or as a store of value.
    • Decentralized: They usually operate independently of central authorities, which makes them attractive but also prone to risks like money laundering. This has led to calls for regulation and oversight.

    Premise of Non-Compliance with PMLA

    • Regulatory Changes in 2023: VDA SPs were brought under anti-money laundering and counter-terrorism financing regulations in March 2023.
    • Mandatory Compliance: These regulations required VDA SPs to register, verify client identities, and maintain records of financial transactions.
    • Non-Registration Issue: Non-compliant entities continued to serve Indian users without registration, evading the AML and CFT framework.

    Purpose of PMLA Compliance

    • Monitoring Financial Transactions: The PMLA aims to track financial transactions to prevent money laundering and terror financing.
    • Selective Compliance Advocacy: Legal experts suggest that FIU IND should enforce compliance only on entities fitting the March 2023 notification parameters.
    • KYC Benefits: Adherence to KYC mandates is seen as beneficial for VDA SPs, addressing concerns about anonymity and unlawful use of crypto assets.

    Global Efforts and Indian Enforcement

    • India’s Global Advocacy: India’s enforcement aligns with its global efforts for cryptocurrency regulation, including proposed frameworks by the IMF and the Financial Stability Board.
    • G-20 Influence: India’s role in the G-20 has been pivotal in advocating for global cryptocurrency regulation.

    International Regulatory Landscapes

    • Dubai’s VARA Model: Dubai’s Virtual Assets Regulatory Authority (VARA) provides a comprehensive licensing framework, emphasizing consumer protection and AML-CFT compliance.
    • EU’s MiCA Regulation: The Markets in Crypto-Assets Regulation (MiCA) in the EU focuses on transparency, disclosure, and supervision, requiring service providers to be authorized.
    • U.S. Regulatory Framework: The U.S. lacks a comprehensive nationwide framework but covers digital assets under existing regulations like the Bank Secrecy Act.

    Considerations in Regulating Virtual Digital Assets (VDAs)

    • Policy Options by BIS: The Bureau for International Settlements (BIS) outlines three policy options: outright ban, containment, and regulation.
    • Challenges of an Outright Ban: An outright ban may be unenforceable due to the pseudo-anonymous nature of crypto markets.
    • Containment Strategy: Containment involves controlling flows between crypto and traditional financial systems but may not address inherent vulnerabilities.
    • Regulatory Motivations: The motivation to regulate varies, with the need to ensure regulatory benefits outweigh costs.
    • Focus Areas for Emerging Markets: Emerging market economies (EMEs) need to define regulatory authority, scope of regulation, and fill data gaps to understand technology interconnections.

    Conclusion

    • Balancing Act: Regulating virtual digital assets presents a complex balancing act between innovation, consumer protection, and financial stability.
    • Global Coordination: The varied approaches across jurisdictions highlight the need for global coordination and harmonization in VDA regulations.
    • India’s Proactive Stance: India’s recent actions reflect a proactive stance in aligning with global standards while addressing local concerns.
    • Future Challenges: As the virtual asset landscape evolves, regulators worldwide will continue to face challenges in adapting their frameworks to ensure effective oversight without stifling innovation.

  • Explained: Delhi Excise Policy Scam

    Delhi Excise Policy Scam

    Central Idea

    • A Delhi court has remanded a member of Rajya Sabha in Enforcement Directorate (ED) custody in the Delhi Excise Policy Scam.
    • This has created a big furore among people over the alleged involvement of a hardliner political party which was established solely to fight political corruption.

    About Delhi Excise Policy Scam

    • Background: Both individuals face corruption allegations related to the formulation and implementation of the Delhi Excise Policy 2021-22, which came into effect but was later scrapped.
    • Procedural Lapses: The allegations stemmed from a report submitted by Delhi Chief Secretary to the Lieutenant Governor in July 2022. The report pointed to procedural lapses in the policy’s formulation.
    • Financial Losses: The report claimed that “arbitrary and unilateral decisions” led to estimated “financial losses to the exchequer.”
    • Alleged Irregularities: It alleged that leaders received “kickbacks” from businesses for preferential treatment, such as discounts, license fee waivers, and relief due to disruptions caused by the Covid-19 pandemic. These funds were purportedly used for electoral influence.

    Involvement of the Enforcement Directorate (ED)

    • ED’s Role: Following the CBI’s FIR, the ED asserted that the alleged proceeds of crime required investigation to establish the modus operandi.
    • Investigation Details: The ED alleged that the “scam” involved irregularities in the wholesale liquor business, margin-fixing, and receiving kickbacks. It claimed that the policy was designed with “deliberate loopholes” to benefit key figures.
    • Financial Transactions: The ED also alleged that individuals, acting as intermediaries, received substantial sums from a group, allowing them access to various businesses.

