Amendments to India’s Prevention of Money Laundering Act, 2002 (PMLA) over the last decade were ostensibly driven by the Financial Action Task Force (FATF).[1] India’s FATF Mutual Evaluation Report in November 2023 notes significant improvements since the last one in 2010, highlighting a ‘high level of technical compliance’.[2]
India has assumed the FATF’s vice-presidency from July 2026-June 2027.[3] Despite the FATF’s glowing reviews on bank account penetration, increased digital transactions and international cooperation, an international task force’s enforcement evaluation is not the measure of a country’s criminal justice system.
A side effect of India’s pursuit of FATF compliance is that PMLA enforcement tends to overstretch legal doctrine. The prevailing dogma of money-laundering being a ‘continuing offence’ is a prime example that risks unsettling (i) the prohibition against ex-post-facto criminal law; and (ii) lawyer-client privilege.
PMLA proceedings begin with a predicate ‘scheduled offence’.[4] Despite the settled prohibition against ex-post-facto criminal law, courts often – and most recently in Pradeep Nirankarnath Sharma v. Enforcement Directorate[5] – hold that PMLA proceedings lie even for scheduled offences concluded before the PMLA was notified on 1 July 2005, as money-laundering is a ‘continuous process’.
Criminal legislation demands certainty not superposition.
Outside India, money-laundering consists of 3 discrete acts: Placement, layering, and integration.[6] Consider a bank robbery in 2004:
Placement: A robber deposits stolen cash with an entry-operator and receives shares of a private unlisted company at face value.
Layering: The operator deploys the stolen cash in cash-dependent restaurants earning exorbitant ‘interest’ against ‘loans’.
Integration: The operator ‘buys back’ shares at a premium in late 2004and projects a ‘smart investment’ to the world, filing tax returns on 30 June 2005.
One would assume prosecution lies only for the theft, filing a false tax return, and fraudulent transactions since no discrete money-laundering act took place after the PMLA was notified.
Instead, the PMLA decides that there is no endpoint to ‘integration’, criminalising the present-continuous “projecting [crime proceeds] as untainted property” under Section 3. Indian courts hold the predicate offence date is immaterial so long as proceeds were ‘continuously’ projected after 1 July 2005.
India’s darling present-continuous cannot of itself create a continuing offence. A continuing offence is one that is “susceptible of continuance”, whose ingredients endure after commission.[7] This is distinct from an ‘instantaneous offence’, “committed once and for all.”[8] The existence of a ‘continuing offence’ depends upon the nature of the act and the purpose intended to be achieved by criminalising it.[9] A continuing offence is analogous to a continuing cause of action in civil law, deemed to arise de die in diem (from day to day) at every moment it persists.[10]
Under Section 317(1) Bharatiya Nyaya Sanhita, 2023 (BNS), property remains ‘stolen’ until returned. Despite this, theft (Section 303 BNS) and dealing in stolen property (Section 317(2)) are instantaneous offences.[11]
In the context of criminal contempt, the Supreme Court held that failure to comply with a court order by executing mutation constituted a one-time act of disobedience, not a continuing one. When property remaining in a ‘stolen’ state or failing to obey court orders does not clothe an act with a continuing character, neither should ‘projecting’. Even reopening an income tax assessment is subject to limitation, despite ‘projection’.
Lawyer-client privilege is also affected. Under Section 132(1)(a)(ii) of the Bharatiya Sakshya Adhininyam, 2023, facts observed by an advocate showing that a crime has been committed since the commencement of services are not protected from disclosure.
If the robber in our example discloses their actions, the lawyer now knows their client ‘continues’ de die in diem to possess[12] and use[13] crime proceeds while projecting[14] and claiming[15] them as untainted. Taken to its logical conclusion, such disclosure would lose privilege, effectively denying those accused of money-laundering access to counsel.
Given its track record, Parliament is unlikely to narrow the PMLA’s reach. Courts must therefore inquire into the last discrete activity connected with proceeds of crime to determine whether the alleged money-laundering is actually continuous when confronted with issues of retrospectivity or privilege, rather than accepting the Directorate of Enforcement’s mantras of continuity at face value.
