Prevention of Money
Laundering Act, 2002
Twenty-two chapter notes covering India’s primary anti-money-laundering statute — the definition of money laundering under Section 3, the scheduled offences, the attachment and confiscation of proceeds of crime, the obligations on reporting entities (banks, financial institutions, intermediaries), the Enforcement Directorate’s powers, the bail bar under Section 45, and the twin Supreme Court decisions on the PMLA’s constitutional validity. Scheduled offence first, proceeds of crime second, ED power third.
PMLA — the anti-money-laundering and proceeds-confiscation code.
The Prevention of Money Laundering Act 2002 implements India’s obligations under the Financial Action Task Force (FATF) framework. The Act criminalises money laundering under Section 3 — whosoever directly or indirectly attempts to indulge in or knowingly assists in any process or activity connected with the proceeds of crime and projecting them as untainted property. The Enforcement Directorate (ED) investigates PMLA offences and has powers of search, seizure, arrest, and attachment of ‘proceeds of crime’.
These notes anchor every chapter to its PMLA section. The most-tested provisions are Section 2(1)(u) (proceeds of crime), Section 3 (money laundering offence), Section 5 (provisional attachment), Section 8 (adjudication), Section 17 (search and seizure), Section 19 (arrest), Section 45 (conditions for bail), and the Schedule of predicate offences.
Each chapter is designed to be read in twelve to fifteen minutes and to leave the reader with the PMLA section, the predicate offence requirement, the ED power, the bail framework, and the leading authority.
How to read these notes
Start with the predicate offence.
Every PMLA chapter begins with the predicate offence. PMLA only operates where there is a scheduled offence — a crime listed in the Schedule to the Act (which includes IPC offences, NDPS offences, corruption offences, and others). Without a scheduled offence, there can be no ‘proceeds of crime’ and no PMLA offence. Identifying the predicate offence is the first analytical step.
Trace the proceeds of crime.
Every PMLA question then traces the proceeds of crime. Section 2(1)(u) defines ‘proceeds of crime’ as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The tracing can be through multiple layers of transactions — the substituted assets doctrine confirmed in Vijay Madanlal Choudhary.
Test on the leading case.
If you can restate the holding of Vijay Madanlal Choudhary v. Union of India, Nikesh Tarachand Shah v. Union of India, or Y. Balaji v. Karthik Desari in two sentences, you understand the chapter. If not, return to the statutory section and rebuild from there.
All 22 chapters, in 3 groups
Sequenced through the natural structure of the subject — every chapter sits in a doctrinal cluster.Definitions, Offence & Schedule
Sections 2–4 + Schedule — the threshold
Section 2(1)(u) proceeds of crime — the broad definition capturing direct and indirect proceeds and substituted assets. Section 3 money laundering offence — the three-stage process (placement, layering, integration) and the standalone ‘whosoever directly or indirectly attempts to indulge in’ formulation. Section 4 punishment — rigorous imprisonment of three to seven years, up to ten years for Part I Schedule offences (NDPS). The Schedule of predicate offences — Parts A to C.
Attachment, Adjudication & Reporting Entity Obligations
Sections 5–13 — the enforcement and compliance framework
Section 5 provisional attachment of proceeds of crime by the ED — the thirty-day limitation on provisional attachment (now one hundred eighty days on adjudicating authority extension). Section 8 adjudication by the Adjudicating Authority — the standard of proof (preponderance of probabilities), the post-confirmation confiscation. Section 12 obligations of reporting entities (banks, financial institutions, SEBI-registered intermediaries) — KYC, record maintenance, suspicious transaction reporting to FIU-IND.
Adjudicating Authority (Section 6)
PMLA · 07Appellate Tribunal (Section 25)
PMLA · 08Powers of Authorities — Survey, Search, Seizure (Sections 16 to 19)
PMLA · 09Arrest Power (Section 19)
PMLA · 10Bail Provisions (Section 45) — Twin Conditions
PMLA · 11Confiscation Procedure (Section 8)
PMLA · 12Records and Reporting Obligations (Section 12)
Search, Arrest, Bail & Constitutional Validity
Sections 17–45 + Supreme Court decisions
Section 17 search and seizure by the ED. Section 19 arrest by the ED with the mandatory grounds of belief, the supply of grounds of arrest at the time of arrest. Section 45 bail conditions — twin conditions, their constitutional validity upheld in Vijay Madanlal Choudhary. The Nikesh Tarachand Shah striking down of the earlier Section 45 and the 2018 amendment restoring the twin-condition framework. Section 50 statements before the ED as admissible evidence (unlike Section 67 NDPS statements post-Tofan Singh). The appeal to the Appellate Tribunal and the High Court.