2009 (11) TMI 1009 - AT - Money Laundering

Tribunal Upholds Orders Confirming Property Attachment under Money Laundering Act

The Tribunal upheld the Adjudicating Authority's orders confirming the provisional attachment of properties, dismissing the appeals. It found that the ... Proceeds of crime - money laundering - provisional attachment under section 5 of the Prevention of Money Laundering Act - attachment of property held by person not charged with a scheduled offence - reason to believe - burden of proof under section 24 of the Prevention of Money Laundering Act - interconnected transactions and presumption under the Act - definition of proceeds as property derived from criminal activity relating to a scheduled offenceAttachment of property held by person not charged with a scheduled offence - provisional attachment under section 5 of the Prevention of Money Laundering Act - Whether property that is proceeds of crime and in possession of a person who has not been charged with a scheduled offence can be provisionally attached under the Act. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's construction of section 5 read with sections 2 and 3 of the Act. It agreed that persons not themselves charged with a scheduled offence may nevertheless be covered by the definition of offences under section 3 (which includes persons who 'directly or indirectly' are involved with proceeds of crime) and that confining attachment to only those persons formally charged would frustrate the legislative purpose. The court held that reading section 5(1)(a) and (b) to require that the person in possession must be charged with a scheduled offence would lead to absurdity and render the Act ineffective against disposal or dissipation of proceeds. The Tribunal therefore affirmed that proceeds of crime in possession of any person covered by the Act can be attached provisionally when the statutory tests are met and there are recorded reasons to believe attachment is necessary. [Paras 15]Property that is proceeds of crime and is in possession of any person, even if that person has not been charged with a scheduled offence, can be attached under section 5 of the Act.Proceeds of crime - reason to believe - burden of proof under section 24 of the Prevention of Money Laundering Act - interconnected transactions and presumption under the Act - Whether the material before the Adjudicating Authority was sufficient to form 'reason to believe' that the remittances into the NRE account and subsequent transfers were proceeds of crime, and whether the appellants discharged the statutory burden under section 24. - HELD THAT: - The Tribunal found that the material gathered in investigation-interconnected corporate relationships across jurisdictions, remittances into the NRE account from related entities for no commercial reason, seized bank pay-in slips, and statements indicating lack of knowledge by payees about deposits-constituted sufficient material to give reasons to believe that the remittances were prima facie proceeds of crime. The Tribunal accepted the Special Court's view that there was prima facie material to take cognizance under section 3 and noted the High Court's refusal to interfere. It emphasised that section 24 places the onus on the accused to prove that proceeds are untainted, and that appellants failed to produce satisfactory documentary evidence of legitimate source despite opportunity to do so. Applying the statutory definition of 'proceeds of crime' (covering property derived from criminal activity relating to a scheduled offence), the Tribunal concluded that the adjudicating authority had sufficient basis to confirm provisional attachment. [Paras 16, 17, 18]There was sufficient material to form a reason to believe that the remittances and resulting transfers were proceeds of crime; the appellants failed to discharge the burden under section 24, and confirmation of provisional attachment was proper.Final Conclusion: The Tribunal upheld the Adjudicating Authority's confirmation of provisional attachment: proceeds remitted into the NRE account and properties acquired therefrom are prima facie tainted and involved in money laundering, the appellants failed to discharge the statutory onus to show legitimate source, and the appeals are dismissed. Issues Involved:1. Validity of Provisional Attachment Orders2. Establishment of Link/Nexus Between Attached Properties and Proceeds of Crime3. Requirement of Being Charged with a Scheduled Offence for Provisional Attachment4. Burden of Proof Regarding Legitimate Sources of FundsDetailed Analysis:1. Validity of Provisional Attachment Orders:The appeals challenge the orders of the Adjudicating Authority confirming provisional attachments under Section 5 of the Prevention of Money Laundering Act, 2002. The appellants argued that the orders were based on assumptions and lacked concrete evidence linking the attached properties to proceeds of crime. The Tribunal found that the provisional attachment orders were valid, as there was sufficient material to form a reason to believe that the remittances in the NRE account of Shri R.P. Modani were proceeds of crime.2. Establishment of Link/Nexus Between Attached Properties and Proceeds of Crime:The appellants contended that no link or nexus had been established between the attached properties and the proceeds of crime. The Tribunal noted that the funds remitted into the NRE account of Shri R.P. Modani were from M/s. Royal Global Exports Pte. Ltd., Singapore, and on a self-basis from Singapore, with no commercial or economic reasons. The Tribunal found that the properties attached were indeed proceeds of crime, considering the interconnected transactions and the lack of legitimate business reasons for the remittances.3. Requirement of Being Charged with a Scheduled Offence for Provisional Attachment:The appellants argued that they had not been charged with a scheduled offence, which is a sine qua non for initiating provisional attachment proceedings under Section 5 of the Act. The Tribunal held that it is not necessary for the person in possession of the property involved in money laundering to be charged with a scheduled offence. The Tribunal referred to the legislative intent and the purpose of the Act, concluding that properties derived from criminal activities related to a scheduled offence could be attached even if the person in possession was not charged with the scheduled offence.4. Burden of Proof Regarding Legitimate Sources of Funds:The appellants claimed that the money received was from legitimate sources and was gifted through authorized banking channels. The Tribunal emphasized that Section 24 of the Act places the burden of proof on the accused to show that the proceeds of crime are untainted property. The appellants failed to provide satisfactory evidence or documentation to prove the legitimate sources of the funds deposited in the NRE account of Shri R.P. Modani. The Tribunal noted that the appellants did not discharge their burden of proof, and the remittances were presumed to be proceeds of crime.Conclusion:The Tribunal upheld the orders of the Adjudicating Authority confirming the provisional attachment of properties. The appeals were dismissed, with the Tribunal concluding that the properties held in the names of the appellants were proceeds of crime and involved in money laundering, thus warranting attachment under the Act.