The Prevention of Money-Laundering Act, 2002 (PMLA) was enacted to combat the growing threat of money laundering in India, particularly in response to global concerns following the Financial Action Task Force (FATF) recommendations. The Act came into force on July 1, 2005, to criminalize money laundering, confiscate illicit proceeds, and strengthen India's financial system against economic crimes.
Key provisions include:
Definition of money laundering as the process of disguising illegally obtained funds as legitimate.
Obligations for financial institutions (banks, mutual funds, etc.) to verify customer identities, maintain records, and report suspicious transactions.
Powers of enforcement vested in the Enforcement Directorate (ED) to investigate, attach properties, and prosecute offenders.
Stringent penalties, including imprisonment (3–7 years, extendable to 10 years) and fines, with the burden of proof partially shifted to the accused.
Attachment and confiscation of properties derived from criminal activities.
The PMLA has been amended periodically to expand its scope, covering more predicate offences and aligning with international standards to combat terrorism financing and black money.