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Synopsis

The Delhi High Court, recently, held that an offence committed in a foreign country can initiate PMLA proceedings if it qualifies as a predicate offence by aligning with any offences listed under the PMLA and has cross-border implications, such as the proceeds of the crime reaching India.

The bench of Justice Vikas Mahajan held, “If an offence has been committed in a foreign country under the laws of that country, the same can be treated as a predicate offence provided such offence corresponds to any of the offences specified under Part C of the PMLA and it has cross border implications in the sense that the proceeds of such crime has travelled to India”. 

Upon investigation, the ED discovered that the transferred cryptocurrency was linked to Moral’s account. Malware from a counterfeit Ledger Live website had compromised the victim's laptop. As a result, the ED initiated a case under Indian law on February 7, 2023.

During a search of Moral’s residence, authorities seized electronic devices and ₹25,60,000 in cash. The evidence suggested that Moral had worked with co-accused individuals Shivang Malkoti and Adnan Nisar to convert the stolen cryptocurrency into cash, using the illicit proceeds to acquire assets. Moral, Malkoti, and Nisar were arrested in April and May 2023.

Following their arrests, the Delhi Police registered an FIR, and a formal complaint was submitted to the Special Court in June 2023. The court summoned the accused, and in August 2023, Nisar and Malkoti attempted to retract their earlier statements.

The prosecution alleged that the stolen cryptocurrencies, specifically 0.48349150649972 Ethereum (ETH) and 21.63831975 Bitcoin (BTC), had been deposited into Moral's account on August 14 and 15, 2022. When questioned under Section 50 of the Prevention of Money Laundering Act (PMLA), Moral provided inconsistent statements and could not explain the source of the funds in his account.

The complaint detailed Moral's involvement in a larger fraudulent syndicate led by a Turkish national named Jack Let. Moral was involved in digital marketing for the syndicate and received Bing Ad accounts from Malkoti. The group suppressed competitors’ advertisements, promoted their own, and drained victims’ cryptocurrency wallets, distributing the profits among the teams.

Malkoti assisted Moral by providing Bing Ad accounts from September 2022 to March 2023, while Nisar converted the stolen cryptocurrency into cash. Moral used some of these illicit proceeds to acquire a liquor shop, which was registered under the name of his brother, Lalit Moral. However, no legitimate source of funds was provided by Lalit for this purchase.

Advocates Amit Shukla and Tanveer Ahmed Mir, representing the accused, argued that the proceedings under Sections 3 and 4 of the PMLA were flawed. They claimed that the Special Court lacked critical information, such as the identity of the victim and the MLA request from the U.S., as these were not presented in court. Additionally, Advocate Shukla argued that the ED exceeded its authority by investigating an offence that took place outside India, which he claimed contradicted the MLA request, which only sought the seizure of assets.

In response, Special Counsel Zoheb Hossain, representing the ED, submitted the MLA request in a sealed cover, showing that the U.S. Attorney’s Office was investigating Vishal Moral for the alleged offences and had requested evidence as part of an ongoing criminal investigation. Hossain pointed out that a U.S. court had issued a seizure warrant for Moral’s account on the WazirX cryptocurrency exchange, and the MLA request, along with the treaty between India and the U.S. and the provisions of the PMLA, justified the ED’s investigation, including the money laundering charge.

The court noted that cross-border offences fell into two categories: first, offences committed outside India, but which would be considered offences under the PMLA Schedule if committed in India, and second, offences committed within India with proceeds transferred abroad. In this case, the court found that the first category, as defined in Section 2(1)(ra) of the PMLA, applied. The ED’s case relied on the fact that the proceeds of the crime had been transferred from the U.S. to Moral’s account in India.

The court also emphasized that offences were investigated under U.S. law by the Attorney’s Office for the District of Kansas. Since these offences had cross-border implications and were considered predicate offences under the PMLA Schedule, the ED had appropriately registered a case under Sections 3 and 4 of the PMLA.

Moreover, the court clarified that while certain offences like theft were not listed under Part A of the PMLA Schedule, they could be included as scheduled offences under Part C if they involved cross-border implications. The court rejected Advocate Shukla's argument that "corresponding law" only applied to asset attachment and precluded penal action under Sections 3 and 4 of the PMLA.

Additionally, the court dismissed Advocate Shukla's contention that the U.S. predicate offence could not be transferred to India’s Special Court under Section 44(1)(c) of the PMLA. The court concluded that Section 44(1)(c) allowed the Special Court to consider requests for the transfer of a predicate offence trial on a case-by-case basis, though it was not mandatory.

“In the context of a predicate offence under the corresponding law of a foreign country, the same can only be tried as per the procedure in force in that foreign country and Section 44(1)(c) of the Act will have no application in such a situation”, the court added. 

Lastly, the court found no merit in Advocate Shukla's argument that the MLA request only sought the seizure and freezing of WazirX accounts and did not justify registering an offence under the PMLA. The court pointed to the PMLA’s preamble, which aimed to combat money laundering in line with international resolutions, justifying the ED’s actions.

The court also noted that “There is a missing link to establish that the seized amount from WazirX account of petitioner/Vishal Moral are proceeds of crime from an offence committed in U.S. which corresponds to the scheduled offence(s), merely seizure of amount pursuant an MLA request is not sufficient for the petitioner/accused Vishal Moral to assume the burden to convince the Court in terms of Section 45 of the Act that there are reasonable grounds to believe that he is not guilty of an offence under the Act”.

Considering the duration of custody, the delay in the trial’s commencement, and the unlikelihood of its conclusion in the near future, the stringent requirements of Section 45 of the PMLA were relaxed. The court noted that all relevant documents and devices had been recovered, and the proceeds of the crime had been frozen. Additionally, no further recovery was necessary, and there was no evidence of any prior criminal record for the accused.

Based on these findings, the court granted bail to Vishal Moral, Adnan Nisar and Shivang Malkoti under specific conditions, including furnishing personal bonds, restrictions on leaving the country, and regular court appearances. 

Case Title: Vishal Moral v Directorate Of Enforcement (2024:DHC:7093)