CURRENT AFFAIRS | 29 JUNE 2026
India has tightened the net around crypto. The Financial Intelligence Unit–India (FIU-IND) has rolled out updated anti-money-laundering (AML) and counter-financing-of-terrorism (CFT) guidelines for Virtual Digital Assets (VDAs) — cryptocurrencies, NFTs and tokens — treating crypto exchanges, custodians and wallet providers at the same compliance standard as banks. This is the most law-heavy story of the day, sitting squarely on the Prevention of Money Laundering Act, 2002 (PMLA), the global FATF framework and a landmark Supreme Court judgment. For a CLAT aspirant, master this and you have a ready-made Legal Reasoning passage.
Money laundering is the process of disguising the proceeds of crime as legitimate income — classically through placement, layering and integration. The PMLA is India’s principal statute to combat it: it creates the offence of money laundering, allows attachment and confiscation of “proceeds of crime,” and is enforced by the Enforcement Directorate (ED).
Statutory & Constitutional Framework
- PMLA, 2002 — the parent Act; criminalises money laundering and empowers attachment of proceeds of crime. Section 3 defines the offence; Section 4 prescribes punishment.
- FIU-IND — the national agency under the Department of Revenue, Ministry of Finance, responsible for receiving and analysing suspicious transaction reports and administering aspects of the PMLA. A 2023 amendment brought VDA service providers within its ambit as “reporting entities.”
- FATF — the Financial Action Task Force, the inter-governmental body setting global AML/CFT standards (including the “travel rule”) that India implements.
- VDA — defined in Indian law via the Finance Act, 2022, which inserted Section 2(47A) into the Income-Tax Act, 1961, giving crypto a statutory definition for the first time.
The constitutional weight comes from the Supreme Court’s decision in Vijay Madanlal Choudhary v. Union of India (2022). A bench upheld the core of the PMLA — including the ED’s powers of arrest, search, attachment and the stringent twin conditions for bail under Section 45 — against challenges that they violated Articles 14, 20 and 21. The Court held that money laundering is a grave socio-economic offence and that the special procedure was justified, though some aspects (such as the supply of the ECIR) remain debated. The judgment is the backbone of every PMLA question today.
The CLAT Angle
This is prime Legal Reasoning material. Be ready to:
- State that PMLA, 2002 is enforced by the ED, while FIU-IND (Dept of Revenue, Finance Ministry) is the financial-intelligence and reporting hub.
- Recall that crypto exchanges are “reporting entities” obliged to do KYC, file suspicious-transaction reports and follow the travel rule.
- Cite Vijay Madanlal Choudhary (2022) as the case that upheld the PMLA, including the Section 45 twin bail conditions.
- Know that VDAs are statutorily defined under s.2(47A) of the Income-Tax Act (inserted by the Finance Act, 2022).
A typical passage gives the principle “a reporting entity must report suspicious transactions to FIU-IND” and asks you to apply it to a crypto-exchange fact pattern.
Key Facts at a Glance
| Parent Act | Prevention of Money Laundering Act, 2002 |
| Enforcer | Enforcement Directorate (ED) |
| Intelligence body | FIU-IND (Dept of Revenue, Min. of Finance) |
| Global standard-setter | FATF |
| VDA definition | s.2(47A), Income-Tax Act (Finance Act, 2022) |
| Key case | Vijay Madanlal Choudhary v. Union of India (2022) |
| Bail provision | Section 45 (twin conditions) |
Why bring crypto under the PMLA at all? Because VDAs can move value across borders pseudonymously, making them attractive for layering illicit funds. The new guidelines therefore mandate registration, KYC, the travel rule, and bar anonymity-enhancing tools like mixers and tumblers — aligning India with FATF expectations. The trade-off is the classic regulatory tension between innovation and integrity: too light a touch invites abuse, too heavy a hand drives the sector offshore.
Memory Mnemonic
“FIU Finds, ED Enforces, FATF Frames” — the three actors:
- FIU-IND → collects & analyses suspicious reports
- ED → investigates & attaches under the PMLA
- FATF → sets the global rules
Case anchor: “Vijay Madanlal = PMLA Validated” (V-M-V).
For CLAT 2027, this is your highest-yield economics-meets-law topic. Lock the Act (PMLA 2002), the trio of actors (FIU-IND, ED, FATF), the VDA definition (s.2(47A)) and the case (Vijay Madanlal Choudhary) — and the densest passage on the paper becomes the one you finish fastest.
Practice Quiz — 10 CLAT-Style Questions
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