Finance Minister P Chidambaram: The key words of money laundering are ‘anything that is the proceeds of crime and projecting it as untainted property’. The crimes are defined in the schedule. We have amended the schedule from time to time, and more crimes have been added to the schedule. This crime in the FATF (Financial Action Task Force) language is called a predicate crime. There must be a crime; and there must be proceeds of a crime as if it is untainted property, whereas it is really a tainted property. This is money laundering.
There could be money laundering arising out of a case of murder; there could be money laundering arising out of a case of cheating; and there could be money laundering arising out of a case of anyone of the crimes mentioned in the schedule. What the world is concerned about is – among other things they are concerned about – grave crimes with grave ramifications like terrorism, human-trafficking, drug-trafficking, and smuggling. These are grave crimes, which know no borders. Fake currency is a crime, which knows no borders. These crimes are committed and those crimes are punishable under specific laws. But the proceeds of the crime continue to flow into the economy...
So, a stand-alone offence called money laundering has been created, where while the crime will be prosecuted and punished according to the domestic laws of the country, the proceeds of the crime should also be prosecuted. Anyone who deals with the proceeds of the crime should be prosecuted, and that offence is called money laundering. I suppose this explains what money laundering is. Money laundering is not the same as generation of black money. Black money can be generated without a crime. There may be no crime involved expect a violation of perhaps the Income Tax (I-T) Act, which is not a crime and is a civil offence. If a doctor or a lawyer or a charted accountant takes fees by cash and does not disclose it, then there is a violation of the I-T Act, but that money is black money, but that necessarily does not become a case of money laundering.
If there is a crime relating to corruption and it is in the schedule, then that money is, of course, money laundering. But all that I am trying to point out is that black money can be generated without it becoming a crime of money laundering, like taking fees without bringing it into account, paying capitation fees for admission, and accepting capitation fees for admission.
Unless there is an Act, which makes it a crime, this is black money and black money is to be dealt with as black money, and it may not quite come under money laundering. Many cases of black money will indeed come under money laundering, but there will be many cases of black money, which will not come under money laundering. The crucial difference is that in the case of money laundering, there must be a predicate crime or a crime as defined in the schedule of the Act.
Now, we are expanding the schedule to include more crimes like, for example, the crime of cheating... We have augmented the sanctioned strength of the officers and staff from 745 to 2,064 in the Enforcement Directorate (ED). But to recruit 1,319 additional officers is not a job that can be done in a month or two. If we have to recruit 1,319 additional officers, I have to go through Staff Selection Commission or UPSC (Union Public Service Commission). It will take time, but action is underway. The initial action has been taken. The strength of ED has been increased from 745 to 2,064, and now we are taking steps to fill the sanctioned posts by way of direct recruitment, deputation and promotion. There was some reference to ‘reporting entity’ by Sanjay Nirupam; he is not here. I think he should read the definition of ‘reporting entity’ with Section 2 (n) as is being amended. He will find that Section 2 (n) includes ‘stock broker, sub-broker, etc.’ Therefore, ‘reporting entity’ includes ‘stock broker and sub-broker’. He read only the definition of ‘reporting entity’. ‘Reporting entity’ means among other things the ‘intermediary’, and ‘intermediary’ is defined as ‘including a stock broker and a sub-broker’. Therefore, ‘stock brokers and sub-brokers’ are brought under ‘reporting entity’.
There was some reference to a foreign bank. This is not a new piece of information. In a debate on black money raised by L K Advani, the then finance minister did make a detailed reply in which he referred to the information that had been received from the Government of France and the action that was being taken. Subsequently, in the middle of August in the last session, my ministry has answered a starred question and an unstarred question on this very matter.
Saugata Roy (Dum Dum): Is it the same bank?
Chidambaram: The same bank. What was purported to be ‘revealed’ was not revealed. It was already there in the public domain; it is already there in the records of the Parliament and we are taking action. But we are bound by agreements between the two countries. Within the limits of the agreement, action is being taken. I can assure the House that every single piece of information received from a foreign government regarding accounts purportedly held in a foreign bank is being investigated and action has been taken and more action will be taken. I cannot say more because the matter is still under investigation...
The official amendments fully and completely reflect the recommendations of the Standing Committee. The suggestions which do not require on the official amendment are being acted upon. I think a very important message will go not only to the FATF and over hundred countries as a representative to the FATF, but also to those who deal with proceeds of crime that Parliament, despite enacting the law in 2002 has improved upon the law in 2005. And again improved upon the law in 2009 and is once again improving upon the law in 2012.
Excerpts from Finance Minister P Chidambaram’s reply
to the debate on the amendment of the Prevention
of Money Laundering Act, 2002, in the Lok Sabha, in
New Delhi on November 29