Scheduled offence
Also written Scheduled offences · Offences in the Schedule to the PMLA
An offence listed in Part A, Part B or Part C of the Schedule to the PMLA — the crime that must have been committed before there can be proceeds of crime, and so before money laundering exists.
In plain language
There is no free-standing crime of "having suspicious money" in India. The PMLA is parasitic on other crimes.
To proceed against a person under the Act, two things must be true: a scheduled offence must have been committed, and proceeds of crime must have been generated by it. Without the first there is nothing for the second to come from, and the PMLA has nothing to bite on.
The Schedule to the Act is the list of qualifying crimes, and Section 2(1)(y) is the definition that reads it.
How it works
Section 2(1)(y) defines a scheduled offence as:
- the offences specified under Part A of the Schedule; or
- the offences specified under Part B, if the total value involved in such offences is one crore rupees or more; or
- the offences specified under Part C.
Part A is an exhaustive list drawn from many statutes, with no monetary threshold: the Bharatiya Nyaya Sanhita, 2023 (erstwhile Indian Penal Code, 1860), the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Arms Act, 1959, the Prevention of Corruption Act, 1988, and also the Antiquities and Art Treasures Act, the Copyright Act, the Trademark Act, the Wildlife Protection Act and the Information Technology Act. Its Paragraph 1 alone maps the IPC sections to their BNS equivalents — cheating at IPC 420 becomes BNS 318(4), forgery of a valuable security at IPC 467 becomes BNS 338, criminal conspiracy at IPC 120B becomes BNS 61(2).
Part B covers offences under Indian tax laws such as the Customs Act, 1962, and is the only Part with a value threshold.
Part C covers any offence mentioned under Part A, particularly offences with cross-border implications, with no monetary threshold. An "offence of cross border implications" is separately defined in Section 2(1)(ra): conduct abroad that would have been a Schedule offence in India where the proceeds are brought to India, or a Schedule offence committed in India whose proceeds are transferred, or attempted to be transferred, out of it.
Punishment under Section 4 is rigorous imprisonment of not less than three years, extending to seven, plus fine — extended to ten years where the proceeds relate to an offence under paragraph 2 of Part A, the NDPS offences.
A worked example
Three sets of facts, three different answers:
A. A syndicate runs an illegal online gambling operation out of Hyderabad and cheats lakhs of people out of Rs 190 crore, remitting the money abroad through payment intermediaries. FIRs are lodged under the Indian Penal Code and the Telangana State Gambling Act. Cheating is a Part A offence, so there is no threshold to clear — the moment the FIR is registered and proceeds exist, it is a PMLA matter. These are, in outline, the Paytm Payments Bank facts.
B. An exporter under-invoices a shipment of machine parts to shift Rs 40 lakh of value abroad, a Customs Act offence. Customs offences sit in Part B, which is threshold-gated. At Rs 40 lakh the PMLA is not engaged on the Part B route. Push the same scheme to Rs 1.4 crore and Section 2(1)(y)(ii) is satisfied.
C. The same exporter also forges the bills of lading. Forgery of a valuable security is IPC 467 / BNS 338, a Part A offence with no threshold — so the Rs 40 lakh scheme becomes a PMLA matter anyway, through a different door.
On conviction in A, the base sentence is three to seven years rigorous imprisonment. Had the proceeds come from an NDPS offence under paragraph 2 of Part A instead, the ceiling rises to ten years.
The examinable habit: never ask "is this big enough?" until you have first asked "which Part is it in?"
Why NISM asks about it
Chapter 4 is devoted to scheduled offences and reproduces the IPC-to-BNS mapping tables; Chapter 2 (section 2.1.1) gives the Section 2(1)(y) definition and section 2.1.3 the Section 4 punishment, including the paragraph 2 of Part A uplift. Expect questions on which Part carries a monetary threshold, on the three-to-seven-year sentence, and on the ten-year uplift for NDPS proceeds.
Common exam traps
- Only Part B has a value threshold. Parts A and C have none — this is the single most common error.
- The Section 4 uplift to ten years is tied to paragraph 2 of Part A, the NDPS offences, not to any large-value case.
- A scheduled offence is the precondition, not the offence being punished. Money laundering under Section 3 is a separate offence and is a continuing one — it continues so long as a person is enjoying the proceeds.
- Part C is about cross-border implications, and works in both directions: proceeds brought into India, or proceeds transferred out of it.
- Learn the IPC-to-BNS pairs, not just the descriptions. Chapter 4 tabulates them and questions quote either numbering.
- The workbook states the Part B threshold twice and not identically: Section 2(1)(y)(ii) in Chapter 2 says one crore rupees or more, while Chapter 4 describes Part B as carrying a threshold of "3 million rupees or 10 million rupees, as may be applicable" — that is Rs 30 lakh or Rs 1 crore. The statutory text in Chapter 2 is the safer answer; if a question offers Rs 1 crore, take it.
Check yourself
1.Under the Prevention of Money Laundering Act, which authorities have been conferred with exclusive and concurrent powers to implement the provisions of the Act?
- a)Director, FIU-IND and Director (Enforcement)
- b)Chairperson, Central Board of Direct Taxes (CBDT)
- c)Secretary, Department of Revenue
- d)Comptroller & Auditor General
Show the answer
Answer: (a) Director, FIU-IND and Director (Enforcement)
Director, FIU-IND and Director (Enforcement) have been conferred with exclusive and concurrent powers under relevant sections of the Act to implement the provisions of the Act.
Two officers, holding both exclusive and concurrent powers — some functions belong to one alone, others to both.
