AML Laws and Regulations for Debenture Trustees in India

Last Updated on: 27th August 2026 | Last Reviewed on: 27th August 2026

Key takeaways at a glance

Who is covered: debenture trustees, that is trustees to a trust deed, registered with SEBI under the SEBI (Debenture Trustees) Regulations, 1993, as reporting entities under the PMLA.
Why they are caught: a trustee to a trust deed is expressly named as an intermediary in section 2(1)(n) of the PMLA, so it is a reporting entity under section 2(1)(wa). No section 2(1)(sa) designation is needed.
Governing laws: the PMLA, 2002 and the PML (Maintenance of Records) Rules, 2005; the SEBI Master Circular for Debenture Trustees, the SEBI AML/CFT Guidelines, 2024 and the SEBI KYC Master Circular; the UAPA 1967 (Section 51A) and the WMD Act, 2005 (Section 12A).
Supervisor: the Securities and Exchange Board of India (SEBI). Reports go to the Financial Intelligence Unit – India (FIU-IND); the Enforcement Directorate (ED) enforces the PMLA.
Core duties: an internal risk assessment, due diligence on the issuer and debenture holders, beneficial owner identification, monitoring, prescribed transaction reporting, five year record-keeping and sanctions screening.

This guide is general information on Indian law, not legal advice. For your firm’s specific position, speak to a qualified AML professional.

Debenture trustees are reporting entities under the Prevention of Money Laundering Act, 2002. A debenture trustee is a person registered with the Securities and Exchange Board of India to act as trustee to a trust deed executed for securing an issue of debentures or other debt securities. Its functions include protecting the interests of debenture holders, monitoring the issuer’s compliance with the terms of the issue and taking steps in relation to the security created for the benefit of the debenture holders where required.

Its AML, CFT and CPF obligations arise under the PMLA, the Prevention of Money Laundering Maintenance of Records Rules, 2005, applicable SEBI requirements for debenture trustees and securities market intermediaries, the SEBI KYC framework, Section 51A of the UAPA, Section 12A of the WMD Act and the FIU IND reporting framework. SEBI is the sectoral regulator for debenture trustees, while prescribed reports are submitted to FIU IND. This guide forms part of the wider framework of AML, CFT and CPF requirements applicable to securities market intermediaries.

The core instruments at a glance

Instrument	What it does for a debenture trustee
PMLA, 2002	The parent Act. Names the trustee to a trust deed as an intermediary and creates the duties of due diligence, record-keeping and reporting.
PML (Maintenance of Records) Rules, 2005	Set out what to report and when, how to identify clients and beneficial owners, and the duty to appoint officers.
SEBI Master Circular for Debenture Trustees (13 August 2025)	The consolidated conduct rulebook for debenture trustees, into which the KYC and AML obligations are read.
SEBI AML/CFT Guidelines (6 June 2024)	The working AML rulebook for every securities market intermediary, including debenture trustees.
UAPA Section 51A and WMD Act Section 12A	Impose targeted financial sanctions for terrorism and proliferation financing.
FATF Recommendations	The international preventive measure standards India’s framework is built to meet.

What Counts as a Debenture Trustee in India?

A debenture trustee is a SEBI-registered entity under Section 12 of the SEBI Act, 1992 and the SEBI Debenture Trustees Regulations, 1993, appointed under a trust deed to protect debenture holders, monitor issuer compliance, oversee security creation, and take prescribed enforcement steps on default.

It does not act as a custodian of debenture holders’ funds or securities. Its AML risk exposure is therefore primarily linked to the issuer, transaction structure, ownership patterns, and underlying security. Key risks include opaque ownership, unusual related-party transactions, and potential misuse of debt structures for illicit fund movement.

Accordingly, the AML framework focuses on customer identification, beneficial ownership determination, assessment of purpose and nature of relationship, enhanced due diligence for higher-risk cases, and ongoing monitoring for ML/TF indicators.

Are Debenture Trustees Reporting Entities under the PMLA?

Yes. The Prevention of Money-Laundering Act, 2002 establishes the statutory framework for prevention of money laundering and imposes specified obligations on reporting entities.

