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Prevention of Money Laundering Act India: PMLA 2002 Guide 2026 | Adv Shoeb Hakim

Adv Shoeb Hakim

PML ACT India

Updated: August 2026 | Reading Time: 12 minutes

Prevention of Money Laundering Act India PMLA 2002 Guide by Adv. Shoeb Hakim

Introduction

The Prevention of Money Laundering Act India (PMLA), 2002, is the cornerstone of India’s fight against financial crime. Enacted to combat money laundering and terrorist financing, the PMLA has evolved significantly over the past two decades through multiple amendments, judicial interpretations, and regulatory developments. In 2026, the Prevention of Money Laundering Act India remains a dynamic and powerful tool in the hands of enforcement agencies—but one that is increasingly subject to judicial scrutiny and procedural safeguards.

Authored by Adv. Shoeb Hakim—a criminal defence, AML, digital forensics, and cybercrime specialist with decades of experience training police and judiciary—this comprehensive guide covers the key aspects of the Prevention of Money Laundering Act India, its amendments, enforcement mechanisms, and the latest judicial developments in 2026.

What Is the Prevention of Money Laundering Act (PMLA), 2002?

The Prevention of Money Laundering Act India, 2002, is the primary legislation in India aimed at preventing and controlling money laundering. The Act came into effect on 1 July 2005 and has been amended several times—most notably in 2005, 2009, 2012, 2019, and 2023—to strengthen its provisions and address emerging challenges.[reference:0][reference:1]

The PMLA defines money laundering as the process of disguising the origins of illegally obtained money, making it appear legitimate. The Act provides for the confiscation and seizure of property obtained from money laundering and establishes special courts to handle money laundering cases.

Key Objectives of the PMLA

The Prevention of Money Laundering Act India serves several critical objectives:

  • Prevent and Control Money Laundering: The Act aims to prevent and control money laundering activities in India.
  • Confiscation of Property: It provides for the confiscation and seizure of property obtained from money laundering.
  • Address Related Issues: The Act also deals with other issues connected with money laundering in India.
  • Obligations on Financial Institutions: Financial institutions must verify the identity of their clients, maintain records, and furnish information to the Financial Intelligence Unit – India (FIU-IND).[reference:2]

Key Aspects of the PMLA in 2026

1. Scheduled Offences

The PMLA derives its jurisdiction only when property flows from a scheduled offence—a list of criminal offences specified in the Schedule to the Act that serve as “predicate offences” for money laundering proceedings.[reference:3]

With the repeal of the Indian Penal Code (IPC) and its replacement by the Bharatiya Nyaya Sanhita (BNS) effective 1 July 2024, a crucial question arose: do BNS offences qualify as scheduled offences under the PMLA?

In a landmark ruling, the Bombay High Court held that the PMLA makes a “dynamic reference” to penal laws and that BNS offences corresponding to IPC provisions would continue to be treated as scheduled offences. The Court observed that to interpret otherwise would “create an unintended legal vacuum and frustrate the purpose of the law.”[reference:4]

2. Obligations on Reporting Entities

Under the PMLA, reporting entities—including banks, financial institutions, intermediaries, and designated professionals—must comply with rigorous obligations:

  • Customer Due Diligence (CDD): Verify the identity of clients and maintain records.
  • Record Keeping: Maintain records of transactions for ten years as required under the PMLA.[reference:5]
  • Reporting to FIU-IND: Furnish information in prescribed forms to the Financial Intelligence Unit – India, including Cash Transaction Reports (CTRs), Suspicious Transaction Reports (STRs), and Cross-Border Wire Transfer Reports (CBWTRs).[reference:6][reference:7]
  • Appointment of Principal Officer: Every reporting entity must designate a Principal Officer to handle reporting obligations.[reference:8]
  • Board-Approved KYC Policy: Reporting entities must have a board-approved KYC policy covering customer acceptance, risk management, customer identification, and transaction monitoring.[reference:9]

