The Prevention of Money Laundering Act, 2002 (PMLA) is an Act of the Parliament of India enacted to combat the criminal offense of money laundering and to provide for the confiscation of property derived from it. The Act, which came into force on July 1, 2005, was created to address the problem of criminals disguising the illegal origin of funds, often obtained through serious offenses like drug trafficking and terrorism, and projecting them as untainted property. Its enactment aligns with India's international commitment to the standards set by the Financial Action Task Force (FATF), an inter-governmental body that sets global anti-money laundering and counter-terrorist financing standards.
The PMLA works by criminalizing the act of money laundering under Section 3, which broadly covers any process or activity connected with the "proceeds of crime," including concealment, possession, acquisition, or use. Key provisions include the power of the Directorate of Enforcement (ED) to investigate cases and provisionally attach property involved in money laundering under Section 5(1), which must then be confirmed by an Adjudicating Authority. A distinctive feature is the reverse burden of proof under Section 24, which presumes that any attached property is involved in money laundering unless the contrary is proved by the accused. The Act also imposes obligations on "Reporting Entities," such as banks and financial institutions, to verify client identity, maintain records, and furnish information to the Financial Intelligence Unit – India (FIU-IND).
The PMLA is closely connected to the Unlawful Activities (Prevention) Act, 1967 (UAPA), as both form the core of India's anti-money laundering and counter-terrorist financing framework. The Act has undergone significant changes, notably through amendments in 2019 and the 2023 rules. Recent amendments in 2023 expanded the scope of "Reporting Entities" to include practicing Chartered Accountants, Company Secretaries, and Cost and Works Accountants for certain activities, and also brought intermediaries in the crypto ecosystem under the PMLA's ambit. Furthermore, the 2023 rules lowered the threshold for identifying beneficial owners and introduced a definition for Politically Exposed Persons (PEPs), in line with FATF recommendations.