PMLA, 2002 and Enforcement Directorate

• 22 Dec 2025

Source: IE 

Why in News? 

A Delhi special court has declined to take cognisance of the Directorate of Enforcement (ED) prosecution complaint in the alleged Rs 2,000-crore National Herald case, placing the spotlight on the Prevention of Money Laundering Act (PMLA), 2002. 

Summary

• The National Herald case has brought renewed focus on the Prevention of Money Laundering Act, 2002 and the role of the Directorate of Enforcement in probing money laundering. 
• The ED steps in only when proceeds of crime are laundered, with courts upholding its powers while insisting on legal safeguards for arrest and investigation. 

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

• About: The PMLA which came into force in 2005, is an act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto. 
• Enforcement Agency: The act empowers the Directorate of Enforcement (ED) to investigate, attach, confiscate assets, and prosecute offenders. 
• Scope: Applies to individuals, companies, financial institutions, and intermediaries involved directly or indirectly in money laundering. 
• Key Provisions of PMLA: 
  • Offences and penalties: Defines money-laundering offences and prescribes rigorous imprisonment and fines. 
    • All the offences under PMLA are cognisable and non-bailable. 
  • Attachment and confiscation: Empowers authorities to attach and confiscate proceeds of crime through an Adjudicating Authority. 
  • Proceeds of crime: Covers any property derived or obtained, directly or indirectly, from criminal activity related to scheduled offences, and also includes equivalent property when such proceeds are held or taken outside the country. 
  • Reporting Obligations: Mandates banks and financial institutions to maintain records and report suspicious transactions to Financial Intelligence Unit-India (FIU-IND) 
  • Institutional framework: Provides for a Designated Authority and an Appellate Tribunal to ensure investigation oversight and appellate review. 
• Judicial Pronouncements: 
  • Vijay Madanlal Choudhary v. Union of India (2022): The Supreme Court upheld the constitutional validity of the PMLA, including the ED’s powers of arrest, attachment, and investigation. It ruled that the accused has no right to receive a copy of the ECIR (Enforcement Case Information Report). 
  • Arvind Kejriwal v. Directorate of Enforcement (2024): The Supreme Court held that arrest under Section 19 of the PMLA must satisfy a high threshold of “reason to believe”, based on material that is legally admissible and not merely on suspicion.

What are the Key Facts About Directorate of Enforcement (ED)? 

• About: The Directorate of Enforcement (ED) was established in 1956 with its headquarters in New Delhi. It is the key agency responsible for enforcing economic and financial laws in India, primarily the Foreign Exchange Management Act (FEMA), 1999, the Prevention of Money Laundering Act (PMLA), 2002 and the Fugitive Economic Offenders Act, 2018 (FEOA). 
• Structure: Organisationally, the ED is headed by a Director (not below the rank of Additional Secretary, to the Government of India). 
  • It has a nationwide presence with 10 Zonal Offices and 11 Sub-Zonal Offices, ensuring coverage across major regions. 
  • The ED functions under the Department of Revenue for operational matters. Policy issues related to FEMA fall under the Department of Economic Affairs, while policy matters concerning PMLA are handled by the Department of Revenue. 
• Functions of the Enforcement Directorate: 
  • Collects, analyses, and disseminates intelligence related to violations of FEMA and PMLA. 
  • Investigates offences such as hawala transactions, foreign exchange racketeering, and non-repatriation of export proceeds. 
  • Conducts search, seizure, arrest, attachment, and prosecution in money laundering cases under PMLA. 
  • Recommends cases for preventive detention under Sponsoring agency for preventive detention under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, (COFEPOSA) (1974). 
  • Facilitates mutual legal assistance with foreign countries for attachment, confiscation of proceeds of crime, and extradition-related matters. 
  • The ED is empowered to attach and confiscate properties of fugitive economic offenders and vest them with the Central Government. 
• Achievements of ED: In FY 2024–25, the ED issued provisional attachment orders worth Rs 30,036 crore, reflecting a 44% increase in number and a 141% increase in value over 2023–24.  
  • As of 2025, the total value of assets under provisional attachment stood at Rs 15.46 lakh crore.  
  • Between 2014 and 2024, ED initiated around 5,000 new PMLA investigations, showcasing a significant increase in enforcement activities. 

Note: Whenever any offence registered by a local police station generates proceeds of crime exceeding Rs 1 crore, the investigating officer forwards the details to the ED.  

• Alternatively, if the offence comes to the notice of the central agency, the ED may call for the First Information Report (FIR) or chargesheet to examine whether money laundering is involved. 
• The local police primarily investigate the predicate (original) offence such as theft, fraud, or cheating. If the illegal money is simply recovered and not used or transferred, the case remains limited to the original offence and the ED does not intervene. 
• The ED steps in when there is suspicion of money laundering, that is, when the proceeds of crime are used, transferred, layered, or invested, for example, in purchasing properties or routing funds through others. 
  • The ED focuses on tracing the flow of illicit money and attaching the assets of the accused to recover the proceeds of crime. 

Frequently Asked Questions (FAQs) 

Q. What is the Prevention of Money Laundering Act (PMLA), 2002? 
It is a law enacted to prevent money laundering and enable attachment and confiscation of proceeds of crime linked to scheduled offences.

Q. Which agency enforces the PMLA in India? 
The Enforcement Directorate (ED) is the nodal agency empowered to investigate, attach assets, and prosecute offences under PMLA.

Q. What are “proceeds of crime” under PMLA? 
Any property derived directly or indirectly from criminal activity related to scheduled offences, including equivalent property held abroad.

Q. Why is PMLA considered a stringent law? 
Offences are cognisable and non-bailable, and the law allows provisional attachment and confiscation of property before conviction. 

UPSC Civil Services Examination, Previous Year Questions (PYQs) 

Q. Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (2021)