The Prevention of Money Laundering Act (PMLA), 2002, is an Act of the Parliament of India enacted to prevent money laundering and provide for the confiscation of property derived from it. The Act received Presidential assent on January 17, 2003, and came into force on July 1, 2005. The PMLA was created to fulfill India's international commitments, particularly the recommendations of the Financial Action Task Force (FATF) and the United Nations General Assembly's resolutions on countering the world drug problem.
The core mechanism of the PMLA is the criminalization of money laundering under Section 3, which defines the offence as any activity connected with the "proceeds of crime" and projecting it as untainted property. "Proceeds of crime" is defined in Section 2(1)(u) as any property derived from a "scheduled offence" listed in the Act's Schedule. The investigating agency is the Directorate of Enforcement (ED), which functions under the Department of Revenue, Ministry of Finance. The ED is empowered to conduct investigations, provisionally attach property under Section 5 for up to 180 days, and make arrests under Section 19.
The PMLA connects to several other laws, as the scheduled offences include sections from the Indian Penal Code, the Prevention of Corruption Act, 1988, and the Narcotic Drugs and Psychotropic Substances Act, 1985. The Act has been amended multiple times, notably in 2005, 2009, 2012, and through the Finance Acts of 2018 and 2019, which expanded the scope of "proceeds of crime" and established money laundering as a continuing offence. A major point of contention has been the stringent bail conditions under Section 45, which impose a reverse burden of proof on the accused. The Supreme Court, in Nikesh Tarachand Shah v. Union of India (2017), struck down the original Section 45(1) as unconstitutional, but Parliament amended the provision in 2018 to cure the defect. The amended Section 45 was subsequently upheld by the Supreme Court in Vijay Madanlal Choudhary and Ors. v. Union of India (2022), which validated the core provisions of the PMLA, including the ED's powers of arrest and attachment. The 2022 judgment held that the twin conditions for bail do not violate Articles 14 or 21 of the Constitution, given the gravity of the offence. Recent amendments in 2023 expanded the scope of reporting entities to include practicing chartered accountants, company secretaries, and intermediaries in the crypto ecosystem.