Section 23 PMLA Presumption for Inter-Connected Transactions

When ED proves one transaction to be involved in money-laundering, can every connected payment, loan, invoice, reimbursement or commercial transfer be pulled into the same tainted chain?

Research and professional guidance by

Legally reviewed and updated: 14 August 2026

Direct Answer: One Tainted Transaction Can Activate a Powerful Presumption—but It Does Not Automatically Taint Every Transaction Between the Parties

Section 23 of the Prevention of Money-Laundering Act, 2002 addresses a particular evidentiary problem: money-laundering may occur through a series of transactions rather than through one isolated transfer.

Where money-laundering involves two or more inter-connected transactions and one or more of them is proved to be involved in money-laundering, Section 23 permits a statutory presumption concerning the remaining transactions in that inter-connected structure, unless the contrary is proved before the competent statutory forum.

That is a serious evidentiary consequence.

But Section 23 should not be enlarged into the following proposition:

“If one transaction between A and B is tainted, every transaction between A and B is tainted.”

That is not a substitute for examining whether the other transactions really form part of the alleged inter-connected structure.

The defence therefore needs to ask three questions separately:

1. Which transaction has actually been proved to be involved in money-laundering?
2. Which other transactions are ED treating as inter-connected with it?
3. What evidence creates the claimed connection for each transaction?

Section 23 in One Legal Flowchart

TWO OR MORE TRANSACTIONS
        ↓
ARE THEY SAID TO BE
INTER-CONNECTED?
        ↓
ONE OR MORE TRANSACTIONS
PROVED TO BE INVOLVED
IN MONEY-LAUNDERING
        ↓
SECTION 23 PRESUMPTION
        ↓
REMAINING TRANSACTIONS
MAY BE PRESUMED TO FORM PART
OF THE INTER-CONNECTED STRUCTURE
        ↓
UNLESS OTHERWISE PROVED
        ↓
ADJUDICATING AUTHORITY
OR
SPECIAL COURT
AS APPLICABLE

The critical discipline is to preserve the sequence.

The presence of several transactions does not itself answer the Section 23 question.

Section 23 Is a Cluster Presumption—not an Unlimited Relationship Presumption

A person, company or group may have thousands of transactions over several years.

Section 23 should not be treated as permission to collapse all of them into one evidentiary block merely because one transaction is disputed.

The relevant inquiry is the alleged cluster.

For example:

COMMERCIAL RELATIONSHIP
2019 → 2026

T1  Genuine supply
T2  Genuine supply
T3  Loan
T4  Reimbursement
T5  DISPUTED TRANSACTION
T6  Genuine supply
T7  Security deposit
T8  Refund

If ED relies on T5 as the transaction proved to be involved in money-laundering, it remains necessary to analyse why T1, T2, T3, T4, T6, T7 or T8 are said to form part of the relevant inter-connected structure.

The “Anchor Transaction”: First Identify What Has Actually Been Proved

For forensic convenience, call the transaction that ED says is proved to be involved in money-laundering the:

ANCHOR TRANSACTION.

This is an analytical expression—not statutory terminology.

Before analysing the remaining cluster, identify:

• date;
• amount;
• sender;
• recipient;
• bank account;
• UTR/reference number;
• alleged proceeds-of-crime source;
• documentary evidence;
• Section 3 process/activity alleged;
• person said to control the transaction.

The defence should not allow the anchor itself to remain vaguely described.

What Does “Inter-Connected” Mean?

The PMLA does not provide a standalone mathematical formula for inter-connectedness.

It does not state:

• same person = interconnected;
• same account = interconnected;
• same day = interconnected;
• same director = interconnected;
• same family = interconnected;
• same financial year = interconnected.

The factual relationship must therefore be reconstructed from the evidence.

Potential indicators may include:

• traceable movement of the same funds;
• rapid onward transfer;
• matching or near-matching amounts;
• common counterparties;
• common beneficial ownership;
• common instructions;
• common contractual purpose;
• same alleged proceeds-of-crime source;
• circular routing;
• transformation of one asset into another;
• common intermediary;
• coordinated documentation.

These are analytical indicators rather than automatic statutory rules.