Section 2(1)(wa) of the PMLA defines a reporting entity to include an intermediary. Section 2(1)(n) expressly includes a trustee to a trust deed as an intermediary associated with the securities market and registered under Section 12 of the SEBI Act, 1992. A debenture trustee registered with SEBI therefore falls within the reporting entity framework through the intermediary limb of Section 2(1)(wa), read with Section 2(1)(n). No separate designation under Section 2(1)(sa) is required where the debenture trustee is already covered through this intermediary category.

This places a debenture trustee in the same broad category of reporting entities that file with FIU-IND as banks and other intermediaries, and within the wider AML laws and regulations for intermediaries in India.The obligations are calibrated to the trusteeship business, but the reporting entity status is not optional.

Supervisory Authority for Debenture Trustees in India

The Supervisor for Debenture Trustees is the Securities and Exchange Board of India, which registers them under the SEBI (Debenture Trustees) Regulations, 1993, sets the AML rules they work from and inspects their compliance.

The consolidated conduct rulebook is the SEBI Master Circular for Debenture Trustees, updated on 13 August 2025, and the central AML instrument is the SEBI Guidelines on AML Standards and CFT Obligations of Securities Market Intermediaries, updated on 6 June 2024, read with the SEBI Master Circular on KYC Norms for the Securities Market. Together, these carry the issuer and holder due diligence, monitoring, record-keeping and reporting duties into the language of the trusteeship business.

The Financial Intelligence Unit – India receives, analyses and disseminates the reports a debenture trustee files, and the Enforcement Directorate investigates and prosecutes the offence of money laundering under the PMLA. In short, SEBI sets and inspects the rules, FIU-IND receives the intelligence, and the ED enforces the criminal law.

AML Regulatory Requirements for Debenture Trustees in India

The law that governs a debenture trustee does not sit in one place. It is a layered framework. It includes the core legislation, the overarching obligations, the sectoral regulator and its instruments, the miscellaneous official reports, the international standards, and the allied laws.

The framework reads from the core outward. The PMLA is the parent Act; the PML Rules turn it into operational duties; the SEBI Master Circular for Debenture Trustees and the SEBI AML/CFT Guidelines translate both into instructions a debenture trustee can follow; the UAPA and the WMD Act add counter terrorism and proliferation financing sanctions; and the allied laws, including the securities statutes, shape the risk. The risk based approach ties the entire framework together.

Core Legislation

The primary statutes and rules that create the AML, CFT and CPF obligations are grouped into three categories.

AML Legislation

Prevention of Money-Laundering Act, 2002 (PMLA)

The parent anti money laundering law. It creates the offence of money laundering and the core duties on reporting entities, including client due diligence under Section 11A and record-keeping under Section 12. A debenture trustee is a reporting entity by virtue of the intermediary definition in section 2(1)(n), so the Act applies to a trusteeship firm in the same shape as to a bank, scaled to the business.

The PML (Maintenance of Records) Rules, 2005 (PMLR)

The rules made under the PMLA. They set what to report and when (Rule 3 and Rule 8), how to identify clients and beneficial owners (Rule 9), and the duty to appoint officers (Rule 7). For a debenture trustee the relevant Regulator named in Rule 2(1)(fa) is SEBI. The PMLR has been amended through 31 Gazette notifications and orders, set out below as a legal history timeline.

The 31 PMLR amendment notifications, in date order:

