Introduction
On 10th May 2024, the Supreme Court of India stayed the National Green Tribunal's ("NGT") directive in Waris Chemicals Pvt. Ltd. v. Uttar Pradesh Pollution Control Board to initiate action under the Prevention of Money Laundering Act, 2022 (“PMLA”) against a company for the dumping of hazardous waste in violation of environmental norms, citing the NGT's lack of jurisdiction to issue such a directive. While procedurally sound, the decision raises critical questions regarding whether leaving the prosecution of environmental offences under PMLA solely within the discretion of the Enforcement Directorate ("ED") is advisable and the impact it has on India’s money laundering prevention regime. These questions have persisted amid a tumultuous period of conflict between the NGT and the ED concerning the latter's failure to investigate matters related to money laundering through violations of environmental norms.
Environmental offences were added to the PMLA vis-a-vis the 2013 amendment, where offences under certain statutes such as the Biological Diversity Act, 2002, Environment Protection Act, 1986, Water (Prevention and Control of Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act, 1981, etc. were added to the schedule. Consequently, scheduled environment offences create concurrent liability in the PMLA wherein a person who obtains commercial gains in contravention of the environmental norms would be liable for money laundering as defined under section 3 of the PMLA. However, since the amendment in 2013, the ED has yet to investigate a single case involving environmental offences. This lack of enforcement is not attributable to a dearth of environmental crimes either, as evidenced by the over 88,400 cases pending trial related to environmental offences in India. This article examines the implications of the lackadaisical approach to addressing money laundering under the guise of environmental crimes on India's credibility within the global money laundering prevention regime. Furthermore, it proposes structural remedies to ensure that environmental crimes are effectively addressed under the PMLA.
International Obligations
Money laundering must not be understood merely in its colloquial sense but rather in a broader context, which involves any person who obtains financial gains from committing prescribed offences such as the trade of narcotic drugs, terror financing, cyber fraud, and environmental offences, among others. In India, the PMLA was enacted in response to its international obligations as a party to the United Nations Vienna Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988 (“Vienna Convention”), wherein Article 3.1 provides for the prosecution of money laundering by all state parties. To further ensure international cooperation and effective global action against money laundering, the Financial Action Task Force ("FATF"), an independent intergovernmental body, was established. The FATF plays a crucial role in categorising offences closely linked to money laundering, thereby ensuring that such high-risk activities are effectively monitored and controlled by states. Notably, the FATF has recognized environmental offences as a significant avenue for money laundering. In its report titled “Money Laundering from Environmental Crime”, the FATF found that environmental offences, such as illegal deforestation and the dumping of hazardous wastes, were exploited by large scale commercial operators to obtain financial gains, thus engaging in money laundering. The report advocated for greater governmental action against environmental offences through effective monitoring and criminalisation.
In compliance with international standards, the 2013 amendment to the PMLA incorporated environmental statutes such as the Biological Diversity Act 2002, The Environment Protection Act 1986, The Water (Prevention and Control of Pollution) Act 1974, and The Air (Prevention and Control of Pollution) Act 1981, among others, into the list of scheduled offences. However, in Nizamuddin West Association v. Union of India, the NGT noted that the lack of prosecution of environmental offences under the PMLA meant that the Act's inherent criminal liabilities were not being applied, thus limiting liability to civil remedies in the form of compensation. The non-application of the PMLA to environmental offences indicates that India's money laundering prevention regime is effectively not aligned with the international standards established by the FATF. Although the FATF's directives are merely recommendations and not binding on India, the consequences of not complying are severe. The FATF has the authority to categorise states which take weak measures in combating money laundering as high-risk, commonly referred to as the grey and black lists. Inclusion in these lists can result in the imposition of economic penalties and a reduction in trade relations with other countries.
Remedies
The lax enforcement of the PMLA in cases concerning environmental crimes poses significant challenges, both internally and externally. Internally, it emboldens polluters, while externally, it undermines India’s international obligations to prevent money laundering under the Vienna Convention and the FATF’s recommendations. To address the issue of environmental offences evading criminal liability, it is proposed that the NGT be granted jurisdiction to recommend actions in cases where money laundering is suspected in scheduled environmental offences. This would mean the NGT's findings could indicate potential money laundering in violation of environmental norms, serving as leads for the Enforcement Directorate ("ED") rather than binding directives. The tribunal is well-suited for such recommendatory powers due to its supervisory role in overseeing violations of environmental norms and its authority to investigate and analyse the financial gains accrued by infringers. In cases such as the Yamuna pollution case and the UP realtor dumping case, the tribunal's investigations clearly established instances of money laundering. In these cases, the infringements were identified as scheduled offences, and the financial proceeds were directly linked to the infringers, demonstrating that money was made as a result of the environmental crime—thereby fulfilling the elements of money laundering.
The author advocates for a mechanism to ensure accountability and transparency when the Enforcement Directorate declines to investigate cases recommended by the National Green Tribunal (NGT). Under this proposal, if the ED decides not to pursue an investigation into an environmental offence referred by the NGT, it must provide a detailed explanation for its decision. This reasoning should be documented and be open to judicial scrutiny, which prevents arbitrary decisions by ensuring the ED's discretion is exercised fairly and rationally. The proposal aims to strengthen the PMLA’s enforcement by promoting greater transparency and accountability, thus acting as a strong deterrent against environmental offences. By ensuring that offenders can be tried under the PMLA’s criminal charges, the proposal leverages criminal liability as an effective deterrent to environmental crimes.
Conclusion
The intersection of environmental crimes and money laundering presents a complex challenge that demands immediate attention and robust solutions. The recent developments highlighting the lack of enforcement of the PMLA in environmental cases underscore the urgent need for structural reforms. By empowering the NGT with the authority to recommend actions in suspected money laundering cases related to environmental offences, a crucial step towards accountability and compliance with international standards can be taken. Transparency, accountability, and adherence to global anti-money laundering obligations are essential to uphold India's credibility and commitment to combating financial crimes linked to environmental violations.
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