The Bridge-Evidence Test

For every additional transaction, ask one question:

WHAT IS THE EVIDENTIARY BRIDGE BETWEEN THIS TRANSACTION AND THE ANCHOR TRANSACTION?

Possible bridges may be:

• the same identifiable funds;
• an onward transfer;
• a common written instruction;
• a shared beneficial owner;
• a common contract;
• a common sham invoice arrangement;
• a circular return of value;
• the same property acquisition;
• a communication directing the series of transfers.

“Bridge evidence” is used here as an analytical term. It is not language appearing in Section 23 itself.

Common Counterparty: Relevant, but Not Enough by Itself

Assume Company A purchased material from Company B for five years.

Their history contains:

• 180 supply invoices;
• 24 advances;
• 12 refunds;
• 20 credit notes;
• 6 reimbursements;
• one ₹80-lakh transaction now alleged to form part of money-laundering.

A common counterparty is obviously relevant.

But it does not explain why every previous invoice, credit note and reimbursement belongs to one laundering arrangement.

For every material transaction ask:

• Was there a separate order?
• Did the liability arise independently?
• Were goods or services supplied?
• Was GST reported?
• Is there delivery evidence?
• Did the counterparty account for the transaction?
• Did it precede the alleged proceeds-of-crime event?

Same Bank Account ≠ One Transaction

A business current account can contain hundreds of economically different entries.

For example:

• customer collections;
• working-capital finance;
• capital contribution;
• GST receipts;
• salary payments;
• supplier payments;
• taxes;
• rent;
• loan repayment;
• one disputed receipt.

The entire bank account should therefore not be portrayed as one undifferentiated stream.

Build a source-and-application statement.

Opening Balance Can Change the Apparent Fund-Flow Story

Compare these two presentations.

Incomplete Presentation

₹50 LAKH RECEIVED
        ↓
₹40 LAKH PAID

That graphic suggests direct onward movement.

Complete Account Picture

OPENING BALANCE
₹2.80 CRORE

OTHER LAWFUL CREDITS
₹65 LAKH

DISPUTED CREDIT
₹50 LAKH

TOTAL AVAILABLE
₹3.95 CRORE

PAYMENT
₹40 LAKH

The second presentation does not automatically defeat a tracing allegation.

But it prevents an incomplete visual chronology from being treated as complete financial proof.

Mixed Funds: Avoid Both Extremes

Two overstatements should be avoided.

OVERSTATEMENT 1:

“Once alleged PoC enters an account, every rupee in that account is automatically tainted.”

OVERSTATEMENT 2:

“Once legitimate funds are mixed with disputed funds, tracing becomes legally impossible.”

Neither proposition should replace a transaction-specific analysis.

Examine:

• opening balance;
• chronology of credits;
• chronology of debits;
• amounts;
• contractual obligations;
• ultimate recipients;
• the actual tracing theory advanced.

Temporal Links: Why Rapid Sequential Transfers Matter

Timing can become persuasive when combined with other evidence.

Example:

10:04 AM
₹1,00,00,000 RECEIVED

10:28 AM
₹98,00,000 TRANSFERRED

11:07 AM
₹96,00,000 TRANSFERRED

2:15 PM
₹95,00,000 USED FOR ASSET

The close sequence and near-matching amounts may provide a factual basis for examining inter-connectedness.

But timing remains contextual.

Same-Day Transactions Can Also Be Completely Ordinary

Consider:

9:30 AM
CUSTOMER COLLECTION

10:40 AM
GST PAYMENT

12:00 PM
MONTHLY PAYROLL

2:30 PM
PRE-EXISTING SUPPLIER DUE

4:00 PM
LOAN EMI

These payments are temporally close because that is how a business operates.

Their proximity alone does not make them one money-laundering cluster.

Fund-Flow Chains: Trace Every Link

A strong Section 23 allegation may arise from an identifiable sequential chain:

ALLEGED PoC
₹1,00,00,000
        ↓
ACCOUNT A
        ↓ ₹98,00,000
ACCOUNT B
        ↓ ₹96,00,000
ACCOUNT C
        ↓ ₹95,00,000
ACCOUNT D
        ↓
PROPERTY / SECURITY / INVESTMENT

For each arrow identify:

• bank;
• account;
• date;
• time;
• UTR;
• amount;
• opening balance;
• narration;
• beneficiary;
• supporting contract;
• ultimate application.