Gazette notification and date	Key change or rule touched
G.S.R. 389(E), 24 May 2007	Expanded the scope of suspicious transactions under the PML Rules, 2005 to cover transactions without an apparent economic rationale or those connected with terrorist financing. The amendment also extended reportable cash transactions to include forged currency and documents, prescribed timelines for reporting to the Director and reduced the number of certified copies required for certain submissions from three to one.
G.S.R. 816(E), 12 November 2009	Added the definitions of non profit organisation and Regulator and further widened the scope of suspicious transactions to include transactions involving unusual complexity, no apparent economic rationale or connections with terrorist financing. The amendment also introduced reporting requirements for cash receipts exceeding ten lakh rupees by NGOs, replaced references to individual regulators including RBI, SEBI and IRDA with the term Regulator and extended the record retention period to ten years from the date of the transaction.
G.S.R. 76(E), 12 February 2010	Enhanced the provisions relating to record keeping and reporting under Rules 3, 4, 5 and 7 of the PML Rules, 2005. It also inserted an Explanation to Rule 9(1A) to clarify that the beneficial owner is the natural person who ultimately owns or controls the client or on whose behalf a transaction is carried out.
G.S.R. 508(E), 16 June 2010	Revised Rules 2, 9 and 10 of the PML Rules, 2005 to strengthen provisions relating to definitions, customer due diligence and record keeping. The amendments further developed customer identification requirements and reinforced the obligation of reporting entities to maintain and preserve relevant records.
G.S.R. 980(E), 16 December 2010	Established the small account framework by introducing definitions for Designated Officer and small account. The amendment expanded the list of officially valid documents to include the NREGA job card and Aadhaar letter and inserted Rule 9(2A) prescribing conditions for the opening, operation and monitoring of small accounts.
G.S.R. 481(E), 24 June 2011	Changed the short title of the Rules through an amendment to Rule 1, adopting the title Prevention of Money Laundering Maintenance of Records Rules, 2005. This established the abbreviated title used for subsequent references to the Rules.
G.S.R. 576(E), 27 August 2013	Introduced the definition of Designated Director under Rule 2 and revised Rules 3, 7, 8, 9 and 10. The amendments enhanced requirements relating to transaction reporting, compliance oversight, customer due diligence and record maintenance by reporting entities.
G.S.R. 288(E), 15 April 2015	Specified the documents recognised as officially valid documents for customer identification under the PML Rules, 2005.
G.S.R. 544(E), 7 July 2015	Introduced the definition of Central KYC Records Registry and amended Rules 9 and 10 of the PML Rules, 2005 to further strengthen the KYC framework. The amendments also supported the centralised collection, maintenance and management of KYC records by reporting entities.
G.S.R. 730(E), 22 September 2015	Revised several definitions under Rule 2 and made related amendments to the PML Rules, 2005 to align the framework with evolving KYC requirements. The changes clarified key regulatory terms and strengthened provisions relating to customer identification and due diligence.
G.S.R. 882(E), 18 November 2015	Increased the prescribed period under the relevant provisions of the PML Rules, 2005 from 90 days to 180 days. The amendment provided reporting entities with additional time to complete the applicable procedural and reporting requirements.
G.S.R. 347(E), 12 April 2017	Introduced provisions concerning the definition of Regulator and inserted Rule 9B to further strengthen the customer due diligence framework under the PML Rules, 2005. The amendment also enhanced requirements relating to customer identification and verification.
G.S.R. 538(E), 1 June 2017	Revised Rules 2 and 9 of the PML Rules, 2005 by introducing additional provisions to strengthen the operational AML framework. The changes further developed requirements concerning customer identification, due diligence and compliance procedures applicable to reporting entities.
G.S.R. 1038(E), 21 August 2017	Revised the definitions under Rule 2 of the PML Rules, 2005 by introducing provisions to clarify important terms used within the regulatory framework. The amendments promoted greater consistency in the interpretation and implementation of AML and KYC requirements.
G.S.R. 1318(E), 23 October 2017	Further amended Rule 2 by introducing a proviso concerning the acceptance and treatment of officially valid documents. The amendment clarified the manner in which such documents could be considered for customer identification and verification purposes under the PML Rules, 2005.
G.S.R. 456(E), 16 May 2018	Strengthened Rule 9 by requiring reporting entities to establish and maintain a formal customer due diligence programme. The amendment reinforced the requirement for appropriate processes to identify and verify customers as part of the AML framework.
G.S.R. 1078(E), 31 October 2018	Increased the period prescribed under Rule 9(1A) from three days to ten days. The amendment gave reporting entities additional time to complete the specified customer due diligence requirements.
