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The Prevention of Money Laundering Act PMLA came into force from Friday. It stipulates punishment for money laundering activities related to narcotics, immoral trafficking and money from fraud and corruption. This bill originates from India8217;s commitment to cooperate in the international effort to curb such criminal activities. The IMF estimates that about 600 billion is laundered each year globally 8212; about 300 billion is estimated to be laundered in the US, including about 60 billion in drug money, alone. In addition, the 9/11 attacks focused attention on the need for international cooperation in tracking down the terrorists and their supporters.

A realistic procedure to track criminals is expected to be through an initial identification of likely criminals rather than through reports of financial transactions. This is because world financial markets are immense. Each day, there are 7,00,000 electronic money transfers involving about 2 trillion. The vast majority of these transactions, perhaps more than 99 per cent, represent legitimate commerce. As a result, it is impractical to expect law enforcement to take the raw data and somehow identify the transfers that are criminal in nature. However, if suspected terrorists and criminals are identified then the legal community will, given the power of these laws, target transactions that are likely to be tied to illegal activities. In this global cooperation, police forces and intelligence agencies would play a critical role.

To prevent misuse of power, the Act provides that a police officer can investigate an offence only after he has been specifically authorised by the Central government, subject to certain conditions as may be specified by rules. While it is important to catch the criminals, the challenge lies in not compromising the privacy and the rights of law abiding citizens. Hopefully, the PMLA will pass this test.