2018 (1) TMI 273 - AT - Money Laundering

Tribunal Modifies Penalties, Stresses Consistency

The Tribunal modified the penalties imposed under Section 13(2) of PMLA, reducing them from the maximum penalty to warnings under Section 13(2)(a). It ... Offence under PMLA - inadmissible evidence in passing the Impugned Order - failure to establish case on electronic evidence - Held that:- Video tapes and their transcripts are inadmissible as evidence. The Ld. Director could not have relied upon inadmissible evidence in passing the Impugned Order without such compliance. Further, it is also a matter of fact that original equipment used in the recording of the evidence were not produced in order to establish the case for the purpose of imposing the major penalties u/s. 13(2)(d) of PMLA, 2002. Not only that the journalists who has conducted the sting operation of cobra post has not been examined and the department is merely relying on certain video tape recordings of the conversations between the bank officials and the journalists of cobra post. It is also the admitted position that the transcripts and videos were not re-produced in the same condition. It was rearranged and sliced versions of the actual conversations and cannot be considered as conclusive proof of the actual conversations, certain Cobrapost reporter had with the featured employees of the Appellant Bank. The Cobrapost transcripts not only reflect selective conversation, the video and written transcripts do not match in entirety. The Report of the independent forensic investigator engaged by the one of the Appellants who has carried out a forensic audit on the allegations made vide Cobrapost sting operation, clearly establishes that the sting video footage and the transcripts available do not provide the complete conversation or complete record of events as they have possibly been rearranged and edited to provide a misleading picture (Annexure D at Page 121 of the Appeal has been filed along with the appeal by the said appellant). It was also been reiterated by the Appellant at multiple instances including its reply dated 24 January 2014 to the Show Cause Notice, during the personal hearing granted to the Appellant on 24 February 2014, additional submissions placed by the Appellant on 05 March 2014 and in Appellant’s detailed response of 6 May 2014. Copies of the same have been filed as Annexure H to K. It is evident that the Ld. Director before passing the Impugned Order even failed to investigate beyond the edited tapes and transcripts. Admittedly, the FIU, till date has not received the complete and unedited tapes. The FIU has not produced the original recorded tapes and has sought to rely upon the incomplete version as broadcasted by the Cobra Post Reporter. The transcripts of such incomplete versions of purported sting operation cannot be considered. Thus it is apparent that the respondent has failed to establish its case on electronic evidence. The transcripts uploaded online is not admissible and authorized under the law in the absence of proving its case as alleged by the respondent. Under these circumstances, for the reasons explained, impugned order passed by the respondents in all the matters are modified to the extent that the present matters are covered u/s. 13(2)(a) and not under section 13(2)(d) of the PMLA, 2002. The finding given by the respondent for major penalty is not sustainable as on merit the respondent has not proved its case of major penalty. But in future, the banks and their employees are directed to be careful and if these types of discussion are happened, it should be reported u/s. 12 of PMLA, 2002. Issues Involved:1. Admissibility of electronic evidence.2. Definition and reporting of 'attempted suspicious transactions.'3. Obligations of banks under Section 12 of PMLA.4. Imposition of penalties under Section 13(2) of PMLA.Detailed Analysis:1. Admissibility of Electronic Evidence:The primary contention from the appellants was the inadmissibility of the electronic evidence (video recordings and transcripts) presented by Cobrapost. The appellants argued that these electronic records were not accompanied by a certificate under Section 65B of the Evidence Act, making them inadmissible. The Supreme Court's rulings in Anvar P.V. v. P.K. Basheer and Harpal Singh v. State of Punjab were cited, emphasizing that electronic records must be accompanied by a certificate under Section 65B to be admissible. The Tribunal agreed that the electronic evidence was inadmissible without the certificate and noted that the original equipment used for recording was not produced, and the journalists were not examined.2. Definition and Reporting of 'Attempted Suspicious Transactions':The Tribunal examined whether the conversations recorded in the Cobrapost sting operation constituted 'attempted suspicious transactions' under the PMLA. The appellants argued that no actual transactions took place, and mere inquiries or discussions do not qualify as 'attempted transactions.' They cited judicial definitions of 'attempt' from criminal law, emphasizing that an attempt requires an overt act beyond mere preparation. The Tribunal, however, held that the conversations should have been reported as attempted suspicious transactions under Section 12(1)(b) of PMLA, read with Rule 2(g) of the PML (Maintenance of Records) Rules, 2005. The Tribunal noted that the RBI Master Circular and IBA guidelines required banks to report even abandoned or aborted transactions.3. Obligations of Banks under Section 12 of PMLA:The Tribunal discussed the obligations of banks under Section 12 of PMLA, which requires banks to maintain records of all transactions, including suspicious transactions, and report them to the Financial Intelligence Unit-India (FIU-IND). The appellants contended that the obligation to report arises only when a transaction is formally initiated and not merely based on inquiries. The Tribunal, however, concluded that the banks failed to report the attempted suspicious transactions as required under Section 12 of PMLA.4. Imposition of Penalties under Section 13(2) of PMLA:The Tribunal reviewed the penalties imposed by the Director, FIU-IND, under Section 13(2) of PMLA. The appellants argued that the maximum penalty was imposed without justification and that other banks involved in similar cases received only warnings. The Tribunal agreed that the imposition of maximum penalties was not justified and modified the penalties to those under Section 13(2)(a) of PMLA, which allows for warnings instead of fines. The Tribunal emphasized that the penalties should be consistent and non-discriminatory.Conclusion:The Tribunal modified the impugned orders, reducing the penalties from those under Section 13(2)(d) to Section 13(2)(a) of PMLA. The Tribunal directed the banks to be vigilant in the future and report any suspicious conversations or attempted transactions as required under Section 12 of PMLA. The amounts or FDRs deposited by the banks were ordered to be released immediately.