G.S.R. 108(E), 13 February 2019	Further strengthened Rule 9 through amendments to the customer due diligence framework. The changes introduced additional requirements relating to customer identification and verification and further developed the AML framework.
G.S.R. 381(E), 28 May 2019	Established specific customer due diligence provisions for prisoners opening or maintaining bank accounts. The amendment permitted the officer in charge of the jail to certify the customers signature or thumb impression and allowed such accounts to continue operating subject to the annual submission of a proof of address certificate issued by the same authority.
G.S.R. 582(E), 19 August 2019	Introduced digital KYC, equivalent electronic documents and offline Aadhaar verification under the PML Rules, 2005. The amendment revised Rule 9 to recognise different methods of customer identification and established a digital KYC process involving live photographs, geotagging, OTP based authentication and prescribed verification procedures.
G.S.R. 669(E), 18 September 2019	Introduced the definition of depository receipt and streamlined customer due diligence requirements for specified foreign investments. The amendment permitted reporting entities to rely on beneficial ownership requirements prescribed by notified foreign jurisdictions for specified investments. It also provided certain exemptions for listed companies and their subsidiaries from identifying and verifying individual shareholders or beneficial owners in specified circumstances.
G.S.R. 840(E), 13 November 2019	Permitted customers undergoing Aadhaar based identity verification to declare a current address that differed from the address recorded in the Central Identities Data Repository. The amendment allowed reporting entities to accept a self declaration of the customers current address for customer due diligence purposes.
G.S.R. 228(E), 31 March 2020	Granted temporary relief to small accounts that were due for closure because of pending customer due diligence requirements. The amendment permitted such accounts to remain operational from 1 April 2020 to 30 June 2020 and authorised the Central Government to extend the period further in view of the COVID 19 pandemic.
G.S.R. 251(E), 13 April 2020	Granted temporary relief to small accounts that were due for closure because of pending customer due diligence requirements. The amendment permitted such accounts to remain operational from 1 April 2020 to 30 June 2020 and authorised the Central Government to extend the period further in view of the COVID 19 pandemic.
G.S.R. 254(E), 16 April 2020	amendment covered reports under Rule 3(1)(A), (B), (BA), (C) and (E) for March, April and May 2020 and reports under Rule 3(1)(F) for the January to March 2020 quarter, with submission permitted up to 30 June 2020.
G.S.R. 798(E), 28 December 2020	Included real estate agents with an annual turnover of Rupees 20 lakh or more within the category of persons carrying on a designated business or profession under the PMLA. This brought qualifying real estate agents within the reporting entity framework and made them subject to the applicable AML and customer due diligence requirements.
G.S.R. 575(E), 13 July 2022	Established specific AML and KYC requirements for reporting entities operating within an International Financial Services Centre. The amendment designated the head of the reporting entity in India as the designated officer for IFSC entities, expanded the range of officially valid documents available to foreign nationals, introduced the definition of International Financial Services Centre into the Rules and provided exemptions from specified Central KYC Records Registry requirements for foreign national customers of IFSC reporting entities.
S.O. 1074(E), 7 March 2023	Lowered the beneficial ownership threshold to 10 percent and introduced requirements for group wide AML policies. The amendment also introduced definitions for group, politically exposed person and non profit organisation, strengthened customer due diligence requirements applicable to legal persons and trusts and established registration requirements for eligible non profit organisations.
G.S.R. 652(E), 4 September 2023	Further strengthened the AML framework by enhancing requirements relating to beneficial ownership, group wide AML policies and customer due diligence. The amendment also refined provisions concerning groups, politically exposed persons and non profit organisations, strengthened due diligence requirements for legal persons and trusts and introduced further registration requirements for eligible non profit organisations.
G.S.R. 745(E), 17 October 2023	Strengthened customer due diligence by requiring customer identity to be verified through reliable and independent sources. The amendment also enhanced group wide AML programmes, required suspicious transaction reports to be submitted within the prescribed timeframe after suspicion was established and reinforced confidentiality requirements relating to AML records and reporting.
G.S.R. 419(E), 19 July 2024	Enhanced the Central KYC Records Registry framework by requiring reporting entities to use the KYC Identifier when retrieving customer records. The amendment restricted requests for duplicate KYC documents to specified circumstances, introduced a seven day timeframe for updating KYC records and required reporting entities to retrieve and use updated customer information maintained in the Central KYC Records Registry.