A flowchart without these details is an allegation map—not necessarily a complete forensic reconstruction.

Near-Matching Amounts

Patterns such as:

₹1.00 CRORE
↓
₹98 LAKH
↓
₹96 LAKH
↓
₹95 LAKH

may support a tracing theory because transaction charges, commission or partial retention can account for differences.

But still ask:

• Were sufficient independent balances available?
• Was a separate liability already due?
• Do contractual documents predate the disputed receipt?
• Does the destination correspond with ordinary business activity?

Circular Routing: A → B → C → A

Circular fund movement deserves careful scrutiny.

A
↓ ₹50 lakh
B
↓ ₹48 lakh
C
↓ ₹46 lakh
A

But a circle on a diagram does not itself explain the commercial/legal character of each payment.

Examine whether the movement represents:

• loan disbursement and repayment;
• security deposit and refund;
• cost reimbursement;
• purchase and subsequent cancellation;
• capital movement;
• or an artificial routing arrangement without commercial substance.

Common Beneficial Ownership

Group companies under common ownership may receive greater scrutiny because control over both sides of a transaction can facilitate coordinated fund movement.

But common ownership is not itself proof of laundering.

Legitimate group transactions may include:

• inter-company loans;
• shared-service costs;
• centralised purchasing;
• cash-management arrangements;
• capital contribution;
• expense reimbursement;
• asset transfers.

For each movement, show the commercial reason and documentary footprint.

Common Director versus Actual Transaction Control

Corporate charts often visually suggest guilt by association.

Instead map:

• shareholding;
• directorship period;
• bank-signing authority;
• board approval;
• actual payment instruction;
• beneficial recipient;
• person who negotiated the transaction;
• financial benefit.

Common corporate connection and transaction-specific participation are different evidentiary questions.

Inter-Company Loans: Transaction-by-Transaction Proof

A genuine inter-company loan should ordinarily generate contemporaneous evidence.

Depending upon the transaction, examine:

• loan agreement;
• board resolution;
• financial capacity of lender;
• source of lender funds;
• interest;
• TDS where applicable;
• accounting entry;
• repayment schedule;
• actual repayment;
• statutory disclosure.

A documented and performed loan presents a materially different evidentiary profile from a retrospective loan explanation created only after investigation begins.

Reimbursements: Follow the Original Expense

A reimbursement should be linked to the expenditure being reimbursed.

Build:

THIRD-PARTY INVOICE
        ↓
COMPANY A PAYS
        ↓
COST ATTRIBUTABLE TO COMPANY B
        ↓
REIMBURSEMENT REQUEST
        ↓
COMPANY B PAYS COMPANY A

Supporting material may include:

• original invoice;
• bank debit;
• expense allocation;
• reimbursement communication;
• matching ledger entries.

Security Deposit or Refund ≠ Automatic Circular Laundering

A legitimate contract may produce:

A
→ SECURITY DEPOSIT
→ B

CONTRACT COMPLETED

B
→ REFUND
→ A

Visually, money has moved from A to B and back to A.

But the contract, duration, purpose and performance may explain why.

A proper Section 23 analysis must therefore examine legal and commercial cause, not merely directional arrows.

One Allegedly Fake Invoice among Hundreds of Genuine Transactions

Suppose ED challenges Invoice No. 117.

Do not reply:

“All 200 invoices are genuine.”

Instead isolate the disputed invoice while independently establishing the surrounding transactions.

For genuine supply transactions, evidence may include:

• purchase order;
• invoice;
• e-invoice;
• e-way bill;
• LR/GR;
• delivery challan;
• goods-receipt note;
• gate entry;
• stock register;
• GST return;
• bank payment;
• counterparty books.

The aim is to stop one disputed invoice from becoming a substitute for analysis of every other invoice.

Historical Commercial Pattern Can Break a False Cluster

A long trading history may provide powerful context.