The scope of reporting entities has expanded significantly. In May 2023, practising professionals in the fields of Chartered Accountancy, Company Secretaries, and Cost and Works Accountants were brought under the ambit of the PMLA as reporting entities when they execute specific financial transactions on behalf of clients.[reference:10]

3. Beneficial Ownership

The definition of “beneficial owner” under the PMLA has been a subject of significant clarification in 2026. Press Note No. 2 (2026 Series), dated 15 March 2026, formally anchored the determination of beneficial ownership to Section 2(1)(fa) of the PMLA and Rule 9(3) of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005.[reference:11]

The clarification establishes that beneficial ownership is determined not solely by numerical ownership thresholds but also by governance rights, shareholders’ agreements, board rights, and veto rights. This broader look-through approach requires investors with multi-layered holding structures to carefully assess ownership and governance arrangements.[reference:12]

Additionally, the definition of Politically Exposed Persons (PEPs) has been added to the PMLA framework.[reference:13] Reporting entities must now maintain records of financial transactions of PEPs and share information with the Enforcement Directorate (ED) as and when required.[reference:14]

4. Enforcement Directorate (ED) Powers

The Enforcement Directorate (ED) is the primary agency responsible for enforcing the PMLA. Its powers include:

  • Arrest: The ED can arrest individuals involved in money laundering.
  • Attachment of Properties: The ED can attach properties involved in money laundering.
  • Search and Seizure: The ED can conduct searches and seizures under the PMLA.[reference:15]

In July 2022, the Supreme Court upheld the validity of these powers in the Vijay Madanlal Choudhary case. However, in August 2026, the Supreme Court agreed to hear review petitions challenging the 2022 verdict.[reference:16][reference:17] A new three-judge bench has been constituted to hear the review pleas.[reference:18]

5. Supreme Court Safeguards on ED Powers

In a significant ruling on 31 July 2026, the Supreme Court held that the ED cannot freeze bank accounts merely on suspicion and must first record legally sustainable “reasons to believe” before exercising such powers.[reference:19]

The Court upheld a November 2025 Delhi High Court judgment that interpreted Section 17(1A) of the PMLA to require the same threshold of “reasons to believe” as Section 17(1) for search and seizure. The ruling strengthens procedural safeguards for individuals and businesses whose bank accounts are frozen during ED investigations.[reference:20][reference:21]

6. Recent Supreme Court Developments (August 2026)

In August 2026, the Supreme Court has:

  • Stayed a Delhi High Court ruling on ED’s powers to seize assets related to non-scheduled offences, reviving the debate on how far the agency can go in tracing “proceeds of crime.”[reference:22]
  • Reconstituted a bench to hear review petitions challenging the 2022 PMLA verdict upholding ED’s powers.[reference:23]

Amendments to the PMLA

The Prevention of Money Laundering Act India has been amended several times:

  • 2005: Initial amendments to operationalise the Act.
  • 2009: Brought authorised persons under FEMA within the purview of PMLA.[reference:24]
  • 2012: Strengthened provisions relating to confiscation of property.
  • 2019: Expanded the definition of “proceeds of crime.”
  • 2023 (Act 18 of 2023): The most recent comprehensive amendment, incorporated into the 2026 edition of the Act.[reference:25]

The Jan Vishwas (Amendment of Provisions) Act also introduced amendments to the PMLA.[reference:26]

Additionally, the Parliamentary Standing Committee has recommended targeted amendments to the Securities Markets Code Bill, 2025, to ensure that changes are carried through into the Schedule of the Prevention of Money-Laundering Act, 2002.[reference:27]

FIU-IND Reporting Obligations

The Prevention of Money Laundering Act India, together with the PMLA (Maintenance of Records) Rules, 2005, requires every reporting entity to keep records of transactions and furnish prescribed reports to FIU-IND.[reference:28]

Key reporting requirements include:

  • Cash Transaction Reports (CTRs): For cash transactions above prescribed thresholds and integrally connected cash transactions that aggregate above the threshold.[reference:29]
  • Suspicious Transaction Reports (STRs): Must be filed promptly once the Principal Officer is satisfied that the transaction is suspicious, within seven working days of that satisfaction.[reference:30]
  • Cross-Border Wire Transfer Reports (CBWTRs): A new mandatory reporting category introduced by the IFSCA, to be submitted to FIU-IND by the 15th of the succeeding month.[reference:31]
  • Non-Profit Organisation Transaction Reports (NTRs): For transactions involving non-profit organisations.[reference:32]

All reports must be submitted through the FIU-IND FINgate 2.0 portal.[reference:33]

Enforcement Actions Under PMLA in 2026

The ED has been actively enforcing the PMLA in 2026, with several high-profile cases:

  • CMRL-Exalogic Case: ED conducted fresh searches in Kerala in August 2026, investigating alleged fraudulent payments of ₹2.78 crore made by Cochin Minerals and Rutile Ltd (CMRL) to Exalogic Solutions.[reference:34][reference:35]
  • Jauhar University Case: ED raided 10 locations linked to Azam Khan’s trust and university in Uttar Pradesh and Delhi, investigating offences including extortion, cheating, forgery, and criminal conspiracy—all scheduled offences under the PMLA.[reference:36]
  • 32nd Avenue Group Case: ED attached ₹71.60 crore assets in a money laundering case.[reference:37]

Recent Judicial Developments

Supreme Court (31 July 2026)

Held that the ED cannot freeze bank accounts merely on suspicion and must record “reasons to believe” before exercising such powers. This ruling upholds procedural safeguards under the PMLA.[reference:38]

Supreme Court (9 February 2026)

Stayed a Delhi High Court ruling on ED’s powers under the PMLA, reviving the debate on whether the ED can seize assets related to non-scheduled offences.[reference:39]

Supreme Court (August 2026)

Agreed to hear review petitions challenging the July 2022 verdict upholding ED’s powers. A new three-judge bench has been constituted.[reference:40]

Bombay High Court (July 2025)

Held that BNS offences corresponding to IPC provisions continue to be treated as scheduled offences under the PMLA, rejecting the argument that the repeal of the IPC creates a legal vacuum.[reference:41]

Conclusion

The Prevention of Money Laundering Act India (PMLA), 2002, remains the cornerstone of India’s anti-money laundering framework in 2026. Through multiple amendments, judicial interpretations, and regulatory developments, the Act has evolved into a comprehensive and powerful tool for combating financial crime.

However, recent Supreme Court rulings have emphasised the importance of procedural safeguards, requiring the ED to record legally sustainable “reasons to believe” before freezing bank accounts. The ongoing review of the 2022 PMLA verdict will further shape the contours of ED’s powers.

For reporting entities, compliance with PMLA obligations—including CDD, record keeping, and FIU-IND reporting—remains non-negotiable. The expansion of the definition of beneficial ownership, the inclusion of PEPs, and the broadening of reporting entity categories all underscore the Act’s continuing evolution.

Whether you are a compliance professional, a legal practitioner, or a citizen seeking to understand India’s anti-money laundering framework, understanding the Prevention of Money Laundering Act India is essential for navigating the complex landscape of financial crime regulation in 2026.

Frequently Asked Questions

Q1: What is the Prevention of Money Laundering Act (PMLA), 2002?

The Prevention of Money Laundering Act (PMLA), 2002, is India’s primary anti-money laundering legislation. It prevents and controls money laundering, provides for confiscation of property obtained from money laundering, and imposes obligations on financial institutions to verify customer identities and report suspicious transactions to FIU-IND.

Q2: What is a scheduled offence under the PMLA?

A scheduled offence is a criminal offence listed in the Schedule to the PMLA that serves as a “predicate offence” for money laundering proceedings. The ED derives jurisdiction only when property flows from a scheduled offence. Under the PMLA, offences under the Bharatiya Nyaya Sanhita (BNS) corresponding to IPC provisions continue to be treated as scheduled offences.

Q3: What are the obligations of reporting entities under the PMLA?

Reporting entities—including banks, financial institutions, and intermediaries—must verify customer identities, maintain records of transactions for ten years, appoint a Principal Officer, have a board-approved KYC policy, and file Cash Transaction Reports (CTRs), Suspicious Transaction Reports (STRs), and Cross-Border Wire Transfer Reports (CBWTRs) with FIU-IND.

Q4: Can the ED freeze bank accounts under the PMLA?

Yes, but the Supreme Court held on 31 July 2026 that the ED cannot freeze bank accounts merely on suspicion. The ED must first record legally sustainable “reasons to believe” before exercising freezing powers under Section 17(1A) of the PMLA.

Q5: What are the latest Supreme Court developments on the PMLA in 2026?

In August 2026, the Supreme Court agreed to hear review petitions challenging the 2022 verdict upholding ED’s powers. A new three-judge bench has been constituted. Additionally, in February 2026, the Supreme Court stayed a Delhi High Court ruling on ED’s powers to seize assets related to non-scheduled offences.

Q6: Who is a beneficial owner under the PMLA?

Press Note No. 2 (2026 Series) clarified that beneficial ownership is determined under Section 2(1)(fa) of the PMLA and Rule 9(3) of the PML Rules. It is not solely based on numerical ownership thresholds but also considers governance rights, shareholders’ agreements, board rights, and veto rights.

Q7: What is FIU-IND and what are its reporting requirements?

FIU-IND (Financial Intelligence Unit – India) is the central agency responsible for receiving, analysing, and disseminating information relating to suspicious financial transactions. Reporting entities must file Cash Transaction Reports (CTRs), Suspicious Transaction Reports (STRs) within seven working days, and Cross-Border Wire Transfer Reports (CBWTRs) by the 15th of the succeeding month.

Q8: What are the penalties for non-compliance with the PMLA?

Non-compliance with PMLA provisions can result in regulatory enforcement action, including penalties, fines, and legal proceedings. Reporting entities that fail to maintain records, file reports, or comply with CDD obligations may face action from regulatory bodies such as RBI, SEBI, or IRDAI, as well as prosecution under the PMLA.

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By Adv. Shoeb Hakim
Criminal defence, AML, digital forensics, and cybercrime specialist; former General Counsel, Credit Suisse; training police and judiciary since 1995.

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Disclaimer: This content is for informational purposes only and does not constitute legal advice. Readers should consult qualified legal counsel for advice on their specific circumstances.

Additional Page Metadata

  • Author: Adv. Shoeb Hakim
  • Author Bio: Adv. Shoeb Hakim is a Mumbai-based criminal defence, AML, digital forensics and cybercrime specialist. Former General Counsel at Credit Suisse. Has been training police and judiciary since 1996. Provides expert commentary on anti-money laundering, financial crime, regulatory compliance, and criminal law.
  • Article Publisher: Adv. Shoeb Hakim
  • Article Section: Anti-Money Laundering | Criminal Law | Regulatory Compliance | Financial Crime
  • Article Tags: Prevention of Money Laundering Act India, PMLA 2002, Anti-Money Laundering Act India, Enforcement Directorate, ED Powers, FIU-IND, Scheduled Offences, Beneficial Ownership, PMLA Amendments 2026, Supreme Court PMLA, Money Laundering, Adv Shoeb Hakim

#PreventionOfMoneyLaunderingAct #PMLA #PMLA2002 #AntiMoneyLaundering #MoneyLaundering #EnforcementDirectorate #ED #FIUIND #ScheduledOffences #BeneficialOwnership #SupremeCourt #PMLA2026 #FinancialCrime #AMLCompliance #IndianLaw #CriminalLaw #RegulatoryCompliance #AdvShoebHakim

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