Scheduled Offences Under PMLA: Part B, Part C, and Cross-Border AML/CFT Compliance (Part 4 of 4)
1. Introduction and Chapter Context
Under the Prevention of Money Laundering Act, 2002 (PMLA), the schedule of predicate offences acts as the legislative anchor for identifying and prosecuting money laundering. If an act does not fall within this schedule, the funds generated from it cannot be legally classified as "proceeds of crime", and a money laundering case cannot be registered.
While Parts 1, 2, and 3 of this series covered the conceptual foundations and the extensive list of offences under Part A (carrying no monetary thresholds), this final part examines Part B and Part C of the PMLA Schedule. It provides compliance professionals, students, and financial intermediaries in the International Financial Services Centre (IFSC) with an in-depth understanding of tax-related thresholds, cross-border implications, and international regulatory alignment.
2. Part B Scheduled Offences: Tax, Trade, and Customs Violations
2.1 Statutory Definition and Monetary Thresholds
Part B of the PMLA Schedule targets financial, commercial, and trade-based tax evasions. Unlike the zero-threshold rules of Part A, Part B offences are subject to a strict statutory monetary limit.
Under Section 2(1)(y)(ii) of the PMLA, an offence specified under Part B only becomes a "scheduled offence" if the total value involved in the crime is one crore rupees (INR 10,000,000) or more.
The statutory framework accounts for specific thresholds within Indian tax laws, such as the Customs Act, 1962. For these custom-related offences, a monetary threshold of 3 million rupees (INR 3,000,000) or 10 million rupees (INR 10,000,000) is prescribed, depending on the nature of the trade evasion or false representation.
| Step | Assessment | Outcome |
|---|---|---|
| 1 | 💰 Check Total Value Involved | Determine whether the total value involved meets the applicable statutory threshold. |
| 2A | ✅ Threshold Met | If the value is ≥ ₹1 crore (or the applicable ₹30 lakh / ₹1 crore threshold for specified Customs offences), it may be classified as a Scheduled Offence under Part B. |
| 2B | ❌ Threshold Not Met | If the applicable threshold is not met, the offence is outside PMLA purview as a Part B Scheduled Offence. |
2.2 Detailed Statutory Mapping of Part B
The primary offence listed in Part B of the Schedule originates from the Customs Act, 1962:
| Act / Code | Section | Description of Scheduled Offence | Applicability Criteria |
|---|---|---|---|
| The Customs Act, 1962 | 132 | False declaration, false documents, etc. | Applicable when fake invoices, misdeclared values, or forged shipping papers are used to evade duties. |
Compliance Impact on Trade-Based Money Laundering (TBML):
Section 132 of the Customs Act is the primary tool for prosecuting Trade-Based Money Laundering (TBML). TBML is defined as the process of disguising the proceeds of crime and moving value through trade transactions to legitimise their illicit origin.
Launderers use Section 132 violations, such as false declarations or forged documents, to manipulate invoices. If the total value of these falsified transactions reaches one crore rupees (INR 10,000,000) or more, it triggers PMLA prosecution under Part B.
3. Part C Scheduled Offences: Cross-Border Implications and International Asset Evasion
3.1 Understanding "Offence of Cross-Border Implications"
Part C of the PMLA Schedule addresses crimes that cross international boundaries. Offences in Part C carry no monetary threshold. This reflects the global nature of money flows, where funds generated in one country are layered or integrated in another.
Section 2(1)(ra) of the PMLA defines an offence of cross-border implications under two distinct scenarios:
| Scenario | Direction of Flow | Conditions | PMLA Relevance |
|---|---|---|---|
| 1. Inward Flow | 🌍 Outside India → India | Conduct occurring outside India constitutes an offence in that country and would also constitute an offence under Part A, B or C if committed in India. The resulting proceeds of crime are transferred to India. | Cross-border proceeds entering India may fall within the relevant PMLA framework. |
| 2. Outward Flow | 🇮🇳 India → Outside India | An offence specified in Part A, B or C is committed in India, and the proceeds of crime (or any part thereof) are transferred or attempted to be transferred outside India. | Cross-border movement of proceeds outside India may trigger the relevant PMLA provisions. |
- Inward Money Laundering (Clause i): Any conduct by a person outside India that is a crime under local laws and would also constitute an offence under Part A, Part B, or Part C of the Schedule if it had been committed inside India. This applies if the person transfers any part of those proceeds of crime into India.
- Outward Money Laundering (Clause ii): Any offence specified under Part A, Part B, or Part C of the Schedule committed inside India, where the proceeds of crime (or part of them) are transferred, or attempted to be transferred, to a place outside India.
