Corporate and Economic Laws · Laws and Regulations related to Anti-Money Laundering

Punishment for Money-Laundering under Section 4 of PMLA

Updated 11 October 2026 · Fact-checked

Section 4 of the PMLA, 2002 punishes the offence of money-laundering with rigorous imprisonment of at least three years, extendable to seven years, and also a fine. Where the proceeds relate to an offence under paragraph 2 of Part A of the Schedule, the maximum rises to ten years. The minimum stays three years.

Understand Punishment for Money-Laundering (Section 4)

Section 3 defines the offence of money-laundering. Section 4 says what happens to the person who commits it. Keep the two apart: Section 3 is the offence, Section 4 is the punishment.

The punishment has two parts. The first is rigorous imprisonment for not less than three years, which may extend to seven years. The second is a fine. The Act says the person is also liable to fine. The older cap of five lakh rupees was omitted with effect from 15-2-2013, so the section now sets no upper limit on the fine.

The proviso raises the ceiling. If the proceeds of crime relate to any offence specified under paragraph 2 of Part A of the Schedule, read "ten years" in place of "seven years". Only the maximum changes. The floor stays at three years. Paragraph 2 of Part A is the narcotics group of offences, so you can describe this as the higher term for narcotics-linked proceeds.

Two related rules often come in the same question. Under Section 45, the Special Court cannot take cognizance of an offence punishable under Section 4 except on a written complaint by the Director or an officer of the Central or a State Government authorised in writing by the Central Government. Also, offences under the Act are cognizable and non-bailable, with a stricter bail test.

Key rules to remember

Basic punishment: Rigorous imprisonment: minimum 3 years, maximum 7 years, AND fine; Imprisonment and fine both apply. The imprisonment is rigorous, not simple.
Proviso (paragraph 2 of Part A of the Schedule): Rigorous imprisonment: minimum 3 years, maximum 10 years, AND fine; Only the upper limit changes from seven to ten years. The minimum is unchanged.
Fine: Liable to fine; no maximum stated in the section; The words 'which may extend to five lakh rupees' were omitted w.e.f. 15-2-2013.
Cognizance of Section 4 offence: Only on written complaint by the Director or an authorised officer (Section 45, second proviso); The officer must be of the Central or a State Government, authorised in writing by the Central Government.

How to solve Punishment for Money-Laundering (Section 4) questions

Use this sequence for any question on punishment for money-laundering.

1Confirm that the facts amount to the offence under Section 3: a person directly or indirectly attempting, knowingly assisting, being a knowing party, or actually involved in a process connected with proceeds of crime (concealment, possession, acquisition, use, projecting or claiming as untainted).
2State that Section 4 prescribes the punishment.
3Identify the scheduled offence behind the proceeds. Check whether it falls under paragraph 2 of Part A of the Schedule.
4If it does not, state rigorous imprisonment of three to seven years plus fine. If it does, state three to ten years plus fine.
5Mention that the fine is in addition and that the section sets no ceiling on it.
6Add procedure if asked: written complaint under Section 45, cognizable and non-bailable offence, and the bail conditions.
7Conclude with a clear statement of the term and the fine applicable to the given facts.

Quickest way: Three-line recall for Section 4

When to use it: Use this for MCQs and for the opening lines of a descriptive answer.

Say '3 to 7, plus fine' for the general case.
Check the Schedule: paragraph 2 of Part A (narcotics) means '3 to 10, plus fine'.
The minimum is always 3 years and the fine is always additional.

Common mistakes in Punishment for Money-Laundering (Section 4)

Saying the maximum is ten years in every case.
Students remember the proviso and forget it applies only to a particular Schedule offence.
Fix: Treat seven years as the default. Ten years applies only for proceeds relating to offences under paragraph 2 of Part A of the Schedule.
Raising the minimum to seven years under the proviso.
The proviso is read as replacing the whole term.
Fix: The proviso replaces only the words 'which may extend to seven years'. The minimum remains three years.
Writing that the fine can go up to five lakh rupees.
Older notes still carry the pre-2013 wording.
Fix: The cap was omitted w.e.f. 15-2-2013. Say the person is also liable to fine, with no limit stated.
Treating imprisonment or fine as alternatives.
Confusion with sections like 62 and 63, which say 'or fine' or 'or both'.
Fix: Section 4 says 'and shall also be liable to fine'. Both apply.
Mixing up Section 4 with Section 3.
Both are short and appear together.
Fix: Section 3 defines the offence. Section 4 gives the punishment. Name the right section in your answer.

Worked examples

Example 1

Ramesh knowingly helps a friend hide money earned from cheating a bank. The offence behind the money is not under paragraph 2 of Part A of the Schedule. What is the punishment for Ramesh under the PMLA?

Show the solution

Ramesh knowingly assists in concealing proceeds of crime. This is the offence of money-laundering under Section 3.
Section 4 prescribes the punishment.
The underlying offence is not under paragraph 2 of Part A, so the proviso does not apply.
The term is rigorous imprisonment of not less than three years and up to seven years.
He is also liable to fine.

Answer: Rigorous imprisonment of 3 to 7 years, and also a fine.

Example 2

Which one of the following is the maximum imprisonment under Section 4 PMLA where the proceeds of crime relate to an offence under paragraph 2 of Part A of the Schedule? (a) 5 years (b) 7 years (c) 10 years (d) 3 years

Show the solution

The general maximum is seven years.
The proviso substitutes 'ten years' for 'seven years' for paragraph 2 offences.
So the maximum is ten years. Three years is the minimum, not the maximum.
Five years is not a figure in the section.

Answer: (c) 10 years

Exam tips

Learn the numbers as a pair: 3 to 7 generally, 3 to 10 under the proviso. Examiners test the maximum, so check which case the question describes.
In a 14-mark answer, link Section 3 (offence), Section 4 (punishment) and Section 45 (cognizance, bail) in that order.
Write 'rigorous imprisonment' and 'and also fine' exactly. Marks are lost for 'or fine'.
Do not quote a cap on the fine. If asked, mention the 2013 omission of the five lakh rupee limit.

Practice questions from Laws and Regulations related to Anti-Money Laundering

Punishment for Money-Laundering (Section 4) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Punishment for Money-Laundering (Section 4): frequently asked questions

What is the punishment under Section 4 of the PMLA?

Rigorous imprisonment for not less than three years, which may extend to seven years, and also a fine. The imprisonment and fine both apply.

When does the ten-year maximum apply?

It applies where the proceeds of crime involved relate to any offence specified under paragraph 2 of Part A of the Schedule. In that case the maximum is ten years instead of seven. The minimum stays three years.

Is there a limit on the fine under Section 4?

The section does not state a limit. The earlier words capping the fine at five lakh rupees were omitted with effect from 15-2-2013.

Who can file a complaint for an offence under Section 4?

The Special Court takes cognizance of a Section 4 offence only on a written complaint by the Director, or by an officer of the Central or a State Government authorised in writing by the Central Government. This is in the second proviso to Section 45(1).