AML Laws and Regulations for Mutual Funds and AMCs in India

Last Updated on: 21st August 2026 | Last Reviewed on: 21st August 2026

Key Takeaways at a Glance

Who is covered: mutual funds registered under the SEBI (Mutual Funds) Regulations, 1996 and the asset management companies that manage their schemes, are covered as reporting entities under the PMLA.
Why they are covered: mutual funds and their AMCs are intermediaries registered under section 12 of the SEBI Act and therefore fall within section 2(1)(n) of the PMLA, making them reporting entity under section 2(1)(wa).
Governing laws: the PMLA, 2002 and the PML (Maintenance of Records) Rules, 2005; the SEBI Master Circular for Mutual Funds, the AMFI AML standards, 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 of India (FIU-IND); the Enforcement Directorate (ED) enforces the PMLA.
Core duties: internal risk assessment, investor due diligence and KYC, beneficial owner identification, periodic updation, transaction monitoring, prescribed transaction reporting, record-keeping for five years 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.

A mutual fund is a SEBI-regulated investment vehicle that pools investors’ money into schemes, while its asset management company (AMC) manages the scheme and carries out functions including investor onboarding. Mutual funds and AMCs fall within the reporting entity framework under the Prevention of Money Laundering Act, 2002, as intermediaries. Their AML, CFT and CPF obligations arise mainly from the PMLA, the PML (Maintenance of Records) Rules, 2005, the SEBI Master Circular for Mutual Funds, the AMFI AML standards, the SEBI AML/CFT Guidelines for securities market intermediaries, the SEBI KYC Master Circular, Section 51A of the UAPA, Section 12A of the WMD Act, and the FIU-IND reporting framework. SEBI supervises mutual funds and AMCs, and reports are filed with FIU-IND. This guide sits within the wider set of guides for securities market intermediaries.

The core instruments at a glance

Instrument	What it does for a mutual fund or AMC
PMLA, 2002	The parent Act. Brings the mutual fund and its AMC in as intermediaries and creates the duties of investor due diligence, record-keeping and reporting.
PML (Maintenance of Records) Rules, 2005	Operationalises the Act and Set out what to report and when, how to identify investors and beneficial owners, and the duty to appoint officers.
SEBI Master Circular for Mutual Funds (20 March 2026)	The consolidated conduct rulebook for mutual funds and AMCs, into which the KYC and AML obligations are read.
AMFI AML standards (January 2024)	Industry minimum standards on AML, CFT and KYC that operationalise the framework across the mutual fund industry.
SEBI AML/CFT Guidelines (6 June 2024)	The working AML rulebook for every securities market intermediary, including mutual funds.
UAPA Section 51A and WMD Act Section 12A	Impose targeted financial sanctions for terrorism and proliferation financing.

What Counts as a Mutual Fund and AMC in India?

A mutual fund is a vehicle established as a trust under the SEBI (Mutual Funds) Regulations, 1996, to raise money from investors through one or more schemes for investment in securities. The fund is managed by an asset management company appointed by the trustees, while its assets are held by a custodian and investor records are maintained by a registrar and transfer agent. In practice, the AMC handles the fund’s day-to-day operations, including scheme management and investor onboarding, transactions and redemptions, and plays the central role in implementing AML requirements. Accordingly, this guide addresses the mutual fund and its AMC together.

The money laundering risk of a mutual fund and its AMC is a retail-scale onboarding risk. It sits in the very large number of investors onboarded through many channels, including distributors and online platforms, where identity and beneficial ownership must be verified at volume; in third-party payments and redemptions to accounts other than the investor’s own, which break the link between the investor and the money; in benami folios (account) and structuring of investments to stay below thresholds; and in high-value or unusual subscription and redemption patterns. The AML framework therefore leans on robust investor KYC and beneficial owner identification, on channel and third-party controls, and on transaction monitoring across folios.

Are Mutual Funds and AMCs Reporting Entities Under the PMLA?

Yes. Mutual funds and their AMCs fall within the reporting entity framework under the Prevention of Money-Laundering Act, 2002. Section 2(1)(wa) includes an intermediary within the definition of a reporting entity, while section 2(1)(n) covers intermediaries associated with the securities market and registered under section 12 of the SEBI Act, 1992. Accordingly, mutual funds and AMCs covered by this intermediary definition are reporting entities by virtue of their regulatory status.