    Differences in the Delhi Excise Policy

    • Policy Goals: The Delhi Excise Policy 2021-22 aimed to exit the state from the liquor business, eliminate black marketing, increase revenue, enhance consumer experiences, and ensure equitable distribution of liquor vends.
    • Private Operation: Under the policy, Delhi was divided into zones, each with liquor vends operated by private licensees. Licensees had the freedom to offer discounts and set prices.

    Issues and Reversals

    • Deviation from Procedures: A report in July 2022 highlighted deviations from established procedures in the policy formulation.
    • Market Distortions: The report pointed out that discounts offered by liquor retailers were causing market distortions.
    • Policy Reversals: It noted policy reversals, leading to questions about the justification for such changes.
    • Blanket Relaxations: The report flagged blanket relaxations granted for default in license fee payments.

    ED Chargesheets and Allegations

    • Campaign Funding: The ED has alleged financial improprieties related to campaign funding.
    • Conduit for Financial Transactions: Individuals are alleged to have acted as intermediaries in financial transactions.
    • Involvement of Key Figures: The ED has claimed the involvement of certain individuals in meetings and interactions related to the case.

    Conclusion

    • The scam has led to arrests and legal proceedings involving corruption allegations and procedural lapses.
    • Allegations of financial improprieties and irregularities in the policy’s implementation have created a complex legal landscape.
    • The involvement of the Enforcement Directorate adds to the intricacies of the case, while ongoing investigations seek to establish the veracity of the allegations.

  • UAPA invoked against Media agency

    Central Idea

    • Allegations against NewsClick: The FIR against NewsClick alleges illegal funding from China, routed through the United States.
    • UAPA Provisions: The FIR invokes various sections of the Unlawful Activities (Prevention) Act (UAPA), with a primary focus on Section 16, which deals with punishment for terrorist acts.

    Understanding UAPA Provisions

    *Section 15 – Definition of “Terrorist Act”

    • Section 15 of the UAPA defines “terrorist act” and prescribes imprisonment for at least five years to life. In cases where the act results in death, the punishment is either death or imprisonment for life.
    • This section encompasses serious and violent acts with the potential to threaten India’s unity, integrity, security, economic security, or sovereignty.
    • It includes actions such as the use of explosives, causing death or damage to property, disruption of essential services, and damaging monetary stability through counterfeiting.

    Other UAPA Provisions Invoked

    • Section 13 – Unlawful Activities: This section deals with unlawful activities and their consequences.
    • Section 17 – Raising Funds for Terrorist Acts: It addresses raising funds for terrorist activities.
    • Section 18 – Conspiracy: This section covers conspiracy related to terrorist acts.
    • Section 22 (C) – Offences by Companies, Trusts: This provision pertains to offenses committed by companies and trusts.
    • IPC Sections Invoked: Additionally, the FIR includes IPC sections 153 A (promoting enmity between different groups) and 120B (criminal conspiracy).

    Understanding the UAPA Framework

    • Unique Criminal Law Framework: The UAPA provides an alternative criminal law framework that differs from the general principles of criminal law.
    • Enhanced State Powers: Compared to the Indian Penal Code (IPC), the UAPA grants the state greater powers.
    • Bail Provisions: The UAPA has stringent conditions for bail and relaxes timelines for the state to file chargesheets.
    • Denying Bail: To deny bail under the UAPA, the court must establish a “prima facie” case against the accused.
    • Prima Facie Definition: In 2019, the Supreme Court defined “prima facie” narrowly, meaning that the court must not analyze evidence or circumstances but must consider the “totality of the case” presented by the state.
    • Section 43D(5): This section specifies that a person accused of an offense under Chapters IV and VI of the UAPA shall not be released on bail or their own bond if the Public Prosecutor hasn’t been heard on the application for release.
    • Court’s Opinion: The court may deny bail if it finds reasonable grounds to believe that the accusation against the accused is prima facie true.

    Conclusion

    • The FIR against NewsClick under the UAPA underscores the seriousness of the allegations and the complex legal framework surrounding such cases.

  • $1.8 billion recovered under Fugitive Economic Offenders Act

    Central Idea

    • Assets worth over $12 billion have been attached since 2014 under the Prevention of Money Laundering Act (PMLA).
    • Additionally, assets exceeding $1.8 billion have been recovered in the past four years under the Fugitive Economic Offenders Act (FEOA), 2018.

    About the Fugitive Economic Offenders Act, 2018

    • The FEOA is a significant legal instrument designed to address the issue of economic offenders who flee the country to evade criminal prosecution or refuse to return to face charges.
    • This act empowers authorities to confiscate the ill-gotten gains of these individuals and bar them from filing or defending civil claims, among other provisions.

    Key Provisions of the Fugitive Economic Offenders Act:

    (1) Definition of Fugitive Economic Offender:

    • A “fugitive economic offender” is an individual against whom an arrest warrant has been issued for committing an offense listed in the Act, and the value of the offense is at least Rs. 100 crore.
    • Offenses listed in the act include counterfeiting government stamps or currency, cheque dishonor, money laundering, and transactions defrauding creditors.

