§ Section 3 (in substance, as amended in 2019)

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 is guilty if found to have directly or indirectly attempted, knowingly assisted, been a party to, or been actually involved in one or more of the processes or activities: concealment, possession, acquisition, use, projecting as untainted, or claiming as untainted, in any manner.

Explanation (ii). The process or activity connected with proceeds of crime is a continuing activity, and continues till the person directly or indirectly enjoys the proceeds by concealment, possession, acquisition, use, projection or claim, in any manner.

Placement

Criminal cash enters the financial system

Many small deposits below reporting thresholds; cash run through a cash-heavy business

Layering

The link to the crime is obscured by transactions

Transfers across accounts, shell companies and jurisdictions; false invoices; hawala; crypto assets

Integration

The money returns as apparently legitimate wealth

Purchase of property, business profits, repayment of a sham loan

§ The Preamble, and what it means

• The Preamble. An Act to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering and for matters connected therewith or incidental thereto.

• Prevent. Through duties on reporting entities to verify clients, keep records and report, so that laundering is harder to begin.

• Punish. Through a distinct offence under Section 3, punished under Section 4 with rigorous imprisonment of three to seven years and fine, rising to ten years where the proceeds relate to an offence under the NDPS Act.

• Confiscate. Through provisional attachment, adjudication and confiscation of the proceeds, so that crime does not pay.

• Cooperate. Through reciprocal arrangements with other countries, because laundered money crosses borders.

Territorial extent

The whole of India: s. 1(2)

Commencement

1 July 2005

Who can commit it

Any 'person', defined in s. 2(1)(s) to include an individual, HUF, company, firm, association of persons or body of individuals, artificial juridical person, and agencies, offices or branches owned or controlled by any of them

What it reaches

'Proceeds of crime' under s. 2(1)(u): property derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence, or its value; and, where held outside India, property of equivalent value in India

The predicate crimes

'Scheduled offences' under s. 2(1)(y), listed in Parts A, B and C of the Schedule, drawn from the BNS and many special laws

Cross-border reach

Part C covers offences with cross-border implications; Chapter IX provides for reciprocal arrangements

Overriding effect

s. 71: the Act prevails notwithstanding anything inconsistent in any other law

Directorate of Enforcement (ED)

Investigates money laundering; attaches property; files prosecution complaints

Financial Intelligence Unit, India (FIU-IND)

Receives and analyses reports from reporting entities; shares intelligence; set up in November 2004

Adjudicating Authority

Confirms provisional attachment under s. 8

Appellate Tribunal

Hears appeals against the Adjudicating Authority; further appeal to the High Court under s. 42

Special Courts

Try the offence of money laundering and, where connected, the scheduled offence: Chapter VII

Reporting entities

Banks, financial institutions, intermediaries and designated businesses and professions that verify, record and report: Chapter IV

§ What sets the PMLA apart from the ordinary criminal law

• A dependent but distinct offence. Money laundering requires proceeds of a scheduled offence, but is punished separately from it.

• Attachment before conviction. Property may be provisionally attached for 180 days under Section 5, and the attachment confirmed by the Adjudicating Authority under Section 8, long before trial.

• A reverse burden. Under Section 24, in proceedings relating to proceeds of crime, the authority or court shall presume, in the case of a person charged, that the proceeds of crime are involved in money laundering, unless proved otherwise.

• Stringent bail. Section 45 imposes twin conditions: the court must be satisfied that there are reasonable grounds for believing the accused is not guilty and is not likely to commit an offence on bail.

• Statements to officers. Statements recorded under Section 50 by ED officers, who are not police officers, are admissible in evidence.

• Preventive duties. Reporting entities must verify clients and report cash and suspicious transactions to FIU-IND.

📖 Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929, decided 27 July 2022

The challenge. Over two hundred petitions challenged the constitutional validity of key provisions of the PMLA and the powers of the ED.

The holding. A three-judge Bench of Justices A. M. Khanwilkar, Dinesh Maheshwari and C. T. Ravikumar upheld the core provisions, including Sections 3, 5, 8(4), 17, 18, 19, 24, 44, 45 and 50.

Section 3 is wide. Each of the processes and activities listed, including concealment, possession, acquisition and use, is by itself money laundering; projecting the property as untainted is not a separate essential requirement.

The predicate link. The offence depends on proceeds of crime relatable to a scheduled offence. If the person is finally discharged or acquitted of the scheduled offence, or the criminal case is quashed, there can be no offence of money laundering against him or anyone claiming through him in respect of that property.

ECIR and ED officers. An Enforcement Case Information Report is an internal document, not an FIR, and need not be supplied; it is enough that the grounds of arrest are disclosed. ED officers are not police officers, so statements under Section 50 are not barred by the protection against confessions to police.

Bail. The twin conditions in Section 45, as amended in 2018, are valid.

Later developments. A review was admitted on limited questions; and later judgments, such as Pankaj Bansal v. Union of India (2023), have required the grounds of arrest to be furnished in writing. These are covered in the topics on arrest and bail.