Compare transaction behaviour:

Period	Typical Monthly Business	Payment Cycle	Nature
2022	₹15–20 lakh	30–45 days	Regular supply
2023	₹16–22 lakh	30–45 days	Regular supply
2024	₹14–21 lakh	30–45 days	Regular supply
Disputed period	₹18 lakh	38 days	ED alleges connection

If the disputed-period transaction closely follows a genuine pre-existing commercial pattern, that fact deserves to be placed before the authority or court.

Temporal Segmentation: Before, During and After the Alleged PoC Event

PERIOD A
BEFORE ALLEGED CRIMINAL ACTIVITY

        ↓

PERIOD B
ALLEGED PoC GENERATION / MOVEMENT

        ↓

PERIOD C
AFTER THE ALLEGED EVENT

Compare transaction frequency, pricing, credit periods and business behaviour across all three periods.

An ordinary payment pattern that existed before the alleged proceeds of crime were generated may help challenge an allegation that every later similar payment was created to launder those proceeds.

The Counterfactual Question

A useful forensic question is:

“Would Transaction B have occurred even if the alleged anchor Transaction A had never occurred?”

Evidence supporting independence may include:

• purchase order predating A;
• goods already delivered;
• debt already due;
• regular historical payment cycle;
• separate lawful funds available;
• contractual payment obligation predating A.

This is an analytical technique used in this guide—not an express statutory test in Section 23.

Create a “Transaction DNA” Sheet for Every Material Entry

TRANSACTION ID:
T-014

DATE:
________________

AMOUNT:
________________

SENDER:
________________

RECIPIENT:
________________

ACCOUNT:
________________

UTR:
________________

OPENING BALANCE:
________________

SOURCE OF FUNDS:
________________

COMMERCIAL PURPOSE:
________________

CONTRACT:
YES / NO

INVOICE:
YES / NO

GST:
YES / NO

DELIVERY:
YES / NO

TALLY / ERP ENTRY:
________________

BENEFICIAL OWNER:
________________

ED ALLEGED LINK:
________________

LINK TO ANCHOR:
________________

DEFENCE DOCUMENTS:
________________

INDEPENDENT TRANSACTION:
YES / NO / DISPUTED

This forces financial analysis away from general allegations and toward verifiable facts.

Transaction-by-Transaction Rebuttal Matrix

Txn	ED Theory	Source	Commercial Purpose	Evidence	Anchor Link
T1	Same counterparty	Customer revenue	Raw-material purchase	PO + invoice + GST + delivery	None demonstrated
T2	Proved/anchor transaction	Disputed	Disputed	Separate contest	Anchor
T3	Onward layering	Mixed account	Old loan repayment	Agreement + ledger + bank	Needs tracing
T4	Same account	Ordinary revenue	Payroll	Payroll + TDS + bank batch	No direct bridge
T5	Same parties	Customer payment	Actual supply	Invoice + e-way + stock + GST	Commercially independent

Tally and ERP: Use the Books to Disaggregate, Not Merely to Defend Generally

Accounting systems may reveal:

• voucher date;
• voucher type;
• invoice reference;
• ledger;
• cost centre;
• user ID;
• outstanding balance;
• credit note;
• contra entry;
• adjustment history.

But internal accounting material should ideally be reconciled with independent evidence.

The preferred structure is:

TALLY / ERP
+
BANK
+
CONTRACT
+
INVOICE
+
GST
+
DELIVERY
+
COUNTERPARTY BOOKS

GST Is Corroborative—not Magical

A GST return can support the claimed existence and tax treatment of a transaction.

But it does not automatically prove every underlying commercial fact.

A stronger file combines:

• invoice;
• GST;
• e-way bill;
• transport document;
• stock movement;
• delivery;
• bank payment;
• counterparty confirmation.

Common Commercial Purpose: Same Project Does Not Mean Same Criminal Character

A construction project may generate hundreds of connected transactions:

• buyer collections;
• land payments;
• contractor bills;
• cement procurement;
• salary;
• statutory dues;
• project finance;
• refunds.

These transactions are commercially connected to the same project.

That does not automatically establish that each is a laundering transaction.

The criminal/PoC character must remain separately analysed.

Connected Does Not Mean Tainted

This is the conceptual safeguard at the heart of a Section 23 defence.