Their roles differ. The Directorate of Enforcement is a multi-disciplinary organization mandated with investigation of offence of money laundering and violations of foreign exchange laws, enforcing the Prevention of Money Laundering Act, 2002 (PMLA), the Foreign Exchange Management Act, 1999 (FEMA), the Fugitive Economic Offenders Act, 2018 (FEOA) and acting as sponsoring agency under COFEPOSA.
FIU-IND is the intelligence side — the central national agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions, and an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.
Receive and analyse on one side; investigate and prosecute on the other.
The Act itself: Prevention of Money Laundering Act (PMLA) forms the core of the legal framework put in place by India to combat money laundering. It is an act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering.
And it came into force later than its year suggests: Prevention of Money Laundering Act (PMLA) and the Prevention of Money Laundering Rules (PMLR) notified there under came into force with effect from July 1, 2005.
The obligations it imposes: on banking companies, financial institutions, and intermediaries and persons carrying on a designated business or profession, to verify identity of clients, maintain records and furnish information to FIU-IND.
Other agencies may still be involved. Depending on the scheduled offence, agencies like IFSCA, SEBI, CBI, customs, and police may be involved for parallel investigation of predicate (scheduled) offences — but the Act's implementation rests with the two named Directors.
2.Under the PMLA, 2002, which of the following is a mandatory pre-condition for initiating proceedings for the offence of money laundering?
- a)Commission of a scheduled offence listed in Parts A, B or C of the Schedule and generation of proceeds of crime
- b)Registration of an FIR under any cognizable offence
- c)Detection of suspicious transaction by a reporting entity
- d)Issuance of a show-cause notice by FIU-IND
Show the answer
Answer: (a) Commission of a scheduled offence listed in Parts A, B or C of the Schedule and generation of proceeds of crime
In order to proceed against a person under the PMLA, a scheduled offence, as defined under section 2(1)(y) and mentioned in Parts A, B and C of the Schedule of the PMLA 2002 should have been committed and the proceeds of crime should have been generated.
Two requirements, joined by "and" — the offence and the proceeds.
Option B is too wide. Not every cognizable offence is a scheduled offence; only those listed in the Schedule qualify, and Part B offences only above the threshold.
Option C confuses a report with a prosecution. A reporting entity files a Suspicious Transaction Report when, to a person acting in good faith, a transaction gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime — the standard being suspicion, not proof. That obligation exists whether or not any prosecution follows.
Option D misplaces FIU-IND's role. It is the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspected financial transactions — it does not issue show-cause notices founding a prosecution.
Why the precondition exists: a critical element, for an offence to be termed as a money laundering offence is the commission of a scheduled offence, as it serves as the foundation for generating proceeds of crime.
And it follows from the definition of proceeds of crime, which is property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence.
Two investigations therefore run in parallel. Depending on the scheduled offence, agencies like IFSCA, SEBI, CBI, customs, and police may be involved for parallel investigation of predicate (scheduled) offences, while the Directorate of Enforcement investigates the laundering.
3.Which of the following best describes the relationship between scheduled offences and the offence of money laundering under the PMLA?
- a)Scheduled offences form the foundation for money laundering as they generate proceeds of crime
- b)Scheduled offences are independent crimes and have no linkage with money laundering prosecution
- c)A money laundering offence can be established even without commission of a scheduled offence
- d)Scheduled offences apply only to cross-border crimes listed under Part C of the Schedule
Show the answer
Answer: (a) Scheduled offences form the foundation for money laundering as they generate proceeds of crime
A critical element, for an offence to be termed as a money laundering offence is the commission of a scheduled offence, as it serves as the foundation for generating proceeds of crime.
Foundation is the word the workbook uses.
And the relationship is stated again: the offence of money laundering arises from criminal activity committed by a person in relation to scheduled offences.
Option B severs a link the Act depends on. Without a scheduled offence there are no proceeds of crime, and without proceeds of crime there is nothing for section 3 to attach to — that section catches involvement in any process or activity connected with the proceeds of crime.
Option C states the opposite of the rule: in order to proceed against a person under the PMLA, a scheduled offence... should have been committed and the proceeds of crime should have been generated.
Option D shrinks the Schedule to one Part. Scheduled offences (as defined in section 2(1)(y) of the PML Act) are those offences that are mentioned in Parts A, B and C of the Schedule to the PML Act — Part A alone runs to twenty-nine paragraphs, and Part C is the additional cross-border limb, not the whole.
What the Schedule reaches: offences refer to any type of property or assets derived from proceeds of crime or used in the commission of crime in relation with the scheduled offences.
Note that the money laundering offence is separate from the predicate one. They are tried on different tracks — the predicate offence by the relevant agency, the laundering by the ED before a Special Court — and the laundering offence has its own punishment under section 4, rigorous imprisonment for a term which will not be less than three years but which may extend to seven years.
Where this is taught
Free preparation for NISM Series IFSCA-01Related terms
- Adjudicating AuthorityThe quasi-judicial body constituted by the Central Government under Section 6 of the PMLA that issues notices, adjudicates attachments of property and confirms confiscations.
- Directorate of EnforcementThe multi-disciplinary agency that investigates the offence of money laundering and foreign exchange violations, enforcing the PMLA, FEMA, the Fugitive Economic Offenders Act and sponsoring COFEPOSA cases.
- Money launderingTurning the proceeds of a crime into money that looks legitimate — classically in three stages, placement, layering and integration — and a standalone offence under section 3 of the PMLA.
- Offence of cross border implicationsDefined in section 2(1)(ra) — conduct abroad that would have been a Schedule offence had it been committed in India, where the proceeds are brought to India; or a scheduled offence committed in India whose proceeds have…
- Predicate offenceAnother name for the scheduled offence that generates the proceeds — the critical element without which an act cannot be termed money laundering, since it serves as the foundation for generating proceeds of crime.
- Proceeds of crimeAny property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, or the value of such property — and where the property is held outside India, property of…