INDIA Trends and Developments Contributed by: Vijayendra Pratap Singh, Priyank Ladoia, Shubhangni Jain and Arjun Narang, AZB & Partners
prima facie findings of guilt and violations com - mitted by audit firms while issuing an Audit Qual - ity Review Report (AQRR) and then proceed to take a decision to commence disciplinary action while issuing the show-cause notice based on the very same AQRR. According to the Court, this manner of functioning would scar the pro - cess with pre-determination and unfairness. In this light, the Court quashed the show-cause notices issued by the NFRA, while granting lib - erty to the NFRA to draw the proceedings afresh from the stage of issuance of show-cause notic - es, which must be passed by members who were disconnected and disassociated from the process of audit review. The NFRA has challenged the Deloitte Judgment before the Supreme Court in India. The Supreme Court has issued notice and will now be hearing the challenge. The Global Reach of PMLA: Addressing Transnational Offences The Delhi High Court’s recent judgment in Adnan Nisar v Enforcement Directorate 2024 DHC 7093 has profound implications for the transnational reach of the Prevention of Money Laundering Act, 2002 (PMLA) in India. The case delves into the issue of whether offences committed outside India can trigger proceedings under the PMLA, and the jurisdictional challenges arising from such cases. The ruling highlights the evolving nature of financial crimes in an increasingly glo - balised world and the necessity for India’s legal framework to adapt accordingly. The case originated from a mutual legal assis - tance request from the US Department of Jus - tice, which was forwarded to the Enforcement Directorate (ED) by Indian authorities on 23 December 2022. The request pertained to alle - gations against an Indian national, for offences
under various US statutes, including wire fraud, access device fraud, computer fraud and money laundering. The US authorities alleged that cryp - tocurrency worth approximately USD527,615.45 was fraudulently transferred from a victim’s hard - ware wallet in Leawood, Kansas, USA. After investigation, the ED concluded that these offences corresponded to Section 75 of the Information Technology Act, 2000, and Sections 420 and 424 of the IPC, which are scheduled offences under the PMLA. Consequently, an Enforcement Case Information Report (ECIR) was registered for further investigation. Cross-border implications under the PMLA The PMLA provides jurisdiction over offences committed outside India if they have financial implications within the country. Section 2(1)(ra) defines an “offence of cross-border implica - tions” as one where: • a person outside India commits an act that would have been an offence under Part A, Part B or Part C of the Schedule to the PMLA if committed in India, and the proceeds of crime are transferred to India; and • a scheduled offence is committed in India, and its proceeds are transferred outside the country. In Adnan Nisar , the Court held that the case fell under the first category, as the fraudulent trans - actions originated in the USA, but proceeds of crime were traced to an Indian account linked to the accused. This allowed the ED to initiate pro - ceedings under the PMLA, treating the offence in the USA as “predicate offence” under Part C of the Schedule, which provides for offences of cross-border implications.
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