1. Introduction

Is entering into someone’s house or breaking open someone’s property allowed by law? Can someone search your premises without a warrant and only on reasonable suspicion. If yes, whether such power is illegal or legally justified. To investigate a crime, it is ofcourse necessary to conduct searches and seize incriminating material but who can conduct such a search and across what territories can an investigating authority exercise its jurisdiction. All of these are general legal questions that would intrigue the mind of any person. However, these questions in reference to an offence of money laundering have been answered in chapter V of The Prevention of Money Laundering Act, 2002 (hereinafter referred to as the act).

2. Survey

A survey can be conducted when any authority on the basis of any material in his or her possession has reason to believe that an offence of money laundering has been committed. Such an authority is authorised under section 16 of the act to survey any such place and inspect, check or verify records, transactions that such authority believes to be incriminating enough to qualify as a proceed of crime. However, before conducting such a survey an authority must record in writing the reasons for believing that an offence of money laundering has been committed. The term “authority” as mentioned in section 16 has not been defined under the act however on a plain and simple reading of sub section (c) and sub section (da) of section 2 of the act, one can infer that the term “authority” would refer to an officer who has been authorised under this act or an officer who has been authorised under clause (cc) of section 2 of the Foreign Exchange Management Act, 1999. It basically includes officers of the Directorate of Enforcement. The jurisdiction of the authority has been confined to places within its own territorial jurisdiction. If at all an authority wishes to conduct a survey in an area beyond its territorial jurisdiction then authorization in that behalf would have to be obtained by such other authority who has the territorial jurisdiction within that area. A place where an offence under this section is committed also includes any other place where related records or any other related data has been kept. Such an authority after completing the survey, if it seizes any material, then it has to send such material along with the reasons that were initially recorded before conducting the survey to the adjudicating authority in a sealed envelope along with statements of any person that are recorded during the survey that may be relevant. It shall also place marks of identification on the records inspected and make an inventory of the property checked/verified.

3. Search and Seizure

Even though a survey can be conducted without authorization, a search and seizure can only be conducted with prior authorization from the director or any other officer who is not below the rank of deputy director. Whenever the director or any other officer not below the rank of deputy director has been authorised by the director to investigate an offence of money laundering then such person if he has reasons to believe that an offence of money laundering has been committed or feels that a person is in possession of proceeds of crime or any records or properties in that regard then such person can authorise any officer subordinate to him to conduct a search in any building, place, vessel, vehicle or aircraft where he has reasons to believe that evidence in that regard is kept. Such authorised person under section 17 of the act also has the power to break open any door, box, locker, safe, almirah or any other receptacle to conduct a search when the keys of the same are not available and if after conducting the search any incriminating material is found then such person may seize such property and after seizing follow the further procedures like placing marks of identification, preparing an inventory of the materials seized and recording the statements of the persons from whose possession any such material has been found. Whenever it is not possible to seize any property then the authorised officer is empowered to pass an order freezing such property to ensure that such property is not transferred or otherwise dealt with in any manner except with prior permission of the officer making such an order. Needless to say and even a proviso in this regard has been carved out that if such frozen property before it is confiscated becomes capable of being seized then it may be seized accordingly. The seized property along with the reasons that were recorded in writing for the search to be conducted in the first place have to be immediately sent to the adjudicating authority in the prescribed manner.

4. No prior authorization in certain cases

If in any case while conducting a survey any authority finds that any evidence relating to an offence of money laundering is likely to be concealed or tampered with then such authority after recording its reasons in writing may enter and search such place where the evidence is located without any prior authorization.

5. Validity of seizure/ freezing orders

Any freezing order passed by an authorised officer or authority or the seizure of any property or record seized is valid only for thirty days. The authorised officer is empowered to retain such property or record upto one eighty days if he/ she feels that such property or record is required for the puprpose of any inquiry under the act however for a period beyond that an application for retention or continuation of the order of freezing/ seizure has to be filed before the adjudicating authority.

6. Search of a person

Under section 18 of the act the central government has reserved a power of authorization for itself to authorise the investigation of an offence of money laundering however, has left the decision of conducting the search to the person authorised in this behalf. The person getting searched has an option to get himself or herself searched in the presence of a gazetted officer who is superior in rank to the authority conducting the search or in the presence of a magistrate. If such person who is getting searched so requires then he/ she has to be taken to a magistrate or a gazetted officer superior in rank within twenty four hours. The time of the journey while such a person is being taken to the magistrate or the gazetted officer superior in rank is however excluded from those twenty four hours. Upon reaching, if the gazetted officer or the magistrate feels that there is no reasonable ground for the search then he or she has the power to discharge such person forthwith. If at all he/ she allows or the person getting seached consents for the search in the absence of the magistrate or the gazetted officer then while conducting such a search it is incumbent upon the authority to call upon two independent witnesses to attend and witness the search and when any property is seized as a consequence of the search then a list regarding that has to be prepared by the authority and has to be signed by the independent witnesses. The search of a female can only be conducted by another female and at this stage, after conducting the search the authority is also bound to record the statement of the person searched if any material is found or seized from him/ her as a consequence of the search.

