The Prevention of Money Laundering Act, 2002 (PMLA) is an Act of the Parliament of India, enacted to combat money laundering and provide for the confiscation of property derived from, or involved in, money laundering. The Act was enacted on January 17, 2003, and came into force on July 1, 2005. Its origin lies in India's international commitment to combat money laundering, particularly under the Vienna Convention and the Political Declaration adopted by the United Nations General Assembly in 1998. The problem it solves is the systematic process of transforming illegally obtained funds, or "proceeds of crime," into seemingly legitimate money.
The mechanism of the PMLA centers on defining the offense of money laundering in Section 3 as any person directly or indirectly involved in any process or activity connected with the proceeds of crime and projecting it as untainted property. Key provisions include empowering the Directorate of Enforcement (ED) to investigate, arrest, and provisionally attach property involved in money laundering. It also mandates that banking companies, financial institutions, and intermediaries verify client identity, maintain records for a minimum of five years, and furnish information, such as Cash Transaction Reports (CTR) and Suspicious Transaction Reports (STR), to the Financial Intelligence Unit – India (FIU-IND). The Act also establishes an Adjudicating Authority to confirm the attachment of property and an Appellate Tribunal to hear appeals.
The PMLA connects to other laws through the concept of "scheduled offenses," which are the predicate crimes that must occur before a money laundering charge can be pressed. It has been amended multiple times, including in 2005, 2009, 2012, and by the Finance Act, 2019. A significant change was the Supreme Court's ruling in Nikesh Tarachand Shah v. Union of India (2017), which set aside a clause in Section 45 of the PMLA that imposed stringent conditions for granting bail, observing that the provision violated Articles 14 and 21 of the Constitution. However, the core objectives—to prevent money laundering and confiscate the proceeds of crime—have remained the same.