Prevention of Money Laundering Act, 2002
Major Amendments to the PMLA
The PMLA of 2002 was a modest statute. The Act that exists today is the product of repeated amendment: an Amendment Act in 2009, a major Amendment Act of 2012 in force from 2013, and a series of amendments through Finance Acts in 2015, 2016, 2018 and 2019. Each widened the net: more predicate offences, more reporting entities, wider attachment, a stricter bail regime, and in 2019, Explanations that settled the reach of Section 3. This note takes the amendments in order, and then compares Section 3 before and after the 2019 Explanation.
The amendments as layers, and Section 3 before and after 2019
1. The Amendments at a Glance
Amendment | Principal changes |
|---|---|
2009 Amendment Act | Many offences added to the Schedule; Part C for offences with cross-border implications; payment system operators, authorised persons and casinos brought within reporting duties |
2012 Amendment Act (in force 15 February 2013) | s. 3 widened to concealment, possession, acquisition and use; the concept of 'reporting entity'; designated businesses and professions; monetary threshold removed for Part A offences; attachment of property of any person; heavier penalties on reporting entities; stronger international cooperation |
Finance Act, 2015 | Property of equivalent value attachable where proceeds are taken abroad; Part B threshold of one crore rupees; the Black Money Act offence added to the Schedule |
Finance Act, 2018 | s. 45 twin conditions re-enacted for all offences; bail proviso extended to sums below one crore; restoration of confiscated property to claimants who suffered loss under s. 8(8); corporate fraud under the Companies Act added to the Schedule |
Finance (No. 2) Act, 2019 | Explanations to s. 2(1)(u) and s. 3; proviso to s. 17(1) omitted; Explanations to ss. 44 and 45; verification by Aadhaar authentication, s. 11A; enhanced due diligence, s. 12AA; an inter-ministerial committee, s. 72A |
2. The 2012 Amendment, in Force from 2013
§ The most far-reaching amendment • Section 3 widened. Laundering now expressly included concealment, possession, acquisition or use, not only projecting as untainted. • Reporting entities. The term 'reporting entity' brought banking companies, financial institutions, intermediaries and persons carrying on designated businesses or professions under one set of duties. • Thresholds removed. The monetary threshold for Part A offences was removed, so any amount of proceeds from those offences could be laundered. • Wider attachment. Attachment could extend to property in the hands of any person, not only a person charged. • Enforcement. Penalties on reporting entities for failures became heavier and more flexible, and the powers of the Director FIU-IND were strengthened. |
3. The Finance Act Amendments
§ Amendments through Money Bills, and the question they raise 2015. The definition of proceeds of crime was widened so that where the property is taken or held outside India, property of equivalent value within India can be attached; the value threshold for Part B was set at one crore rupees. 2018. After Nikesh Tarachand Shah v. Union of India, (2018) 11 SCC 1, struck down the twin conditions as then framed, Parliament re-enacted Section 45 to apply them to all PMLA offences; and provided for restoration of confiscated property to claimants with a legitimate interest who suffered loss. 2019. The Explanations to Sections 2(1)(u), 3, 44 and 45 were added; the requirement in Section 17 that a search follow a police report on the predicate offence was removed. The Money Bill question. These changes were enacted through Finance Acts passed as Money Bills. In Vijay Madanlal Choudhary (2022), the Supreme Court did not decide whether that route was valid, leaving the question to the larger Bench to which the Money Bill issue had been referred in Rojer Mathew v. South Indian Bank. |
4. Section 3 before and after the 2019 Explanation
Question | Before 2019 | After 2019 |
|---|---|---|
Is projection as untainted a separate requirement? | Arguable: the words 'and projecting or claiming it as untainted' were read by some as necessary | No: Explanation (i) makes involvement in any ONE process enough |
Is possession alone enough? | Contested | Yes, possession is one of the listed processes |
When does the offence end? | Uncertain; it was argued that it ended with the transaction | Explanation (ii): it continues while the proceeds are enjoyed |
Effect on old proceeds | Argued to be outside the Act if the laundering was before 2005 | Present enjoyment of proceeds is itself an offence |
Proceeds of crime | Property derived from criminal activity relating to a scheduled offence | Includes property from any criminal activity RELATABLE to the scheduled offence |
📖 Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929 The Supreme Court held the 2019 Explanation to Section 3 to be clarificatory, consistent with the text as widened in 2012 and with India's international obligations under the Vienna Convention and the FATF standards. It rejected the argument that projection as untainted was a separate necessary ingredient, and held that each listed process is independently money laundering. |
5. Frequently Asked Questions
What did the 2012 amendment change?
It widened Section 3 to include concealment, possession, acquisition and use; introduced reporting entities; removed the threshold for Part A offences; and widened attachment and penalties.
Why was Section 45 amended in 2018?
Because the Supreme Court in Nikesh Tarachand Shah struck down the twin conditions as then framed; Parliament re-enacted them to apply to all PMLA offences.
What did the 2019 Explanation to Section 3 do?
It clarified that involvement in any one of the listed processes is money laundering, and that the offence continues while the proceeds are enjoyed. The Supreme Court held it clarificatory.
Were the Finance Act amendments upheld?
The Supreme Court in Vijay Madanlal did not decide whether amending the PMLA through Money Bills was valid, leaving that question to the larger Bench considering the Money Bill issue.