The PML (Manner of Receiving the Records Authenticated Outside India) Rules, 2005

Rules for accepting client records authenticated outside India, relevant where a debenture trustee onboards a non resident client or a foreign portfolio investor and must rely on documents executed abroad.

CFT Legislation

The Unlawful Activities (Prevention) Act, 1967 (UAPA)

The counter terrorism law. Section 51A requires a debenture trustee to screen clients against the designated lists and to freeze, without delay, the funds and securities of listed persons and entities. The duty binds every debenture trustee, whatever its size.

Procedure For Implementation of Section 51A Of the UAPA (Order Dated 2 February 2021; Corrigendum Dated 15 March 2023 And 29 August 2023)

The official procedure a debenture trustee follows to apply Section 51A, including how to act on a designated list match. The SEBI guidelines fold these steps into the debenture trustee to an issue’s screening and freezing controls.

CPF Legislation

The Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (WMD Act)

The proliferation financing law. Section 12A provides the legal basis for targeted financial sanctions relating to the financing of weapons of mass destruction and applies to debenture trustees alongside banks and financial institutions.

Procedure for Implementation of Section 12A of the WMD Act (dated 1 September 2023)

The official procedure for applying Section 12A mirrors the screening and freezing steps that Section 51A sets for terrorism financing.

The WMD and their Delivery Systems (Prohibition of Unlawful Activities) Implementation Rules, 2016

Rules implementing the WMD Act and supporting the proliferation financing controls a debenture trustee must operate.

Overarching Obligations

The cross cutting systems and procedures that sit above any single regulator and carry a debenture trustee’s KYC data and reports.

CERSAI Central KYC Records Registry (CKYCR) Operating Guidelines, 2025

Govern the central registry that stores client KYC records for reuse across the financial system. A debenture trustee files client KYC data to the CKYCR, retrieves an existing record on onboarding, and updates it within the prescribed window when details change, cutting duplicate paperwork for investors.

SEBI KYC Registration Agency Regulations, 2011

Govern the KYC Registration Agencies that store and share client KYC records across SEBI-registered intermediaries. An underwriter uploads a new client’s KYC documents to a KRA, checks an incoming client’s KYC status before onboarding, and flags or updates the record when the client’s details change, so the same KYC is not repeated for every intermediary the client deals with.

FINnet 2.0 Reporting Formats (2024) and the FINGate 2.0 User Manuals

Define the electronic formats and the gateway through which a debenture trustee files its cash, suspicious and other prescribed reports to FIU-IND, in the current FINnet 2.0 and FINGate 2.0 environment.

eKYC and Section 11A Aadhaar Authentication for the Securities Market

SEBI’s circular on the eKYC authentication facility under Section 11A of the PMLA lets debenture trustees use Aadhaar based verification for resident clients within the statutory and Supreme Court limits, giving a lawful digital onboarding route.

Sectoral

The market regulator and the instruments it issues. This is the sector specific layer, and the SEBI Master Circular for Debenture Trustees and the SEBI AML/CFT Guidelines are the instruments a debenture trustee works from most closely.

Securities and Exchange Board of India (SEBI)

SEBI Master Circular for Debenture Trustees

The star instrument for a debenture trustee. This Master Circular consolidates the conduct requirements for debenture trustees, from registration and due diligence on an issue to security creation, covenant monitoring, disclosures and default handling, and it is the document into which the KYC and AML obligations are read for the trusteeship business. It is where a debenture trustee should look first for a rule that applies to how issuers and protects debenture holders.

SEBI Guidelines on AML Standards and CFT Obligations of Securities Market Intermediaries (6 June 2024)

The working AML rulebook for every SEBI registered intermediary, updated on 6 June 2024. It carries the client due diligence, risk categorisation, beneficial ownership, ongoing monitoring, record-keeping, reporting and sanctions requirements into the securities market, and it replaces the earlier 2010 and 2014 AML master circulars. For a debenture trustee, it is the source of the detailed AML duties that sit alongside the conduct rulebook.

