Anti-Money Laundering (PMLA) Training

Section 3 of the Prevention of Money-laundering Act, 2002 makes it an offence to directly or indirectly attempt to indulge in, knowingly assist, knowingly be a party to, or be actually involved in any process or activity connected with the proceeds of crime. The Explanation lists concealment, possession, acquisition, use, and projecting or claiming the proceeds as untainted property, and treats the activity as continuing for as long as a person enjoys the proceeds.

Section 4 sets the punishment: rigorous imprisonment of three to seven years and a fine. The upper limit rises to ten years where the proceeds relate to offences in paragraph 2 of Part A of the Schedule. Under section 70, where a company contravenes the Act, every person in charge of and responsible for its business at the time is also deemed guilty, unless they prove the contravention happened without their knowledge or despite all due diligence.

A "reporting entity" under section 2(1)(wa) means a banking company, financial institution, intermediary or a person carrying on a designated business or profession. Section 11A requires reporting entities to verify the identity of their clients and beneficial owners.

Section 12(1) requires every reporting entity to keep a record of all transactions in a way that allows individual transactions to be reconstructed, to furnish information on prescribed transactions (whether attempted or executed) to the Director of FIU-IND, and to keep records of client and beneficial owner identity, account files and business correspondence. Transaction records must be kept for five years from the date of the transaction (section 12(3)). Identity records must be kept for five years after the business relationship ends or the account is closed, whichever is later (section 12(4)).

Section 12AA requires enhanced due diligence, including source of funds checks, before certain specified transactions. Section 13 empowers the Director to inquire into compliance and to act against the reporting entity, its designated director on the Board or any of its employees. Section 14 protects the entity, its directors and employees from civil or criminal proceedings for furnishing information under section 12(1)(b).

The PML (Maintenance of Records) Rules, 2005 set out what must be recorded and reported. Rule 3(1) covers, among others, cash transactions above ten lakh rupees or the foreign currency equivalent, series of connected cash transactions below that amount that together exceed ten lakh rupees in a month, cash transactions involving counterfeit currency or forged documents, and all suspicious transactions whether or not made in cash.

Rule 7 requires each reporting entity to designate a Principal Officer at management level and to communicate the officer's name, designation and address to the Director, FIU-IND. Under rule 8(1), monthly reports such as cash transaction reports are due by the 15th day of the following month. Under rule 8(2), once the Principal Officer is satisfied that a transaction is suspicious, the information must be furnished promptly. FIU-IND's AML and CFT guidelines state this as no later than seven working days from being satisfied that the transaction is suspicious. Rule 8(4) treats each day of delay as a separate violation.

RBI-regulated entities must also follow RBI's KYC directions. For commercial banks these are now the Reserve Bank of India (Commercial Banks - Know Your Customer) Directions, 2025, which replaced the Master Direction - Know Your Customer (KYC) Direction, 2016. RBI has issued separate KYC directions for other classes of regulated entity, so check the version that applies to you.

The 2016 Master Direction (paragraph 70) required an on-going employee training programme so that staff are adequately trained in KYC/AML/CFT policy, with a different focus for frontline staff, compliance staff and staff dealing with new customers. It also asked regulated entities to ensure that staff dealing with KYC/AML/CFT have high integrity and a good understanding of current standards. Check the corresponding paragraph in the 2025 directions that apply to your entity.