This places a mutual fund and its AMC 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 mutual fund business, but the reporting entity status is not optional.

Supervisory authority for mutual funds and AMCs in India

The Securities and Exchange Board of India (SEBI) is the principal regulator and supervisor of mutual funds and their asset management companies. It registers and regulates mutual funds under the SEBI (Mutual Funds) Regulations, 1996, prescribes their AML, CFT, CPF and KYC requirements and supervises compliance. The sector-specific framework includes the SEBI Master Circular for Mutual Funds, also applicable to asset management companies, updated on 20 March 2026, together with the AMFI Minimum Standards Recommendations on AML, CFT and KYC, which provide industry-level implementation standards. 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.

The Financial Intelligence Unit of India receives, analyses and disseminates the reports a mutual fund or AMC 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 Mutual Funds and AMCs in India

The legal framework governing mutual funds and AMCs is spread across multiple instruments rather than contained in a single source. It is best understood as a layered framework, grouped into the core legislation, the overarching obligations, the sectoral regulator and its instruments, the miscellaneous official reports, the international standards, and the allied laws.

Core Legislation

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

AML Legislation

Prevention of Money Laundering Act, 2002 (PMLA)

The primary statute governing money laundering and reporting entity obligations in India. It establishes the offence of money laundering and sets out core obligations for reporting entities, including client due diligence and record-keeping under sections 11A and 12 respectively. Mutual funds and AMCs fall within the reporting entity framework through the intermediary definition in section 2(1)(n), read with section 2(1)(wa), making the PMLA applicable to their activities.

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

The rules made under the PMLA provide the operational framework for reporting entities. They prescribe what must be reported and the applicable timelines under Rules 3 and 8, customer and beneficial owner identification requirements under Rule 9, and the appointment of designated officers under Rule 7. For mutual funds and AMCs, SEBI is the relevant regulator under Rule 2(1)(fa).

The PMLR has been amended through numerous Gazette notifications and orders, forming the basis of the legal-history timeline set out below.

