The Union Finance Ministry has notified changes to the Prevention of Money Laundering Act (PMLA).



  • The Union Finance Ministry has notified changes to the Prevention of Money Laundering Act, 2002, widening its ambit to include transactions facilitated by chartered accountants, company secretaries, etc.
  • Going forward, setting up a company, buying property and financial transactions executed by these professionals on behalf of their clients will now be covered under the PMLA.
  • They will be liable under the PMLA if they facilitate a transaction that violates the law.
  • They will need to comply with verification of identity rules, maintain records and furnish information when asked.
  • The Act also stipulates confidentiality on information sought from the reporting entity, thereby, requiring adherence to the strictest of professional standards.
  • In case a transaction undertaken by a client appears to be suspicious or possibly involves proceeds of crime, the reporting entity shall step up monitoring of the business relationship.
  • The amendments are expected to aid investigative agencies further in their probe against dubious transactions involving shell companies and money laundering.
  • Over a month ago, in March, the government had widened the ambit of reporting entities under money laundering provisions. These provisions incorporate more disclosures for non-governmental organisations and defined politically exposed persons (PEPs) under the PMLA.


About Prevention of Money Laundering Act, 2002

  • The Prevention of Money Laundering Act (PMLA), 2002 was enacted in January, 2003.
  • The Act seeks to combat money laundering in India and has three main objectives
      • To prevent and control money laundering
      • To confiscate and seize the property obtained from the laundered money; and
      • To deal with any other issue connected with money laundering in India.
  • Section 3 of the Act defines offence of money laundering as – whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.
  • The Act was amended by the Prevention of Money Laundering (Amendment) Act, 2009 and by the Prevention of Money Laundering (Amendment) Act, 2012.
  • Most recently, the PMLA was amended through the —
      • Finance Act, 2015 (‘2015 Amendment’)
      • Finance Act, 2018 (‘2018 Amendment’)
      • Finance Act, 2019 (‘2019 Amendment’)


Major provisions of the Act

  • The Act prescribes obligation of banking companies, financial institutions and intermediaries for verification and maintenance of records of the identity of all its clients and also of all transactions.
  • PMLA empowers the Directorate of Enforcement (ED) to carry out investigations in cases involving offence of money laundering and also to attach the property involved in money laundering. ED is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India.
  • PMLA envisages setting up of an Adjudicating Authority to exercise jurisdiction, power and authority conferred by it essentially to confirm attachment or order confiscation of attached properties.
  • It also envisages setting up of an Appellate Tribunal to hear appeals against the order of the Adjudicating Authority
  • PMLA envisages designation of one or more courts of sessions as Special Court or Special Courts to try the offences punishable under the Act.
  • PMLA also allows Central Government to enter into an agreement with Government of any country outside India for enforcing the provisions of the PMLA.


Criticism of the Act

  • Certain provisions of the PMLA have received criticism on the grounds of legal and constitutional principles.
  • These provisions include –
      • Stringent bail conditions,
      • Arrest of persons without supply of Enforcement Case Information Report (similar to FIR),
      • Non-communication of grounds of arrest to the accused,
      • Statement given by accused during investigation made admissible as evidence during trial, and
      • Broad definitions of money laundering and proceeds of crime under the Act.
      • Critics argue that the amendments to the Act have not yielded the desired results of improved convictions but has only resulted in a procedure that takes away an individual’s liberty depriving them of all constitutional guarantees and procedure laid down under the Code of Criminal Procedure (CrPC).