Money-laundering liability extends to persons dealing with proceeds of crime, even beyond the principal offender

Liability under the Prevention of Money-laundering Act, 2002 depends on knowingly assisting, being involved in, or otherwise dealing with proceeds of crime and projecting them as untainted property. A police report against the persons who committed the scheduled offence was treated as sufficient to establish the foundational existence of proceeds of crime, and persons other than the principal offender may still fall within the scope of money-laundering if inquiry material prima facie shows their involvement. The inquiry under the Act was treated as distinct from ordinary criminal prosecution, so the complaint and cognizance order were not quashed on the ground that no report under the criminal procedure law had been filed against the petitioners.

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Issues: Whether a complaint under the Prevention of Money-laundering Act, 2002 and the cognizance order could be quashed on the ground that no report under Section 173 of the Code of Criminal Procedure, 1973 had been filed against the petitioners, and whether involvement in dealing with proceeds of crime could attract liability under Section 3 of the Prevention of Money-laundering Act, 2002.

Analysis: Liability for money-laundering depends on knowingly assisting, being involved in, or otherwise dealing with proceeds of crime and projecting them as untainted property. The filing of a police report against the persons who committed the scheduled offence is sufficient to establish the foundational requirement of proceeds of crime. Persons other than the principal offender may still fall within the ambit of Section 3 if material collected in inquiry prima facie shows their involvement in processing those proceeds as untainted property. The inquiry under the Prevention of Money-laundering Act, 2002 is distinct from ordinary criminal prosecution, and at the stage of quashing it could not be said that no offence was made out.

Conclusion: The challenge to the complaint and cognizance order failed, and the petition was held to be without merit.

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