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	It extended the Rule 2 concept of a suspicious transaction to reach dealings lacking economic rationale or bona fide purpose and those indicating terrorism financing, revised Rule 3 for cash in forged or counterfeit currency, added Rule 8 on furnishing information to the Director, and reduced the document copies requirements under Rule 9 from three to one.
G.S.R. 816(E), 12 November 2009	It inserted the non-profit organisation and Regulator definitions, revised the suspicious transaction test, and made non-profit receipts above Rupees 10 lakh reportable. Imposed ten years as retention period under Rule 6, and rebuilt Rule 9 to require beneficial owner identification, ongoing due diligence, a ban on anonymous accounts and a Client Identification Programme.
G.S.R. 76(E), 12 February 2010	Revised Rules 3, 4, 5, 7 and 9 on record-keeping and the reporting mechanisms and added the first Explanation to Rule 9(1A), defining the beneficial owner as the natural person who ultimately owns or controls a client or on whose behalf a transaction is carried out.
G.S.R. 508(E), 16 June 2010	Amended Rules 2, 9 and 10 on definitions, client due diligence and record-keeping, altering the way a reporting entity identifies its clients and what it must retain, as part of the 2010 tightening of the CDD and records regime.
G.S.R. 980(E), 16 December 2010	Inserted the small account regime, defining the Designated Officer and the small account, drawing the NREGA job card and the Aadhaar letter into the officially valid documents in Rule 2, and adding Rule 9(2A) on how such an account is opened and monitored.
G.S.R. 481(E), 24 June 2011	Provided the short title, under Rule 1 to shorten the long 2005 name into the Prevention of Money Laundering (Maintenance of Records) Rules, the PMLR label in use ever since.
G.S.R. 576(E), 27 August 2013	Revised Rules 2 and 3 and added provisions after Rule 10, covering definitions, the cash and suspicious transaction reporting duties and the records framework so that they matched the reporting obligations.
G.S.R. 288(E), 15 April 2015	Amended definitions under Rule 2; to expand and clarify the scope of the rules as whole.
G.S.R. 544(E), 7 July 2015	Revised Rules 2, 9, 10 and inserted Rule 9A covering definitions, client due diligence and record-keeping, revising the way a reporting entity identifies its clients and the records it keeps, within a substantial 2015 rewrite of the CDD and records provisions.
G.S.R. 730(E), 22 September 2015	Added an explanation under Rule 2 clarifying that a marriage certificate may be accepted as a supporting document for a subsequent name change in an officially valid document.
G.S.R. 882(E), 18 November 2015	Extended the Rule 9A timeline for the Central Government to establish the Central KYC Records Registry from 90 to 180 days from the commencement of the PML Amendment Rules.
G.S.R. 347(E), 12 April 2017	Amended Rule 2 and added Rule 9B, folding the Central KYC Records Registry into the Rules, creating the duty to file client KYC records centrally and the basis to reuse them, the structural addition behind today’s CKYCR.
G.S.R. 538(E), 1 June 2017	Revised Rules 2 and 9 to add Aadhaar into client due diligence, prescribing Aadhaar-based identification and authentication for KYC, an approach the Supreme Court’s Aadhaar ruling later recast.
G.S.R. 1038(E), 21 August 2017	Revised the Rule 2 definitions, updating the defined terms that decide how the operative rules apply.
G.S.R. 1318(E), 23 October 2017	A later 2017 amendment of the Rule 2 definitions, keeping the defined terms up to date as the framework advanced.
G.S.R. 456(E), 16 May 2018	Inserted a clause in Rule 9 requiring reporting entities to align their customer due diligence programmes with applicable sector-specific guidelines and specifying the requirements those guidelines must address.
G.S.R. 1078(E), 31 October 2018	Amended Rule 9 to extend the deadline for filing a customer’s electronic CDD records from 3 days to 10 days.
G.S.R. 108(E), 13 February 2019	Revised Rules 2 and 9 covering definitions and client due diligence, following the legislative changes to Aadhaar use, revising the permitted ways of conducting identification.
G.S.R. 381(E), 28 May 2019	Amended Rule 9 regarding the identification and verification process and the routes for confirming a client’s identity, part of the post-Aadhaar reshaping of CDD.
G.S.R. 582(E), 19 August 2019	Revised Rules 2 and 9 and added provisions after Rule 11, addressing definitions, client due diligence and the supporting provisions on information and records, one of the broader 2019 updates.
G.S.R. 669(E), 18 September 2019	Further revised Rules 2 and 9 to update key definitions and strengthen customer due diligence requirements relating to depository receipts.
G.S.R. 840(E), 13 November 2019	Revised Rule 9 with further edits to the identification and verification requirements, closing out the 2019 sequence of CDD changes.
G.S.R. 228(E), 31 March 2020	Extended the validity of small accounts for the year 2020 and any subsequent period notified by the Central Government.
G.S.R. 251(E), 13 April 2020	Amended Rule 8, governing the submission of transaction reports to FIU-IND, by revising the prescribed reporting timeline.
G.S.R. 254(E), 16 April 2020	A further Rule 8 timeline revision for that specific quarter.
G.S.R. 798(E), 28 December 2020	A landmark that carried the regime beyond the financial sector. Read with G.S.R. 799(E) and 800(E) of the same day, it designated real estate agents and dealers in precious metals and stones and designated their regulator, taking the perimeter out to the non-financial businesses.
G.S.R. 575(E), 13 July 2022	Added the International Financial Services Centre definition with a tailored beneficial owner provision for IFSC entities and inserted an IFSC proviso into Rule 9A on the CKYCR, of note for a mutual fund or AMC operating a scheme from an IFSC or GIFT City.
S.O. 1074(E), 7 March 2023	A major amendment that added definitions of politically exposed persons, non-profit organisations and group and added duty for making group-wide AML policies under Rule 3A and cut the company beneficial ownership threshold from 25 to 10 per cent, with a matching change to Rule 9(3)(e), of direct relevance to a mutual fund or AMC identifying the owners behind a corporate or institutional investor.
G.S.R. 652(E), 4 September 2023	The second major 2023 amendment that put the Principal Officer at management level, cut the partnership beneficial ownership threshold from 15 to 10 per cent, added an Explanation of control, obliged trustees to disclose their status, and required the results of any Rule 3 and Rule 9 analysis to be kept among the records, all of which bear on a mutual fund or AMC vetting corporate issuers, sub-mutual funds and AMCs and their controllers.
G.S.R. 745(E), 17 October 2023	Revised Rules 2, 3, 8 and 9, addressing definitions, the reporting duties and client due diligence, adjusting several operative provisions together to close the 2023 changes.
G.S.R. 419(E), 19 July 2024	Revised Rule 9(1C) on the KYC Identifier and set a deadline of seven days to update a CKYCR record after any change, added a duty to fetch the updated record, and recast Rule 9A(2)(g) on filing, retrieving and using registry records, sharpening how current central KYC data is maintained.