Consider:

SALE AGREEMENT
        ↓
INVOICE
        ↓
DELIVERY
        ↓
PAYMENT
        ↓
GST

These transactions/documents are clearly inter-related.

But their connection does not by itself establish money-laundering.

Section 23 becomes important where a transaction within a broader connected structure is proved to be involved in money-laundering and the statutory presumption is invoked against the rest.

Section 23 Does Not Replace “Proceeds of Crime”

After mapping the cluster, return to the fundamental PMLA question:

WHAT IS THE IDENTIFIED PROPERTY SAID TO BE PROCEEDS OF CRIME?

The transaction network should be connected back to:

• criminal activity relating to a scheduled offence;
• property derived or obtained from that activity;
• or the legally applicable value-based limb of the proceeds-of-crime definition.

A complex network diagram cannot substitute for identifying the alleged proceeds of crime.

Section 23 Does Not Replace Section 3

Even when several transactions are connected, person-specific liability remains important.

For each accused or notice recipient ask:

• Did the person instruct the transaction?
• Did the person control the account?
• Did the person receive a benefit?
• Was the person merely an employee?
• Did the person prepare paperwork?
• Was the person a professional intermediary?
• What process or activity connected with proceeds of crime is alleged?

A transaction network and individual criminal participation are not the same question.

Section 22, Section 23 and Section 24: Three Different Presumption Systems

Provision	Primary Focus
Section 22	Records/property, contents, handwriting, signature, execution
Section 23	Inter-connected transaction structure
Section 24	Separate burden concerning proceeds of crime

These provisions may operate in the same proceeding.

But the defence should identify separately:

• which presumption is being invoked;
• which foundational fact is asserted;
• what consequence ED says follows;
• what evidence rebuts that particular proposition.

How an Entire Business Relationship Gets Wrongly Compressed into One “Layering” Story

A common analytical danger is chronology compression.

A five-year relationship may be presented through only ten selected bank entries.

That can hide:

• hundreds of genuine invoices;
• historic balances;
• ordinary payment cycles;
• credit notes;
• returns;
• commercial disputes;
• independent loans;
• lawful source of funds.

The defence should reconstruct the complete commercial relationship sufficiently to show whether the selected entries are truly exceptional or merely ordinary transactions extracted from a much larger legitimate history.

Do Not Let a Flowchart Become Evidence by Repetition

A prosecution or investigation chart may be useful.

But every arrow on the chart should correspond to evidence.

For each arrow ask:

• Is there a bank transfer?
• Is there a cash allegation?
• Who proves the cash movement?
• Is there a document?
• Is there a digital communication?
• Is beneficial ownership established?
• Is the amount identical?
• Is there an intervening transaction?

A diagram is a representation of an evidentiary theory. It is not itself proof of every link represented by the diagram.

Build a Source-and-Application Statement

For each material account:

Date	Opening Balance	Credit	Source	Debit	Purpose	Closing Balance
[DATE]	₹2.20 Cr	₹25 L	Disputed	—	—	₹2.45 Cr
[DATE]	₹2.45 Cr	₹18 L	Customer invoice	₹30 L	Pre-existing vendor liability	₹2.33 Cr

This is far more informative than comparing only one credit and the next debit.

Document the Commercial Cause of Every Material Transfer

A genuine commercial transaction usually has a cause.

Examples:

• invoice liability;
• loan repayment;
• rent;
• advance adjustment;
• security-deposit refund;
• salary;
• tax;
• capital contribution;
• asset acquisition.

For the alleged cluster, create a column titled:

WHY DID THIS TRANSACTION EXIST?

The answer should be supported by contemporaneous records.

How to Rebut Section 23 Transaction-by-Transaction

For each transaction that ED seeks to pull into the cluster, prepare seven layers of proof:

1. SOURCE
   Where did the money come from?
2. LEGAL OBLIGATION
   Why was payment due?
3. COMMERCIAL PERFORMANCE
   Were goods/services actually supplied?
4. BANKING
   What does the complete account show?
5. ACCOUNTING
   How was it recorded contemporaneously?
6. TAX / REGULATORY RECORD
   Was it reported consistently?
7. INDEPENDENCE FROM THE ANCHOR
   What evidence shows it did not depend upon the alleged tainted transaction?

