All over the world, money laundering is considered as a serious economic offence, which not only has insurmountable consequences upon the economic health of a country, but is seriously detrimental to the integrity and sovereignty of a nation.
However it was only after over five decades of ‘giving to ourselves’ the constitution of India, that the parliament enacted the first legislation to prevent the serious offence of money laundering. The Prevention of Money Laundering Act, 2002 (PMLA) was thus enacted to combat money laundering, confiscate criminal assets, and set up enforcement mechanisms. Authorised under Section 49 of PMLA, the central government has entrusted the Directorate of Enforcement (ED) with the authority to ensure efficient and effective enforcement of PMLA.
The necessity of curbing money laundering has caused the PMLA to entrust certain powers with ED, which critics consider as exemplary and sometimes draconian. Under PMLA, ED is given powers to arrest, attach properties, and record admissible statements that even police lack. While these provisions are often at the center of criticism for being ostensibly draconian, such measures are jurisprudentially justified by the unique gravity of the economic offense. Unlike conventional crimes, money laundering involves sophisticated, cross-border financial layering that threatens national economic sovereignty and integrity. Consequently, these heightened powers are necessary to dismantle the financial infrastructure of organised crime and ensure that the ‘proceeds of crime’ are effectively confiscated rather than enjoyed during prolonged litigation.
Corruption and pre-PMLA framework to curb It
While we had acts like Prevention of Corruption Act, 1988 (PCA) that primarily focused on punishing the public servants for the act of taking a bribe, there was lacunae in curbing the illegal process of concealing money obtained from the criminal acts, such as bribery. Before the PMLA came into force, corruption in India was largely viewed through the lens of bribery rather than the complex financial crime of laundering. The era was characterised by a high volume of black money generated through tax evasion, bribery, and organised crime, which was then reintegrated into the formal economy with relative ease. PMLA was thus enacted with an aim to put an end to the economic paralysis caused due to such lacunae.
About five years before the enactment of PMLA, a landmark Supreme Court judgement (Vineet Narain v. Union of India) in 1997 had rightfully raised its concerns over high-profile corruption scandals involving top politicians and bureaucrats, and tried to address the legal framework that gave impunity to those involved in such cases. The case, popularly known as Jain Hawala case, was filed by investigative journalist Vineet Narain and some others, seeking top court’s intervention in the infamous hawala scandals of early 1990s that shook the nation. This case exposed a deep-rooted nexus where secret hawala routes were used to bribe high-profile politicians and bureaucrats, while simultaneously acting as a suspected funding pipeline for terrorist operations.
While the ‘Jain Hawala’ scandal revealed the long cloaks of corruption, the convictions recorded in the case were few, owing to the existing laws that could not effectively establish the ‘money trail’ as a standalone criminal offence. A major loophole in the anti-Corruption laws prior to enactment of PMLA was also that while a person accused of corruption could be jailed for the act of corruption, the assets acquired from that act of corruption were difficult to confiscate. The consequence of this legal vacuum was that convicts could often serve their complete sentence and return to enjoy their ill-gotten wealth, as the law focused on the person rather than the property.
What PMLA changed
The enactment of PMLA marked a significant shift in India’s approach to financial crimes by defining money laundering as a distinct criminal offence under Section 3 of the Act, thus transforming money laundering from a mere side-effect of other crimes into a standalone offence. To enforce a radical framework curbing corruption through money laundering, PMLA structurally transformed the Enforcement Directorate (ED) from a purely investigative body into a formidable prosecutorial agency with unique powers that even the police do not possess.
Central to this empowerment is Section 5 of the Act, which empowers the ED to provisionally attach properties derived from crime, enabling the state to dismantle the offender’s accumulated wealth – the core motivation of the crime – even before a final conviction is secured. While critics have questioned the ‘exemplary’ power given to ED under PMLA to conduct searches without court’s warrant, it is pertinent to note that under its Section 185, the Bhartiya Nagrik Suraksha Sanhita, 2023 (BNSS) provides similar powers of search without court’s warrant to a Police Officer investigating an offence. As a safeguard measure, both BNSS and PMLA require the reasons for search to be recorded in writing before proceeding to search. Requiring ED to seek a warrant from the Court before conducting search could seriously impede the legal process which is necessitated by the very purpose of the legislation to be robust and efficient in the first place.
This authority of ED under PMLA is further bolstered by what is critically referred to as ‘the stringent twin conditions’ under Section 45, which effectively reverse the burden of proof at the bail stage by requiring courts to be satisfied that the accused is not guilty and unlikely to reoffend. While the provision is labelled as ‘unconstitutional’ by many – claiming to violate Article 14 and 21 – the Supreme Court in Vijay Madanlal Choudhary v. Union of India has tested the provision’s validity and has upheld it as intra vires the Constitution. Given the special nature of PMLA as a statute, aiming to curb an offence, which the Supreme Court has also reaffirmed to be “posing a serious threat to the sovereignty and integrity of the country,” these provisions are rather necessary to ensure that for serious economic offenders, bail conditions should fulfill a higher threshold than other offences.
Application of PMLA over the years
In response to a parliamentary question, the central government in December 2025 provided the data on the number of cases filed under PMLA between June 2014 to October 2025, which stands at 6312. While the data presented shows the number of total convictions within this period as 120, it, however, does not provide numbers of cases in which trials were completed under PMLA. This makes it difficult to calculate the total percentage of convictions. Thereby, this Article refers to the data available on the official website of ED to assess the application of PMLA in terms of its numbers.
An analysis of the ED data up to January 31, 2023 shows that out of 5,906 cases registered (ECIRs) under PMLA, the agency has filed PCs (Prosecution Complaints) in only 1,142 instances. This significant disparity suggests a rigorous vetting process where the ED does not automatically proceed to prosecution in every registered case, thereby refuting claims of vexatious or blanket litigation.
Furthermore, the agency has exercised significant restraint regarding personal liberty, with only 513 persons arrested out of the thousands of cases recorded. While the pace of the judicial process has resulted in only 25 cases where the trial has been completed, the outcome of these trials overwhelmingly validates the quality of the ED’s investigations. Of these completed trials, 24 resulted in conviction while only one resulted in acquittal. This high conviction rate indicates that while the disposal of cases remains subject to the timeline of the courts, the cases that do reach a conclusion are backed by substantial evidence, underscoring the agency’s efficacy when its investigations are fully adjudicated.
Conclusion
By bridging the critical lacunae left by earlier statues like the PCA, the PMLA has successfully shifted the paradigm from simply punishing the offender for corruption to dismantling the very financial incentive of the corruption. While the ‘draconian’ nature of the ED’s powers continues to be debated, the data offers a compelling counter-narrative: the disparity between cases registered and prosecutions filed shows an internal mechanism of restraint and rigorous vetting, rather than indiscriminate abuse. Moreover, the overwhelmingly positive conviction rate in completed trials serves as a judicial vindication of the ED’s investigative quality.
In an era where economic terror utilises sophisticated, cross-border channels to undermine the state, the PMLA ensures that the legal system is equipped with an iron-hand capable of retrieving the proceeds of crime. The legislation ensures that while the process may take time, it ultimately succeeds in punishing the guilty and protecting India’s economic integrity.
(Author Koushik Upadhyay is an Advocate with an interest in Constitutional Law, Family Law and Patent Law. He also closely follows socio-political economy and governance.)