3.2 Key Components and Statutory Mapping of Part C
Part C integrates three main categories of offences to prevent criminals from using international jurisdictions to hide illicit wealth:
| Category | Source Legislation / Provisions | Description of Scheduled Offence | Key Focus Areas |
|---|---|---|---|
| Category 1 | All Part A Offences | Any offence listed under Part A (Paragraphs 1 to 29) that has cross-border implications. | Drug trafficking, terrorist financing, corruption, and corporate fraud involving international money movements. |
| Category 2 | Chapter XVII of the IPC (Offences Against Property) | Specific offences against property, including theft, extortion, robbery, dacoity, criminal misappropriation, and criminal breach of trust. | Recovering physical or monetary assets stolen in India and moved abroad, or vice-versa. |
| Category 3 | Section 51 of the Black Money Act, 2015 | Wilful attempt to evade any tax, penalty, or interest in relation to undisclosed foreign income and assets. | Prosecuting individuals who use offshore bank accounts, shell companies, or complex trusts in foreign jurisdictions to hide wealth. |
4. Comparing the PMLA Schedule: Part A, Part B, and Part C
To help compliance officers and candidates prepare for audits and exams, the table below compares the key differences between the three parts of the PMLA Schedule:
| Comparison Parameter | Part A Scheduled Offences | Part B Scheduled Offences | Part C Scheduled Offences |
|---|---|---|---|
| Primary Nature | Broad range of conventional, environmental, violent, security, and white-collar crimes. | Specific tax, customs, and trade-related violations. | International crimes with trans-boundary, cross-border elements. |
| Monetary Threshold | No Monetary Threshold (triggers PMLA at any value). | One Crore Rupees (INR 10,000,000) or more. (Customs Act violations may use 3 million or 10 million rupees thresholds). | No Monetary Threshold. |
| Key Statutes Covered | BNS/IPC, NDPS Act, UAPA, Arms Act, PC Act, SEBI Act, Companies Act. | Section 132 of the Customs Act, 1962 (False declarations/documents). | Any Part A offence with cross-border implications, IPC Chapter XVII property crimes, and Section 51 of the Black Money Act. |
| IFSC Compliance Focus | Focuses on insider trading (SEBI Act) and corporate fraud (Companies Act). | Focuses on Trade-Based Money Laundering (TBML) and customs fraud. | Focuses on international wire transfers, offshore trusts, and foreign undisclosed assets. |
5. Case Connections: Practical AML/CFT Relevance in the IFSC
For financial institutions and intermediaries operating in the International Financial Services Centre (IFSC), Parts B and C are highly relevant to daily transaction monitoring and compliance.
5.1 Trade-Based Money Laundering (TBML) and Part B Risks
IFSC entities frequently handle international trade finance, letters of credit, and cross-border remittances. If an intermediary processes trade payments where the invoices are falsified (violating Section 132 of the Customs Act) and the value exceeds INR 1 crore, the transaction involves "proceeds of crime" under Part B. Under IFSCA guidelines, failure to flag and report these transactions to FIU-IND exposes the institution to severe regulatory penalties.
5.2 Cross-Border Asset Evasion (Part C) and Paytm Payments Bank Case Context
In the case of FIU-IND vs. Paytm Payments Bank Limited (2024), law enforcement found that a network of business entities engaged in illegal online gambling and fraudulent services. The proceeds of these activities were routed through payment intermediaries and subsequently remitted and channeled abroad.
This outbound transfer of illicit funds is a clear example of an offence of cross-border implications under Section 2(1)(ra)(ii). Because the underlying crimes generated proceeds in India that were transferred outside the country, they fell under the cross-border purview of the Act. The bank was fined Rs. 5,49,00,000 for failing to maintain an effective internal mechanism to detect and report these suspicious transactions.
+-------------------------------------------------------------+ | CROSS-BORDER INTEGRATION (Paytm Case Pattern) | +------------------------------+------------------------------+ | 1. Illicit Domestic Activities (Gambling, Fraudulent Services) | v 2. Funds Routed and Structured through Payment Intermediaries | v 3. Proceeds Remitted Abroad (Section 2(1)(ra)(ii) Offence) | v 4. FIU-IND Enforcement: Failure of RE to File Suspicious Reports
6. Important Terms & Exam Definitions
- Part B Offences: Predicate crimes under tax and trade laws (like the Customs Act, 1962) that must meet a minimum monetary threshold of one crore rupees to trigger PMLA prosecution.
- Part C Offences: Predicate crimes with cross-border implications (including property crimes and tax evasion under the Black Money Act) that have no monetary threshold.
- Offence of Cross-Border Implications (Section 2(1)(ra)): Conduct outside India that would be a scheduled offence if committed in India, or a scheduled offence committed in India where proceeds are transferred abroad.
- Black Money Act, 2015 (Section 51): Legislation targeting the wilful attempt to evade taxes on undisclosed foreign income and assets, classified as a Part C scheduled offence.
- One Crore Rupees: The standard monetary threshold (INR 10,000,000) required for Part B scheduled offences under Section 2(1)(y)(ii) of the PMLA.
7. Key Takeaways
- Threshold Distinction: Part A and Part C scheduled offences have no monetary threshold. Part B scheduled offences require the total value involved to be one crore rupees or more to trigger the PMLA.
- Dual-Directional Scope: Section 2(1)(ra) captures both inward and outbound international money laundering, ensuring that Indian authorities can prosecute cross-border crimes.
- The Black Money Act Link: Wilfully evading taxes on undisclosed foreign assets (under Section 51 of the Black Money Act) is a Part C offence. This allows the Enforcement Directorate (ED) to freeze equivalent assets within India if the foreign assets are out of reach.
8. Short Practice Questions for Review
MCQs — PMLA Scheduled Offences & Cross-Border Implications
Q1. What is the minimum monetary threshold required for an offence specified under Part B of the Schedule to the PMLA to be classified as a “scheduled offence”?
A) Ten lakh rupees (INR 1,000,000)
B) Fifty lakh rupees (INR 5,000,000)
C) One crore rupees (INR 10,000,000)
D) Five crore rupees (INR 50,000,000)
Answer: C
Q2. Under Section 2(1)(ra) of the PMLA, an “offence of cross-border implications” includes which of the following?
A) Conduct outside India that would constitute a scheduled offence if committed in India, where proceeds are transferred to India.
B) A scheduled offence committed in India where proceeds are transferred (or attempted to be transferred) outside India.
C) Both (a) and (b)
D) Only tax evasion under local municipal laws.
Answer: C
Q3. Which of the following acts is specifically listed under Part C of the PMLA Schedule to address the evasion of taxes on foreign assets?
A) The Foreign Exchange Management Act, 1999
B) The Income Tax Act, 1961
C) Section 51 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
D) The Securities and Exchange Board of India Act, 1992
Answer: C