What “Unless Otherwise Proved” Means for Practical Defence Preparation

A bare denial is unlikely to be the strongest method of answering a statutory presumption.

The rebuttal should be evidence-based.

Possible material includes:

• bank statements;
• contracts;
• purchase orders;
• invoices;
• GST returns;
• e-way bills;
• transport documents;
• stock registers;
• delivery receipts;
• audited accounts;
• Tally/ERP records;
• board resolutions;
• counterparty books;
• historic transaction data;
• email correspondence.

Section 23 Defence File

01_ALLEGED_ANCHOR_TRANSACTION

02_SCHEDULED_OFFENCE

03_ALLEGED_POC

04_COMPLETE_BANK_STATEMENTS

05_TRANSACTION_MASTER

06_SOURCE_AND_APPLICATION

07_TRANSACTION_DNA_SHEETS

08_COUNTERPARTY_MATRIX

09_BENEFICIAL_OWNERSHIP_MAP

10_CONTRACTS

11_PURCHASE_ORDERS

12_INVOICES

13_GST

14_EWAY_BILLS

15_DELIVERY_AND_STOCK

16_TALLY_ERP

17_LOAN_FILES

18_REIMBURSEMENTS

19_ADVANCES_SECURITY_DEPOSITS

20_HISTORICAL_TRADING_PATTERN

21_EMAIL_WHATSAPP_INSTRUCTIONS

22_ED_TRANSACTION_FLOWCHART

23_ARROW_BY_ARROW_REBUTTAL

24_SECTION_22_ANALYSIS

25_SECTION_24_ANALYSIS

26_SECTION_3_PERSON_SPECIFIC_ROLE

Section 23 Defence Checklist

□ WHAT IS THE TRANSACTION SAID TO BE PROVED?

□ WHAT EXACTLY HAS BEEN PROVED ABOUT IT?

□ WHAT OTHER TRANSACTIONS ARE INCLUDED?

□ WHY DOES ED CALL THEM INTER-CONNECTED?

□ SAME IDENTIFIABLE FUNDS?

□ SAME BANK ACCOUNT ONLY?

□ SAME COUNTERPARTY ONLY?

□ COMMON BENEFICIAL OWNER?

□ RAPID ONWARD TRANSFER?

□ MATCHING AMOUNTS?

□ CIRCULAR FLOW?

□ SAME CONTRACT?

□ SAME PROJECT?

□ SAME INSTRUCTIONS?

□ SAME ALLEGED PoC SOURCE?

□ OPENING BALANCE INCLUDED?

□ OTHER LAWFUL CREDITS INCLUDED?

□ HISTORICAL BUSINESS PATTERN CHECKED?

□ CONTRACT PREDATES ANCHOR?

□ LIABILITY PREDATES ANCHOR?

□ INVOICE VERIFIED?

□ GST VERIFIED?

□ GOODS / SERVICES VERIFIED?

□ E-WAY / DELIVERY VERIFIED?

□ STOCK VERIFIED?

□ TALLY / ERP RECONCILED?

□ COUNTERPARTY BOOKS COMPARED?

□ UTR AND BANK TRAIL VERIFIED?

□ TRANSACTION-BY-TRANSACTION REBUTTAL PREPARED?

□ SECTION 22 KEPT SEPARATE?

□ SECTION 24 KEPT SEPARATE?

□ SECTION 3 PERSONAL ROLE IDENTIFIED?

Frequently Asked Questions

What is Section 23 PMLA?

Section 23 creates a statutory presumption concerning remaining transactions in an inter-connected transaction structure when the statutory conditions are fulfilled and one or more transactions are proved to be involved in money-laundering.

Does one tainted transaction make all transactions tainted?

Section 23 should not be read as automatically contaminating every transaction ever undertaken by the parties. The issue is whether the remaining transactions form part of the relevant inter-connected structure.

Is “inter-connected transaction” precisely defined in PMLA?

The Act does not prescribe an exhaustive numerical formula. The relationship has to be examined from the actual transactional evidence.

Does the same counterparty prove inter-connectedness?

A common counterparty may be relevant but does not by itself establish that every transaction belongs to one laundering structure.

