Standards of proof for money laundering offenses


Jhe Supreme Court in a recent case ruled that in cases of breaches of the Prevention of Money Laundering Act 2002 (PMLA), courts cannot proceed simply on the basis of the principle of “paramountcy”. probabilities”. A claim under the said law must be proven “beyond a reasonable doubt”.

The balance of probabilities is a standard of proof under which the party bearing the burden of proof must present more credible and convincing evidence than that presented by the other party, thus explaining that the existence of a fact is more probable than its non-existence. This principle, used mainly to establish the burden of proof in civil matters, has a lower threshold of proof than the principle “beyond a reasonable doubt”.

The Supreme Court, upon reading the purpose and motive statements provided in the PMLA, held that the intention of the legislature was to verify and control the threat of money laundering, thus understanding it as criminal law strict. Therefore, the standard of proof must be high and beyond a reasonable doubt.

The Supreme Court further stated that the court in such cases must seek prima facie evidence in favor of the case. Unless these allegations are substantiated by the authorities and proven, the person is considered innocent.

In this case, the appellant was a partner in a mining company and had deposited approximately INR 3 billion (USD 38 million) in the company’s bank accounts in 2013. Later, the income tax department raided its premises and seized nearly INR 1 billion in cash and 128 kg of gold from its premises.

The Central Bureau of Investigation (CBI) filed a First Information Report (FIR) under Sections 120B, 409 and 420 of the Indian Penal Code 1860 and Section 13(2) read with 13(1) (c) and 13(1)(d) of the Prevention of Corruption Act 1988. The Enforcement Directorate, based on the FIR, filed an information report on enforcement cases under the PMLA. In subsequent raids, authorities found INR 330 million in new banknotes.

However, it is interesting to note that the CBI, after its investigation, filed a “closing report” before the special judge. The appellant subsequently appeared in the Madras High Court to seek the quashing of the information report on the pending execution case, but the High Court dismissed the appeal.

Counsel for the appellant then argued before the Supreme Court that the PMLA presupposed a pre-existence of a prescribed offense and that proceeds of crime had to be derived from that “predicted offence”. He further argued that the judicial authority never authorized the seizure of the property/assets seized in the first place, as the burden of proof was not fully discharged. Thus, the mere belief of the Director of the Enforcement Branch that the money/property was unaccounted for and was proceeds of crime was not sufficient.

At this point, the Supreme Court held that a mere balance of probabilities was not sufficient to discharge the burden of proof. The threshold of proof must be broadened to incorporate the principle “beyond a reasonable doubt”. In all scenarios, therefore, the only conclusion to be drawn must be determined beyond a reasonable doubt, and not simply on the basis of probabilities.

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