§ Section 3, in substance, with the 2019 Explanation

Whosoever directly or indirectly attempts to indulge, or knowingly assists, or knowingly is a party, or is actually involved in any process or activity connected with the proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as untainted property, shall be guilty of the offence of money laundering.

Explanation (i). A person shall be guilty if found to have directly or indirectly attempted to indulge, knowingly assisted, knowingly been a party, or been actually involved in one or more of the following processes or activities: (a) concealment; (b) possession; (c) acquisition; (d) use; (e) projecting as untainted property; or (f) claiming as untainted property, in any manner whatsoever.

Explanation (ii). The process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever.

Attempting to indulge

Directly or indirectly attempting to engage in a process connected with proceeds, even if it is not completed

Knowingly assisting

Helping another to deal with proceeds, knowing them to be proceeds of crime: the accountant, the nominee, the lender of an account

Knowingly being a party

Participating in the arrangement, knowing its character

Actually involved

Personally engaged in the process or activity

Concealment

Hiding the proceeds, their source, location, ownership or movement: benami holding, shell companies, false records

Possession

Holding the proceeds, physically or through control; a continuing activity

Acquisition

Obtaining proceeds or property bought with them, knowing their character

Use

Spending or employing the proceeds; a continuing activity while enjoyed

Projecting as untainted

Presenting the proceeds to the world as legitimate, such as fake business income

Claiming as untainted

Asserting before an authority or court that the proceeds are clean

§ The meaning of 'knowingly'

Assisting and being a party are qualified by knowingly: the person must know that the property is proceeds of crime. An innocent bank clerk processing a transaction is not within them.

Knowledge may be inferred from circumstances: a price far below value, secrecy, the relationship with the offender, the absence of any lawful explanation.

Attempting and actual involvement are not expressly qualified by knowingly, but the nature of the offence, and the requirement that the property be proceeds of crime, import a guilty mind in practice.

Section 24 presumes, in the case of a person charged, that proceeds of crime are involved in money laundering once the foundational facts are proved, and the person must prove the contrary.

📖 Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929

The argument was that the word 'and' in 'concealment, possession, acquisition or use and projecting or claiming it as untainted property' made projection an essential ingredient, so that mere possession or use was not laundering. The Supreme Court rejected it. Each of the listed processes is independently money laundering; the 2019 Explanation is clarificatory of that position and consistent with India's international obligations. Projection as untainted is one way of committing the offence, not a necessary ending to it.

§ Explanation (ii)

• Possession and use are continuing. A person who continues to hold or use proceeds commits the offence for as long as he does so.

• Consequence for timing. Present enjoyment of proceeds is an offence even if the predicate crime was committed earlier, including before the scheduled offence was added to the Schedule, so long as the enjoyment continues after.

• Not retrospective. The Supreme Court in Vijay Madanlal Choudhary held that this does not violate Article 20(1), because the act punished is the present dealing with the proceeds.

§ Third parties and companies

• Third parties. A person need not have committed, or been accused of, the scheduled offence. In Pavana Dibbur v. Directorate of Enforcement, 2023 INSC 1029, the Supreme Court held that a person who knowingly assists in concealment or use of proceeds may be prosecuted under Section 3 though not an accused in the scheduled offence.

• Companies. A company is a 'person' under Section 2(1)(s). Under Section 70, where a company contravenes the Act, every person in charge of and responsible for its business is also deemed guilty, unless he proves the contravention took place without his knowledge or despite due diligence; and a director, manager or officer by whose consent, connivance or neglect it was committed is also liable.

Shell companies

Routing proceeds through companies with no genuine business is concealment and projection; those who set them up knowingly assist

Bank accounts

Depositing, holding and moving proceeds through accounts, including mule accounts, is possession, use and concealment

Property transactions

Buying property with proceeds is acquisition and use; under-valued or benami purchases add concealment

Virtual digital assets

Converting proceeds into crypto assets, or moving them through offshore platforms, is acquisition, use and concealment

Layered transactions

Each knowing step in a chain designed to obscure the source is a process connected with proceeds

What is punished

The crime that generates the money

Dealing with the money

Who

The offender

Anyone who knowingly deals with the proceeds

Where tried

The court competent for the scheduled offence, or the Special Court with it

The Special Court under s. 43

Dependence

Independent

Dependent on the predicate's existence; falls on its quashing, final discharge or acquittal

Is any one process enough?

Arguable; projection was said to be required

Yes: Explanation (i)

Is possession alone enough?

Contested

Yes

When does the offence end?

Uncertain

It continues while the proceeds are enjoyed: Explanation (ii)