What is Money Laundering Act

The Money Laundering Act refers to legislation enacted by governments to prevent, detect, and penalize money laundering — the process of concealing the origins of illegally obtained money by passing it through legitimate financial systems. These laws form the basis of Anti-Money Laundering (AML) frameworks worldwide and impose strict obligations on financial institutions, corporations, and certain professionals to monitor, report, and prevent suspicious transactions.

Different jurisdictions have their own money laundering acts. For example:

  • India: The Prevention of Money Laundering Act (PMLA), 2002

  • United States: The Bank Secrecy Act (BSA), 1970, later strengthened by the USA PATRIOT Act

  • European Union: A series of EU AML Directives to harmonize anti-money laundering efforts

Why the Money Laundering Act Matters

Money laundering legislation is critical because it:

  • Protects financial systems from being exploited for illegal activities

  • Prevents terrorism financing by tracing suspicious money flows

  • Strengthens compliance for banks, financial institutions, and corporations

  • Promotes international cooperation in combating organized crime

  • Protects reputation of businesses by ensuring lawful financial practices

Key Provisions Commonly Found in Money Laundering Acts

  1. Customer Due Diligence (CDD) – Know Your Customer (KYC) verification processes

  2. Suspicious Activity Reporting (SARs) – Mandatory reporting of unusual transactions

  3. Recordkeeping Requirements – Retention of transaction and customer records

  4. Penalties for Non-Compliance – Heavy fines, sanctions, and possible imprisonment

  5. Regulatory Oversight – Supervisory authorities empowered to investigate and enforce

Example of Money Laundering Act in Action

A bank notices unusually large transfers that do not match a client’s business profile. Under the Money Laundering Act, the bank must file a Suspicious Activity Report (SAR) with the regulatory authority. Failure to report could result in legal penalties for the institution.

Money Laundering Act vs. AML Regulations

  • Money Laundering Act – The legal foundation established by governments to combat money laundering.

  • AML Regulations – Detailed rules and guidelines that implement the act and guide compliance practices.

How VComply Can Help

VComply supports compliance with money laundering acts and AML regulations by:

  • Automating compliance workflows for KYC, CDD, and transaction monitoring

  • Maintaining centralized records to meet legal retention requirements

  • Mapping AML obligations to internal controls and policies

  • Providing dashboards for real-time compliance monitoring

  • Ensuring accountability with clear ownership of AML compliance tasks

With VComply, organizations can simplify AML compliance, reduce regulatory risks, and protect against penalties under money laundering laws.