SEBI Master Circular on KYC Norms for the Securities Market (12 October 2023)

The consolidated KYC framework for the securities market, read with the 12 October 2023 modification circular and the clarification on the use of technology for KYC, which sets how a debenture trustee identifies and verifies its clients and maintains their records through the KYC Registration Agencies.

eKYC, KYC clarification circulars and SEBI FAQs

SEBI’s circular on the eKYC authentication facility under Section 11A (5 November 2019), the clarification on the use of technology for KYC (24 April 2020) and the frequently asked questions on KYC norms give a debenture trustee practical guidance on digital onboarding and record-keeping.

Miscellaneous Official Reports and Guidance

Official reports and guidance that are not binding rules but shape how a debenture trustee reads its risk and the wider enforcement picture.

FIU-IND Annual Report 2024 to 2025

The Financial Intelligence Unit’s yearly account of reporting volumes, typologies and enforcement trends, useful for a debenture trustee calibrating what unusual client or trading activity looks like across the market.

Directorate of Enforcement Annual Report 2025 to 2026

The ED’s yearly summary of PMLA investigations, attachments and prosecutions, a reminder of how the criminal side of the regime operates.

FIU-IND and its Core Functions and FAQs

FIU-IND’s explanation of its own role and a set of frequently asked questions, a plain language reference on registration and reporting expectations.

MHA National Counter Terrorism Policy and Strategy

The Ministry of Home Affairs statement of national counter terrorism policy, background that frames the UAPA sanctions obligations a debenture trustee must apply.

International Standards

The global standards India’s framework is built to meet, and against which a debenture trustee’s controls are ultimately judged.

FATF Recommendations

The Financial Action Task Force’s forty Recommendations are the international baseline for AML and CFT. FATF updated Recommendation 6 on targeted financial sanctions in June 2026.

FATF Mutual Evaluation Report on India, 2024 (and Executive Summary)

The peer assessment of India’s AML and CFT regime, which found India largely compliant and set the direction of travel that continues to shape the supervision of debenture trustees and other securities intermediaries.

Allied Laws

The wider body of law that defines the securities statutes and the predicate offences and enforcement machinery around money laundering. A debenture trustee operates under the securities statutes, while the predicate and enforcement Acts shape the risk it must assess and the conduct it may need to report.

The allied laws that most often bear on a debenture trustee’s risk. The Bharatiya Nagarik Suraksha Sanhita 2023 is India’s new code of criminal procedure, replacing the earlier CrPC. The Bharatiya Nyaya Sanhita 2023 is India’s new penal code, replacing the earlier IPC.

The Black Money Undisclosed Foreign Income and Assets and Imposition of Tax Act 2015 taxes and penalises undisclosed foreign income and assets held by Indian residents. The Central Vigilance Commission Act 2003 establishes the CVC as India’s apex anti corruption watchdog for government bodies.

The Chemical Weapons Convention Act 2000 implements India’s obligations under the international Chemical Weapons Convention, banning their production and use. The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act 1974, also known as COFEPOSA, allows preventive detention to curb smuggling and foreign exchange violations.

The Foreign Contribution Regulation Act 2010 regulates the receipt and use of foreign funding by individuals and organisations in India. The Foreign Exchange Management Act 1999 governs foreign exchange transactions and cross border trade and payments in India.

The Fugitive Economic Offenders Act 2018 enables confiscation of assets of economic offenders who flee India to evade prosecution. The Narcotic Drugs and Psychotropic Substances Act 1985 prohibits and penalises the production, possession, and trafficking of narcotic drugs.

The Prevention of Corruption Act 1988 criminalizes bribery and corrupt practices by public servants. The Securities and Exchange Board of India Act 1992 establishes SEBI as the regulator of India’s securities markets.

The SEBI Debenture Trustees Regulations 1993 set registration, eligibility, and conduct norms for entities acting as debenture trustees. The SEBI Intermediaries Regulations 2008 lay down common registration and conduct obligations for various SEBI regulated market intermediaries.

The SEBI Issue and Listing of Municipal Debt Securities Regulations 2015 govern how municipalities can issue and list debt securities on stock exchanges. The Smugglers and Foreign Exchange Manipulators Forfeiture of Property Act 1976, also known as SAFEMA, allows forfeiture of illegally acquired property of smugglers and foreign exchange offenders.

