Definition
Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence — the central concept of money laundering law under the Prevention of Money Laundering Act, 2002.
'Proceeds of crime' is the foundation of the PMLA's entire framework. Without proceeds of crime, there can be no money laundering offence. The PMLA definition is broad: proceeds of crime include not only property directly derived from the crime (e.g., the stolen money itself) but also property derived indirectly (e.g., a building purchased with stolen money) or property that has been intermingled with legitimate money and then separated (tainted portion). The Supreme Court in Vijay Madanlal Choudhary v. Union of India (2022) confirmed: (a) the definition of proceeds of crime must relate to a scheduled offence; (b) if the accused is acquitted of the scheduled offence, the PMLA prosecution may be affected; and (c) the tainted and untainted portions of mixed property may both be subjected to attachment.
Statutory Definition
Section 2(1)(u), Prevention of Money Laundering Act, 2002: 'proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad.' Explanation: 'the expression proceeds of crime includes property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence.'
Etymology & Origin
From 'proceeds' (profits, earnings, from Latin 'procedere' — to go forward, to result) + 'of crime' (resulting from criminal activity). 'Proceeds of crime' are the financial results that 'proceed' from (flow out of) criminal activity.
Full Legal Analysis
Proceeds of Crime: The Target of Money Laundering Law
Money laundering is about transforming dirty money into clean money — making the proceeds of crime look like legitimate income or property. The 'proceeds of crime' are the dirty money: whatever was derived from the criminal activity. Money laundering law's purpose is to ensure that crime doesn’t pay — that the proceeds cannot be retained or enjoyed by the criminal. Identifying and attaching the proceeds of crime is the central task of PMLA prosecution.
Direct and Indirect Proceeds
(a) Direct proceeds: Property immediately derived from the crime — the cash stolen in a bank robbery, the bribe directly received, the money from a drug sale. (b) Indirect proceeds: Property purchased with direct proceeds — the house bought with the bribe money, the car bought with the drug money. The chain may be several steps long: bribe → cash deposit → investment in real estate → rental income → purchase of shares — each step further from the original crime, but each step still 'proceeds of crime.' (c) Mixed property: Where proceeds of crime are mixed with legitimate money — courts and the Adjudicating Authority must determine what portion is tainted.
Confiscation
The ultimate goal of PMLA is confiscation of proceeds of crime: (a) provisional attachment (Section 5); (b) confirmation by Adjudicating Authority; (c) confiscation order by Special PMLA Court; (d) confiscated property vests in the Central Government. The confiscation deprives the criminal of the benefit of their crime — making crime literally unprofitable.
“Proceeds of crime are the evidence, the motive, and the prize all in one. The criminal committed the offence to get them; money laundering law says you cannot keep them; attachment and confiscation law takes them back. The effectiveness of PMLA is measured by how much of the proceeds of crime actually make their way back to the State.”
This Term in Indian Statutes
Prevention of Money Laundering Act, 2002, 2002
"proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property."
Proceeds of crime: broad definition — direct, indirect, and value equivalent; central concept of PMLA money laundering law