    (2) Declaration of a FEO:

    • After considering an application, a special court (designated under the Prevention of Money Laundering Act, 2002) may declare an individual as a fugitive economic offender.
    • The court may confiscate properties that are proceeds of crime, benami properties, or any other property, whether in India or abroad.
    • Upon confiscation, all rights and titles of the property vest in the central government, free from encumbrances.
    • The central government may appoint an administrator to manage and dispose of these properties.

    (3) Bar on Filing or Defending Civil Claims:

    • The Act allows any civil court or tribunal to prohibit a declared fugitive economic offender from filing or defending any civil claim.
    • Furthermore, any company or limited liability partnership where such an individual is a majority shareholder, promoter, or a key managerial person may also be barred from filing or defending civil claims.
    • Authorities may provisionally attach properties of an accused while the application is pending before the Special Court.

    (4) Powers:

    • The authorities under the Prevention of Money Laundering Act, 2002, will exercise powers conferred upon them by the Fugitive Economic Offenders Act.
    • These powers are akin to those of a civil court and include the search of persons in possession of records or proceeds of crime, the search of premises upon belief that a person is a fugitive economic offender, and the seizure of documents.

    Other laws related to FEOs

    • The existing laws under which such fugitive economic offenders are tried include:
    1. Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI),
    2. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFESI) and
    3. Insolvency and Bankruptcy Code (IBC).

  • RBI to pull out ₹2000 notes from active circulation

    2000

    Central Idea

    • The Reserve Bank of India (RBI) has decided to withdraw ₹2000 denomination banknotes from circulation as part of its “Clean Note Policy.”
    • The withdrawal is similar to a previous withdrawal of notes in 2013-2014 (and not the demonetization).

    Legal Tender Status of ₹2,000 Banknotes

    • ₹2000 banknotes will continue to maintain their legal tender status.
    • People can use ₹2000 banknotes for transactions and accept them as payment.
    • However, the RBI encourages depositing or exchanging the notes by September 30, 2023.

    About the ₹2000 Notes

    • The ₹2000 denomination banknote was introduced in November 2016 under Section 24(1) of RBI Act, 1934.
    • It primarily aimed to meet the currency requirement of the economy in an expeditious manner after withdrawal of the legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time.

    Reasons for withdrawal

    • Demonetization purpose served: Printing of ₹2000 notes was stopped in 2018-19 as other denominations became available in adequate quantities.
    • Clean Note Policy: This aims to provide good-quality currency notes with enhanced security features and withdraw soiled notes from circulation.
    • Ending timespan: Majority of the ₹2000 notes were issued prior to March 2017 and have reached their estimated lifespan of 4-5 years.
    • Disappeared from circulation: This denomination is not commonly used for transactions, and there is sufficient stock of banknotes in other denominations to meet public requirements.

    Withdrawal process

    • People can deposit ₹2,000 notes into their bank accounts or exchange them for banknotes of other denominations at any bank branch.
    • The usual deposit process without restrictions and subject to applicable statutory provisions applies.
    • Banks have been directed to provide deposit and exchange facilities for ₹2,000 notes until September 30, 2023.
    • The facility for exchange up to ₹20,000 at a time will be available at banks and RBI’s Regional Offices from May 23, 2023.
    • Banks are instructed to stop issuing ₹2,000 notes immediately.

    Impact and financial analysis

    • Deposit accretion of banks may improve in the short term, similar to the demonetization period.
    • Improved deposit rates may reduce pressure on interest rate hikes and lead to moderation in short-term interest rates.

    Clean Note Policy

    Previously, banknotes issued before 2005 were withdrawn due to fewer security features.

    Notes issued before 2005 are still legal tender but no longer in circulation to maintain consistency with international practices.

    Key issues

    • Individuals can seek multiple exchanges in packets of ₹20,000, but this may attract attention from enforcement agencies and the Income-tax Department.
    • Large sums of money in ₹2,000 notes may be difficult to exchange.
    • It is likely to witness chaos and long queues in bank branches.

    FAQs: Exchanging and depositing ₹2,000 Banknotes

    • Individuals should approach bank branches for depositing or exchanging ₹2,000 banknotes.
    • Deposit and exchange facilities will be available at banks until September 30, 2023.
    • Exchange facilities will also be available at 19 RBI Regional Offices.
    • There is a limit of ₹20,000 for each exchange transaction.
    • Account holders can exchange up to ₹4,000 per day through business correspondents.
    • Deposits into bank accounts have no restrictions, but compliance with KYC norms and other regulatory requirements is necessary.
    • From May 23, 2023, people can approach bank branches or RBI Regional Offices to exchange their ₹2,000 notes.

     

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