The Arms Act 1959 regulates the acquisition, possession, manufacture, sale, and transport of firearms and ammunition in India. The Benami Transactions Prohibition Act 1988 prohibits property transactions where the ownership is held in the name of a person other than the one who actually paid for it and allows confiscation of such benami property.

Core AML/CFT/CPF Obligations for Debenture Trustees in India

Across that framework, the regulations require a debenture trustee to do the following. This article keeps each at the level required by law; a compliance requirements guide explains how to do each.

Register with FIU-IND. Enrol on the FINnet 2.0 / FINGate 2.0 portal so the debenture trustee can file its reports.

Appoint officers. Appoint a Designated Director and a management level Principal Officer under Rule 7 of the PMLR and the SEBI Guidelines. The same person cannot hold both roles, and both are informed to FIU-IND and, where applicable, SEBI.

Conduct the internal risk assessment. Run an ML and TF risk assessment across clients, products, channels and geographies, document it, and take its outcome to the board, as the SEBI AML/CFT Guidelines require.

Document AML policy, controls and procedures. Adopt a board approved policy that turns the risk assessment into the debenture trustee’s operating procedures.

Client identification and CDD. Identify and verify every client and the beneficial owner (a controlling interest of more than 10 per cent for a company or partnership, and more than 15 per cent for an unincorporated association or body of individuals, with the separate trust test), with enhanced due diligence for politically exposed persons and high risk clients, under Section 11A of the PMLA, Rule 9 of the PMLR and the SEBI KYC Master Circular. Given the trusteeship business, due diligence on the issuer and the debenture holders, identifying the beneficial owners behind corporate issuers and holders, and understanding the assets charged as security, are central.

Ongoing monitoring and periodic updation. Monitor the issuer’s covenants and the debenture holdings on an ongoing basis, and refresh KYC at least once every 2, 8 and 10 years for high, medium and low risk clients. Review each client’s risk categorisation at least once every six months.

Sanctions screening. Screen clients and beneficial owners against the designated lists under Section 51A of the UAPA and Section 12A of the WMD Act, and freeze and report any match, verifying the relevant UNSC and domestic lists daily.

Regulatory reporting. File cash transaction reports for cash above Rupees 10 lakh, suspicious transaction reports of any value, non profit organisation receipt reports and counterfeit currency reports under Rule 3 and Rule 8 of the PMLR. Cash and related reports are filed monthly, by the 15th day of the succeeding month; suspicious transaction reports are filed promptly once the Principal Officer is satisfied, through FINnet 2.0.

Record management, CKYCR and FINnet 2.0. Keep transaction records for five years from the date of the transaction, and identity records, account files and correspondence for five years after the relationship ends, under Section 12 of the PMLA. Upload client KYC records to the CKYCR under Rule 9A, and file all prescribed reports through FINnet 2.0.

Training and awareness. Train staff by role to apply the controls and recognise red flags in trusteeship work, such as shell or connected issuers raising debt, a small group of connected or nominee debenture holders in a private placement, opaque security structures, and unusual flows of enforcement or redemption proceeds.

Independent testing and audit. Test the programme through internal audit, compliance assurance or independent review, and close every finding.

Run group wide controls. Where the debenture trustee is part of a group, apply AML and CFT programmes at group level, including for branches and majority owned subsidiaries, as the SEBI Guidelines require.

What This Article Does Not Cover

This article explains the laws and regulatory instruments that apply to debenture trustees. It does not provide a control by control compliance manual, and it does not restate the SEBI (Debenture Trustees) Regulations or the trust deed and disclosure rules except where they bear on the AML duties. For implementation, a debenture trustee separately documents issuer and holder due diligence, KYC and CDD procedures, beneficial owner identification, record-keeping, sanctions screening, monitoring, suspicious transaction escalation, staff training, audit testing and board reporting. Those controls are the subject of the companion compliance guide.

To see how the debenture trustee framework fits within the sector, see AML laws and regulations for intermediaries in India, and to place it within the national picture, see AML laws and regulations in India.

From Regulation to Compliance: Your Next Step

Knowing the law is step one. These obligations only protect a debenture trustee when they are built into a working programme of risk assessment, policy, due diligence, monitoring, screening, reporting, training and independent review. For a debenture trustee, due diligence on the issuer and the debenture holders, identifying the beneficial owners behind them and watching for connected party or opaque debt structures are the controls that matter most. Understanding the stages of money laundering and how the sanctions screening process works is a useful starting point.