7. Arrest

The power to arrest lies only with the director, deputy director, assistant director or any officer who is authorised in this behalf by the central government by a general or special order. However, the officer arresting should have some basis/material and reasons (such reasons to be recorded in writing) for the arrest of an accused. The accused as soon as he or she is arrested has to be informed and supplied the grounds of such arrest [Roop Bansal v/s Union of India and another, (CWP-23005-2023)].

A copy of the order that states that a person has been arrested comprising of the grounds of arrest along with the material that was relied upon for the arrest has to be immediately sent to the adjudicating authority by the officer arresting in a sealed envelope in the prescribed manner. Every person who is arrested has to be produced before a special court/ judicial magistrate or metropolitan magistrate as the case may be who would have the jurisdiction of that territory within twenty four hours of the arrest however, in computing the period of twenty four hours the time undertaken for the journey from the place of arrest to the concerned court has to be excluded.

8. Retention of property and records

Whenever any property or record has been seized under section 17 or section 18 or frozen under subsection (1A) of section 17 of the Act and the authorised officer believes that such property or record is required to be retained for the purpose of adjudication then he may pass an order of retention of such property for a period not exceeding one eighty days.

Before passing an order of retention the authorised officer has to record in writing the reasons for which he believes that such property or record is required to be retained and once that order of retention has been passed a copy of that order along with the material that formed the basis of passing such an order of retention has to be immediately sent to the adjudicating authority in a sealed envelope in the manner as has been prescribed.

There are two ways that have been provided under the act for retaining a property or record that is frozen or seized. One is that the adjudicating authority can pass such an order at the relevant stage and the second is that the authorised officer can pass such an order however the adjudicating authority has been given more power as it can pass an order of retention for a period not exceeding three sixty five days or during the entire period of adjudication. The authorised officer can only pass an order of retention for a period not exceeding one eighty days and if at all he/she wants an extension of that retention then such extension can only be permitted if the adjudicating authority allows it for which an application would have to be filed for extension of retention before the adjudicating authority. The adjudicating authority has been given more power in this regard because when it passes an order of retention it has to be prima facie satisfied that the property or record in question is involved in money laundering.

Needless to say that once the process of adjudication is complete whatever property or record is found not to be involved in an offence of money laundering is to be released by the adjudicating authority however the authorised officer may withhold such release for a period not exceeding ninety days if he/she believes that such property would be required for the purposes of filing an appeal under the act.

9. Presumption and Reverse burden of proof

Ordinarily in criminal cases in India and in most parts of the world an accused is presumed to be innocent and the evidence against him/ her is, if it can be interpreted in two ways, then it has to be interpreted in the way which favours the accused person until it is proved otherwise beyond reasonable doubt. However, in cases of money laundering under the act, there is a presumption against the accused that whenever any record or property is obtained as a result of a survey or a search and is subsequently seized or frozen then such record is presumed to belong to the person from whom it is recovered, the contents of such records are presumed to be true and whatever signatures or authorizations have been given through such records and are in the handwriting of a particular person, it is presumed that such records have been authenticated by that person only no matter whether such record or property has been found within the territorial jurisdiction of India or outside. All such evidence whether it is duly stamped or not is also admissible in evidence and can be used against such person until it is proven otherwise.

In cases where laundering has been committed through more than one interconnected transaction and if even one of such transaction is proved to be involved in the offence of money laundering then it is presumed that the remaining transactions also form part of such interconnected transactions unless it is otherwise proved to the satisfaction of the adjudicating authority or the special court.

There is a reverse burden of proof in cases of money laundering in India and through section 24 of the act, the onus has been shifted from the prosecution to prove the guilt of the accused, to the accused to prove his/ her innocence as the accused in such cases is presumed to be guilty unless otherwise proven.

10. Authors Comments

So, yes, breaking into someone’s house or breaking open someone’s property is allowed by law but the entire exercise has to be legally carried out without which it automatically becomes illegal. The authority before conducting a survey or search must have material to form an opinion that such a survey or search is necessary. Once it has the material then it has to record the reasons in writing as to how such material leads to an inference that an offence of money laundering is continously being or has been committed at a certain place or that proceeds of crime are being used or kept/ stored/ concealed/ hidden at a certain place. This exercise would be a sine qua non for a survey or search to be conducted in the first place. Needless to say that the officer who collects such material and records reasons in writing and subsequently conducts a survey or search must be an officer authorised under the act or under  clause (cc) of section 2 of the Foreign Exchange Management Act, 1999.

Even an authorised officer without following the due procedure as envisaged under the act, conducting such a survey or search should be liable to face legal consequences as envisaged under the law as it would infringe the right to life of a person which is guarenteed under Article 21 of the Constitution of India. A subsequent arrest would as it is be illegal and a person aggrieved by such an illegal action would be entitled by law to avail his/ her legal remedies against such an act.