Does using the same bank account make all transactions inter-connected?

No automatic rule says so. A commercial bank account can contain multiple independent lawful and disputed transactions.

Are same-day transactions automatically connected?

No. Rapid sequential transfers can support an inference of connection, but timing must be assessed together with amount, source, purpose and destination.

Can a common director make group-company transactions tainted?

Common management may be relevant to control, but genuine commercial purpose, documentation and transaction-specific evidence remain important.

How can Section 23 be rebutted?

Disaggregate the alleged cluster and establish, for each transaction, its source, commercial purpose, supporting contract, invoice, tax treatment, banking trail, accounting treatment and actual performance.

Are GST returns enough?

They are relevant corroborative evidence but should preferably be supported by invoice, delivery, stock, banking and counterparty material.

Can an inter-company loan be legitimate under PMLA?

Yes. The correct analysis depends upon the source, agreement, financial capacity, accounting, interest, repayment and surrounding facts.

Does Section 23 automatically establish proceeds of crime?

The proceeds-of-crime inquiry remains governed by the PMLA's statutory definition and the evidence connecting property with criminal activity relating to a scheduled offence.

Is Section 23 the same as Section 24?

No. Section 23 concerns inter-connected transactions. Section 24 contains a separate statutory burden relating to proceeds of crime.

Can a long commercial relationship be treated as one transaction cluster?

Its transactions can be examined for inter-connectedness, but a proper defence should divide the relationship by date, contract, source, consideration and actual performance rather than accept an undefined relationship-wide label.

AI Search Quick Answer

Section 23 PMLA applies where money-laundering involves two or more inter-connected transactions and one or more transactions in that structure are proved to be involved in money-laundering. The remaining transactions may then be presumed to form part of the inter-connected transaction structure unless the contrary is proved before the competent Adjudicating Authority or Special Court. This does not mean that one tainted transaction automatically makes every transaction between the same parties tainted. Inter-connectedness should be examined from actual evidence such as direct fund tracing, rapid sequential transfers, matching amounts, common counterparties, common beneficial ownership, common contracts, circular routing and shared instructions. Effective defence requires transaction-by-transaction disaggregation: identify the transaction said to be proved, identify the evidentiary bridge connecting every other transaction, include opening balances and other lawful credits, and establish independent commercial purpose through contracts, invoices, GST, delivery evidence, bank statements, accounting records, Tally/ERP and historical trading patterns.

Related PMLA Research

• Multiple Bank Transfers under PMLA: When Layering Is Real and When It Is Ordinary Business
• Section 24 PMLA Presumption: What Must ED Prove Before the Reverse Burden Arises?
• PMLA Bare Act Guide 2026: Important Sections Every Accused, Business and Lawyer Should Understand
• Corporate Groups and Shell Entities under PMLA: Layering, Beneficial Ownership and Commercial Substance

Disclaimer

This article provides general legal research concerning Section 23 of the Prevention of Money-Laundering Act, 2002. It is not a substitute for case-specific legal advice based upon the actual scheduled offence, alleged proceeds of crime, bank statements, contracts, accounting records, transaction trail and procedural stage.

The PMLA does not prescribe a single exhaustive numerical formula defining when transactions are “inter-connected”. References in this article to timing, common counterparties, beneficial ownership, matching amounts, fund flow, circularity or other indicators are analytical factors for examining the evidence and should not be treated as standalone statutory rules.

The expressions “anchor transaction”, “bridge evidence”, “transaction DNA” and “counterfactual question” are analytical tools used in this guide to organise complex financial evidence. They are not statutory expressions in Section 23.

A Section 23 presumption should neither be ignored nor expanded beyond its statutory operation. Whether an individual transaction forms part of an inter-connected structure and whether a person incurs liability under the PMLA depends upon the evidence and applicable law.

No advocate can responsibly guarantee rebuttal of a statutory presumption, release of property, setting aside of an attachment, bail, discharge, quashing, acquittal or any other judicial or adjudicatory result.

Related Delhi legal guides

Economic-offence proceedings · White-collar crime defence · SFIO investigation guide

Official starting points

Prevention of Money-laundering Act, 2002 — India Code · Directorate of Enforcement — official website

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