Money Laundering Charges on Political Parties

The Prevention of Money Laundering Act, 2002:

• Enacted in January 2003, the PMLA aims to combat money laundering with three main goals: prevention, confiscation, and addressing related issues.
• Section 3 of the Act defines money laundering as any involvement in the process of projecting proceeds of crime as clean property.

Laws Applicable to Political Parties for Money Laundering:

• Section 70 of the PMLA deals with offenses by companies, making individuals in charge of a company liable for contraventions.
• The term “company” under Section 70 includes associations of individuals, potentially covering political parties.
• A political party is defined by Section 29A of The Representation of the People Act as an association registered with the Election Commission (EC).

Past Instances of Political Parties Facing Money Laundering Charges:

• Accusing any political party directly in the scam would be the first such case of a political party being charged with money laundering.
• Political parties have been investigated under the Income Tax Act, but not under the PMLA.

Challenges for the Election Commission: 

• Accusing a political party of money laundering presents challenges for the Election Commission, as existing rules provide limited guidance.
• The EC can suspend or withdraw a party’s recognition based on violations of the Model Code of Conduct or non-compliance with its orders.
• There are no provisions to address accusations of illegality, and de-registering a party is a very limited option under specific conditions outlined in the Representation of the People Act.

Why in News

• The Enforcement Directorate (ED) is considering adding the Aam Aadmi Party (AAP) as a accused in a money laundering investigation related to the Delhi government’s scrapped excise policy.