PMLA Money Laundering Act

The Prevention of Money Laundering Act (PMLA), 2002 is India’s primary legislation for preventing and controlling money laundering. It empowers the Enforcement Directorate (ED) to investigate money laundering offences, attach and confiscate the proceeds of crime, and prosecute offenders.

What Is the PMLA?

Money laundering is the process of making illegally obtained funds appear legitimate. PMLA makes this a criminal offence in India and establishes:

– Definition of money laundering and scheduled offences
– Powers of the Enforcement Directorate to investigate, attach property, and arrest
– Obligations of financial institutions and intermediaries to maintain KYC records and report suspicious transactions
– Special courts (PMLA courts) for trial of money laundering cases

Key PMLA Provisions

**Section 3 – Offence of Money Laundering:**
Whoever directly or indirectly attempts to indulge in or knowingly assists in the process of money laundering commits the offence.

**Section 5 – Attachment:**
The ED can provisionally attach property believed to be proceeds of crime, subject to confirmation by the Adjudicating Authority.

**Section 12 – Reporting Entities:**
Banks, financial institutions, payment system operators, intermediaries, and now crypto exchanges must:
– Maintain KYC records for 5 years
– Preserve and report transaction records
– File Suspicious Transaction Reports (STRs) with the Financial Intelligence Unit (FIU-IND)

Recent Expansion: VDA Providers

In 2023, crypto exchanges and Virtual Digital Asset Service Providers were brought under PMLA as Reporting Entities. They must now register with FIU-IND, maintain KYC, and report suspicious transactions.

Practical Example

A real estate developer accepts large cash payments for property, converts these into property assets, and sells them later, claiming legitimate real estate income. The ED investigates under PMLA, attaches the properties as proceeds of crime, and charges the developer with money laundering.

Key Takeaways

– PMLA, 2002 criminalises money laundering and empowers the Enforcement Directorate to investigate and attach assets
– Reporting entities (banks, NBFCs, crypto exchanges) must maintain KYC records and file STRs with FIU-IND
– The ED can provisionally attach property suspected to be proceeds of crime without a court order
– PMLA has been amended multiple times; 2023 amendment extended scope to crypto exchanges
– Conviction under PMLA carries rigorous imprisonment from 3 to 7 years, extendable to 10 years for certain offences