Prevention of Money Laundering Act, 2002
Objects and Scheme of the PMLA, 2002
The PMLA is a compact statute of seventy-five sections in ten chapters, with a Schedule of predicate offences. Read as a whole, it does four things: it defines and punishes the offence; it provides a civil-style track to attach and confiscate property; it imposes preventive duties on reporting entities; and it creates the institutions and procedures to make all of this work, at home and abroad. This note sets out the objects of the Act and walks through its scheme chapter by chapter, and then follows a typical case through it.
The ten chapters of the PMLA as the floors of a building, with the Schedule as the roof
1. The Objects
§ The Preamble and the Statement of Objects and Reasons • To prevent money laundering, through a system of verification, record-keeping and reporting. • To provide for confiscation of property derived from, or involved in, money laundering. • To punish those who launder, as a distinct offence. • To combat the channelling of criminal money into the financial system and the economy. • To meet international commitments, recited in the Statement of Objects and Reasons: the UN Political Declarations of 1990 and 1998 calling for national anti-money laundering legislation. |
2. The Scheme, Chapter by Chapter
Chapter | Sections | Subject |
|---|---|---|
I | 1 and 2 | Preliminary: short title, extent and commencement; definitions, including proceeds of crime, property, scheduled offence, person and reporting entity |
II | 3 and 4 | The offence of money laundering, and its punishment |
III | 5 to 11 | Attachment, adjudication and confiscation: provisional attachment (s. 5), the Adjudicating Authority (s. 6), confirmation (s. 8), vesting and confiscation (ss. 8, 9) |
IV | 11A to 15 | Obligations of banking companies, financial institutions and intermediaries: verification of identity, records, reporting to FIU-IND, and penalties (s. 13) |
V | 16 to 24 | Summons, searches and seizures: survey (s. 16), search and seizure (s. 17), search of persons (s. 18), arrest (s. 19), retention (ss. 20, 21), burden of proof (s. 24) |
VI | 25 to 42 | The Appellate Tribunal, and appeal to the High Court (s. 42) |
VII | 43 to 47 | Special Courts: designation (s. 43), offences triable (s. 44), cognisable and non-bailable with twin conditions for bail (s. 45), application of the Code (s. 46), appeal and revision (s. 47) |
VIII | 48 to 54 | Authorities: the Director and officers; powers regarding summons, production and statements (s. 50); certain officers bound to assist (s. 54) |
IX | 55 to 61 | Reciprocal arrangements with other countries: agreements, letters of request, assistance, attachment and confiscation |
X | 62 to 75 | Miscellaneous: punishment for vexatious search, false information, offences by companies (s. 70), overriding effect (s. 71), rules and regulations |
Schedule | Parts A, B, C | The scheduled offences: Part A (offences under many laws), Part B (customs offences above a value threshold), Part C (offences with cross-border implications) |
3. Two Tracks: Attachment and Prosecution
§ How the scheme runs in parallel The attachment track is civil in character. The Director or an authorised officer may provisionally attach property for 180 days under Section 5, on reason to believe, recorded in writing, that it is proceeds of crime and likely to be concealed or transferred. A complaint goes to the Adjudicating Authority, which may confirm the attachment under Section 8. Confiscation follows the outcome of the trial. The prosecution track is criminal. The ED investigates, may search, arrest under Section 19, and record statements under Section 50, and files a prosecution complaint before the Special Court, which tries the offence under Section 3. The link. Under Section 8(5) and (6), on conviction the property is confiscated; on acquittal, the attachment is released. |
4. A Typical Case through the Scheme
Stage | What happens | Provision |
|---|---|---|
Predicate offence | An FIR or complaint for a scheduled offence is registered by the police or another agency | s. 2(1)(y); Schedule |
ECIR | The ED records an Enforcement Case Information Report, an internal document, and begins investigation | Vijay Madanlal (2022) |
Search and survey | Search and seizure on reasons recorded; statements recorded | ss. 16, 17, 50 |
Attachment | Provisional attachment for 180 days; complaint to the Adjudicating Authority | s. 5 |
Confirmation | The Adjudicating Authority hears and confirms or releases | s. 8 |
Arrest | On reasons to believe guilt, recorded in writing; grounds furnished in writing | s. 19; Pankaj Bansal (2023) |
Prosecution complaint | Filed before the Special Court | s. 44 |
Bail | Twin conditions apply | s. 45 |
Trial and burden | The presumption in s. 24 operates once foundational facts are proved | s. 24 |
Outcome | Conviction: punishment and confiscation. Acquittal: release of property | ss. 4, 8 |
Appeals | Appellate Tribunal on attachment; High Court on conviction and on Tribunal orders | ss. 26, 42, 47 |
5. Frequently Asked Questions
How is the PMLA structured?
In seventy-five sections across ten chapters, with a Schedule of predicate offences in Parts A, B and C.
What are the two tracks under the PMLA?
The attachment track, from provisional attachment under Section 5 to confirmation under Section 8 and confiscation; and the prosecution track, from investigation to trial of the offence under Section 3 before the Special Court.
Which chapter deals with reporting entities?
Chapter IV, Sections 11A to 15, which imposes duties of verification, record-keeping and reporting to FIU-IND.
What is the Schedule to the PMLA?
The list of scheduled offences whose proceeds can be laundered: Part A (offences under many statutes), Part B (customs offences above a value threshold), and Part C (offences with cross-border implications).