Frequently Asked Questions

What is a debenture trustee?

A person registered with SEBI under section 12 of the SEBI Act, 1992 and the SEBI (Debenture Trustees) Regulations, 1993, who acts as trustee to a trust deed securing an issue of debentures or debt securities, holding the security for the debenture holders, monitoring the issuer and enforcing on default. In the PMLA it is a trustee to a trust deed, an intermediary and a reporting entity.

Are debenture trustees reporting entities under the PMLA?

Yes. A trustee to a trust deed is expressly named as an intermediary in section 2(1)(n) of the PMLA, so a debenture trustee is a reporting entity under section 2(1)(wa). No separate designation notification is needed; it is inside the regime by virtue of its SEBI registration.

Which SEBI instruments apply to a debenture trustee?

The SEBI Master Circular for Debenture Trustees, updated on 13 August 2025, is the consolidated conduct rulebook, read with the SEBI AML/CFT Guidelines for Securities Market Intermediaries of 6 June 2024 and the SEBI Master Circular on KYC Norms for the Securities Market of 12 October 2023. Together they carry the AML and KYC duties into the trusteeship business.

What AML risks are specific to a debenture trustee?

A debenture trustee stands between an issuer and its debenture holders, so its AML risks sit in shell or connected issuers raising debt to move funds, in privately placed issues subscribed by a small group of connected or nominee holders, in opaque security structures, and in the flow of enforcement or redemption proceeds on a default. Due diligence on the issuer and the holders and identifying the beneficial owners behind them are the core controls.

What must a debenture trustee report to FIU-IND?

Suspicious transaction reports of any value, cash transaction reports where cash above Rupees 10 lakh is involved, non profit organisation receipt reports and counterfeit currency reports. Cash and related reports are filed monthly by the 15th of the succeeding month, and suspicious transaction reports promptly once the Principal Officer is satisfied, through FINnet 2.0.

Do the sanctions rules apply to debenture trustees?

Yes. The screening duties under Section 51A of the UAPA and Section 12A of the WMD Act apply to every debenture trustee. A debenture trustee screens issuers, debenture holders and their beneficial owners against the United Nations and domestic designated lists and reports and acts on any match without delay.

Official sources and review

Last reviewed: August 2026. This guide is grounded in the following primary official sources, linked to their official source where available.

Prevention of Money-Laundering Act, 2002 (India Code)

Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 (India Code)

SEBI Guidelines on AML Standards and CFT Obligations of Securities Market Intermediaries, 6 June 2024 (SEBI)

SEBI Master Circular on KYC Norms for the Securities Market, 12 October 2023 (SEBI)

Unlawful Activities (Prevention) Act, 1967 and Section 51A procedure (MHA)

WMD Act, 2005 and its Section 12A implementation procedure (India Code)

FATF Recommendations, including the June 2026 update to Recommendation 6

FATF Mutual Evaluation Report on India, 2024

Basel Committee, Sound Management of Risks Related to ML and TF (2014, revised July 2020)

Financial Intelligence Unit – India, including the Annual Report 2024-25

Central KYC Records Registry (CKYCR) Operating Guidelines, 2025 (CERSAI)

Enforcement Directorate Annual Report 2025 to 2026

This guide covers money laundering law and compliance, a sensitive area where the rules change; confirm the current position for your firm with a qualified professional before acting.

Why work with AML India

AML India helps debenture trustees meet their PMLA and SEBI obligations, from risk assessment and policy through to issuer and holder due diligence, screening, monitoring, reporting, training and independent review.

Industries we serve: debenture trustees, merchant bankers, underwriters, registrars, custodians, stock brokers, mutual funds and other securities intermediaries, alongside banks, NBFCs, insurers, DNFBPs and IFSC and GIFT City entities.

Want to confirm what the SEBI framework means for your firm?

AML India can walk you through the SEBI Master Circular for Debenture Trustees and the AML/CFT Guidelines and build a proportionate issuer and holder due diligence programme for your trusteeship business

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik