PMLA 2002 and Money explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Prevention of Money Laundering Act 2002 (PMLA) criminalises money laundering and requires reporting entities (banks, FIs, intermediaries, professionals) to implement KYC, CDD, and transaction monitoring. The Enforcement Directorate (ED) investigates and attaches proceeds of crime under PMLA.
What is Money Laundering?
Section 3 defines money laundering as concealment, possession, acquisition, use, or disguising as untainted property the proceeds of scheduled offences (offences listed in the Schedule to PMLA, including corruption, tax evasion, drug trafficking, FEMA violations, IPC fraud).
Penalty for Money Laundering
- Imprisonment: 3 to 7 years (10 years for NDPS-related laundering)
- Fine up to Rs. 5 lakh
- Attachment and confiscation of proceeds of crime (properties)
Reporting Entities (Obligated Entities)
The following must comply with PMLA KYC/reporting obligations:
- Banks, NBFCs, financial institutions
- Intermediaries (stockbrokers, depositories, mutual funds)
- Casinos
- Real estate agents
- Professionals: CAs, CSs, CWAs, lawyers (for certain transactions)
Obligations of Reporting Entities
- KYC (Know Your Customer): Verify identity using Aadhaar/PAN/Passport before account opening
- CDD (Customer Due Diligence): Enhanced due diligence for PEPs and high-risk customers
- Record-keeping: Maintain records for 5 years
- STR (Suspicious Transaction Reports): File with Financial Intelligence Unit (FIU-IND) within 7 days
- CTR (Cash Transaction Reports): Report cash transactions >Rs. 10 lakh per month
Enforcement Directorate Powers
- Attachment of property (even before conviction) if ED has reason to believe it is proceeds of crime
- Search and seizure
- Arrest without warrant
- Summon and examine witnesses
- Confiscation after trial
PMLA and Professionals (CAs, CSs, Lawyers)
CAs, CS, and lawyers assisting in transactions involving company formation, real estate, or management of client funds are reporting entities under PMLA. They must conduct CDD, maintain records, and file STRs for suspicious transactions.
Need Expert Help?
TaxClue's CA and legal team can assist you. Contact us or see our services.
Key Facts About PMLA 2002 and Money
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What is money laundering under PMLA?
Knowingly assisting in, concealing, or using proceeds from a scheduled offence is money laundering. Punishable with 3-7 years imprisonment plus fine and property confiscation.
What are the PMLA obligations for banks?
KYC verification, enhanced CDD for high-risk customers, STR filing within 7 days for suspicious transactions, CTR for cash transactions above Rs. 10 lakh, and 5-year record maintenance.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
PMLA 2002 and Money: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
Related Services & Guides
Why This Matters
Staying compliant with Indian regulations protects your business from penalties, interest and unnecessary legal trouble. It is always wise to maintain proper records and documentation so that any future scrutiny can be handled smoothly. Rules and thresholds in fema are revised periodically, so it helps to review your obligations at the start of each financial year. Professional guidance from a qualified CA, CS or advocate ensures that filings are accurate and submitted well before the due date.
Small businesses and startups especially benefit from setting up a simple compliance calendar to track recurring deadlines. Government portals now allow most applications and filings to be completed online, reducing paperwork and turnaround time. Keeping your PAN, registration certificates and board resolutions organised makes every subsequent filing faster. When in doubt, it is better to seek clarification early rather than risk a notice or a late-filing penalty later.
A clear understanding of the applicable law helps you make confident, well-informed business decisions. TaxClue's experts regularly assist businesses across India with end-to-end fema support at transparent, affordable pricing. Timely compliance also improves your credibility with banks, investors and government authorities. Reviewing your obligations with a professional at least once a year keeps your business audit-ready and stress-free.
Staying compliant with Indian regulations protects your business from penalties, interest and unnecessary legal trouble.
Getting PMLA 2002 and Money right the first time saves both time and money. Many businesses seek expert help for PMLA 2002 and Money to stay fully compliant.