The Prevention of Money Laundering Act (PMLA), 2002

 

The Prevention of Money Laundering Act (PMLA), 2002 is a key anti-financial crime legislation in India aimed at preventing and controlling money laundering, confiscating property derived from crime, and ensuring compliance with global financial standards like those of the Financial Action Task Force (FATF).

---

🛡️ Overview: Prevention of Money Laundering Act, 2002

🎯 Objective:

To prevent money laundering, combat the financing of terrorism, and allow for the confiscation of property derived from or involved in money laundering.

---

⚖️ Key Provisions of the PMLA

1. Definition of Money Laundering (Section 3)

Whosoever directly or indirectly attempts to indulge in, assist, or knowingly be a party to a process or activity connected with the proceeds of crime shall be guilty of money laundering.

This includes:

• Concealment

• Possession

• Acquisition

• Use

• Projection or claiming it as untainted property

---

2. Proceeds of Crime (Section 2(u))

Refers to any property derived or obtained, directly or indirectly, as a result of criminal activity related to a scheduled offence under the Act.

---

3. Scheduled Offences (Schedule to PMLA)

The Act applies only if the predicate (underlying) offence is listed in the Schedule, which includes:

• Narcotics and drugs

• Corruption (Prevention of Corruption Act)

• Terrorism

• Fraud, forgery, theft

• Tax evasion

• Environmental crimes

---

4. Attachment of Property (Section 5)

• Enforcement Directorate (ED) can provisionally attach property suspected to be proceeds of crime for 180 days.

• After confirmation by the Adjudicating Authority, the property may be confiscated.

---

5. Adjudicating Authority (Section 6)

A special authority appointed to determine whether property attached is involved in money laundering.

---

6. Directorate of Enforcement (ED)

• Primary investigation and enforcement agency under PMLA.

• Can arrest, search, seize, attach, and prosecute under the Act.

---

7. Reporting Entities (Section 12)

Banks, financial institutions, intermediaries (like stock brokers, insurance companies), must:

• Maintain records of transactions

• Conduct KYC (Know Your Customer) verification

• Report suspicious transactions to the Financial Intelligence Unit (FIU-IND)

---

8. Punishment (Section 4)

• Imprisonment: 3 to 7 years (can extend to 10 years for drug-related cases)

• Fine: No limit

---

9. Bail Provisions (Section 45)

• PMLA imposes stringent bail conditions (known as the "twin conditions"):

  1. The public prosecutor must be heard.

  2. The court must be satisfied that the accused is not guilty and not likely to commit an offence while on bail.

  (Note: The Supreme Court in Vijay Madanlal Choudhary v. Union of India [2022] upheld these provisions.)

---

🏛️ Important Institutions under PMLA

• Enforcement Directorate (ED) – Investigation and prosecution

• Adjudicating Authority – Confirmation of attachment

• Appellate Tribunal – Hears appeals against Adjudicating Authority's orders

• Special Court (under PMLA) – Trial of money laundering cases

---

🌍 International Relevance

• PMLA is India’s compliance law for:

  • FATF Recommendations

  • UN Convention Against Transnational Organized Crime

  • Basel Committee’s AML norms

---

📈 Recent Developments

• Broadened definition of "proceeds of crime"

• Enhanced powers of ED

• Supreme Court scrutiny of constitutional validity

• Emphasis on corporate compliance and risk-based KYC