Prevention of Money Laundering Act

Section 2 contains the foundational definitions of PMLA. "Proceeds of crime" means any property derived or obtained — directly or indirectly — by any person as a result of any criminal activity relating to a Scheduled Offence, or the value of any such property. After the 2019 amendment, proceeds of crime can include property obtained through an offence even if the accused is acquitted, as long as the property is derived from criminal activity. "Money laundering" is defined in S.3 as projecting, concealing, claiming as untainted, or using proceeds of crime. "Scheduled Offence" means an offence listed in Part A, B, or C of the Schedule — these are the predicate offences that trigger PMLA jurisdiction. "Reporting entity" means banking companies, NBFCs, financial institutions, intermediaries (stockbrokers, mutual funds, chit funds), and persons carrying on designated non-financial businesses (jewellers, real estate agents above thresholds, CAs, advocates, company secretaries in prescribed circumstances).

Section 3 defines the offence of money laundering. Any person who directly or indirectly attempts to indulge, knowingly assists, knowingly is party to, or is actually involved in any process or activity — including concealment, possession, acquisition, use, projecting as untainted property, or claiming as untainted property — connected with the proceeds of crime and projects it as untainted property commits the offence of money laundering. Post-2019 amendment, even a person who receives or acquires property knowing it to be proceeds of crime commits money laundering, even if the specific predicate offence is not yet proven. This significantly expanded the net of PMLA prosecution.

Section 5 is the most practically impactful provision of PMLA for businesses. The Director (or officer above the rank of Deputy Director) of the Enforcement Directorate can provisionally attach property believed to be proceeds of crime for up to 180 days. No prior court order is needed — the attachment is by ED authority alone on a "reason to believe" standard. Once attached, the property cannot be transferred, alienated, or encumbered. The provisional attachment order is filed with the Adjudicating Authority within 30 days (S.8), which then confirms or revokes it. Critically, attachment is possible even before the filing of a charge sheet in the predicate offence case — the Supreme Court confirmed this in Vijay Madanlal Choudhary (2022).

The Adjudicating Authority (a quasi-judicial authority constituted under PMLA) adjudicates upon provisional attachment orders. Within 30 days of the provisional attachment, the ED must file the attachment order with the Authority, which then issues a show cause notice to the affected person. The Authority decides whether the property is proceeds of crime and confirms or revokes the attachment. On confirmation, the property vests in the Central Government. A confirmed attachment is subject to appeal to the Appellate Tribunal for PMLA (ATPMLA). The Adjudicating Authority functions independently of the Special Court trying the PMLA offence — meaning attachment proceedings and criminal proceedings run in parallel tracks.

Every reporting entity (bank, NBFC, financial institution, stockbroker, mutual fund, and designated non-financial businesses) must: (a) maintain records of all transactions (above prescribed thresholds) for 5 years; (b) verify the identity of clients (KYC — Know Your Customer); (c) identify beneficial owners (BO) of entities; (d) maintain records of the identity of clients and beneficial owners for 5 years after the business relationship ends; and (e) make the records available to the Director of FIU-IND on demand. Cash Transaction Reports (CTR) for cash transactions above Rs 10 lakh (or in equivalent foreign currency) must be filed with FIU-IND monthly. Suspicious Transaction Reports (STRs) must be filed within 7 days of forming a reasonable suspicion.

The ED can arrest any person if the Director (or officers authorised by the Director) has "reason to believe" that the person has been guilty of an offence under PMLA. The arrested person must be produced before a Judicial Magistrate or Special Court within 24 hours. A written communication of the grounds of arrest must be furnished to the arrested person at the time of arrest. The Supreme Court in Vijay Madanlal Choudhary confirmed that the PMLA arrest power is constitutional, but stressed that "reason to believe" must be based on objective material — not mere suspicion — and must be recorded in writing before the arrest.

Section 24 creates a reverse burden of proof in PMLA proceedings. In any civil or criminal proceeding relating to money laundering, once the prosecution establishes that the property is proceeds of crime, the burden shifts to the accused to prove that the property is NOT proceeds of crime. The accused must prove innocence on a balance of probabilities (not beyond reasonable doubt). The Supreme Court upheld this reverse burden in Vijay Madanlal Choudhary (2022), holding that the presumption in S.24 is a reasonable classification justified by the nature of money laundering. This fundamentally changes the litigation strategy — the accused must actively present evidence of the legitimate source of each questioned asset.

PMLA offences are cognizable and non-bailable. For bail under PMLA, S.45 imposes two conditions that must both be satisfied: (1) the Public Prosecutor (PP) must be given an opportunity to oppose the bail; and (2) the court must be satisfied that there are reasonable grounds to believe the accused is NOT guilty of such offence AND that the accused is NOT likely to commit any offence while on bail. Both conditions must be satisfied simultaneously — making PMLA bail extraordinarily difficult in practice. The Rajesh Aggarwal judgment (2024 SC) reaffirmed that the twin conditions are constitutionally valid and the courts cannot grant bail as a matter of routine.