The Prevention of Money Laundering Act 2002 (PMLA), like the Benami Act, was brought into the statute lest the law be caught in a time warp and instead be geared to take sophisticated financial crimes head-on. ‘Not 25 paisa was found’ is the triumphant and smirking refrain of those whose premises were raided by law enforcement agencies, which drew a blank. The PMLA was designed to strengthen the hands of the law enforcement agencies. Money laundering consists in vesting ill-gotten money, often parked in banks, with all the accoutrements of legit money consummated through back-to-back banking transactions that could befuddle the minds of the sleuths. 

Money is laundered through a three-stage process to disguise its illegal origins and make it appear as legitimate funds. The initial stage is placement, where "dirty" money from criminal activities (such as drug trafficking, fraud, organised crime or bribe-taking) is introduced into the legitimate financial system. This is the most vulnerable stage for criminals, who often use camouflages and artifices to avoid detection by authorities by breaking large amounts of cash into smaller, less conspicuous transactions, or deposits, across multiple accounts to avoid triggering anti-money laundering (AML) reporting requirements.

Blending illegal funds with the legitimate revenue of a business that naturally receives a lot of cash, such as restaurants, car washes, or casinos, hospitals and educational institutions, which are exempt from income tax in any case in India, is an equally tempting option. Physically moving large amounts of cash to jurisdictions with weaker........

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