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

Rules made under the PMLA for accepting client records authenticated outside India, relevant where a mutual fund or AMC 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 primary statute governing terrorism financing in India. Its Section 51A requires a mutual fund and AMC 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 mutual fund and AMC, 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 mutual fund and an AMC follow to apply Section 51A, including how to act on a designated list match. The SEBI guidelines fold these steps into the mutual fund and AMCs’ working programme.

CPF Legislation

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

The primary statute for governing proliferation financing, i.e., the financing of weapons of mass destruction in India. Its Section 12A provides the legal basis for targeted financial sanctions relating to proliferation financing and applies to mutual funds and AMCs alongside other reporting entities.

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

The official procedure for applying Section 12A sets out screening and freezing measures that correspond to the framework established under section 51A for terrorism financing sanctions.

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

Rules made for the implementation of the WMD Act and supporting the proliferation financing controls that a mutual fund and AMC must operate with.

Overarching Obligations

The cross-cutting systems and procedures that sit above any single regulator and carry a mutual fund and AMC’s KYC data and reports.

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

These guidelines govern the central KYC records registry and the handling of KYC records by reporting entities. A mutual fund or AMC may upload, and update customer KYC records as required and may retrieve an existing KYC record from the CKYCR for customer identification and due diligence, reducing duplication and promoting consistency across the financial system.

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

These instruments define the electronic formats and the gateway through which a mutual fund or AMC submits its cash, suspicious and other prescribed reports to FIU-IND, in the current FINnet 2.0 and FINGate 2.0 environment.

Sectoral Guidelines

The market regulator and the instruments it issues. This is the sector-specific layer, and the SEBI Master Circular for Mutual Funds and the SEBI AML/CFT Guidelines are the instruments a mutual fund and AMC work from most closely.

Securities and Exchange Board of India (SEBI)

SEBI Master Circular for Mutual Funds

The principal sector-specific regulatory framework for mutual funds and AMCs. The master circular consolidates SEBI’s requirements covering areas such as scheme operations, investor onboarding, valuation, transactions, and disclosures and should be read alongside SEBI’s dedicated AML/CFT and KYC guideline. For AML matters, it provides the mutual fund sectoral context, while the specific AML/CFT and KYC requirements are set out in the applicable SEBI circulars and master circulars.

AMFI Minimum Standards Recommendations on AML, CFT and KYC (January 2024)

The Association of Mutual Funds in India minimum standards translate the PMLA and SEBI framework into practical, industry-wide AML, CFT and KYC procedures for mutual funds and their distributors, promoting consistent investor onboarding and monitoring across the industry.

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

The principal AML/CFT framework for SEBI-registered intermediaries, updated on 6 June 2024. It sets out requirements on customer due diligence, risk categorisation, beneficial ownership, ongoing monitoring, record-keeping, reporting and compliance with sanctions requirements. It superseded the earlier 2010 and 2014 AML master circulars and provides the detailed AML, CFT and CPF requirements applicable to mutual funds and AMCs alongside the broader mutual fund regulatory framework.

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

The consolidated KYC framework for the securities market, read with the 6 June 2024 modification circular, sets out the requirements for customer identification, verification, KYC records maintenance and the use of KYC registration Agencies (KRAs) by mutual funds, AMCs and other SEBI-registered intermediaries.

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 mutual funds and AMCs practical guidance on digital onboarding and record-keeping.

Miscellaneous

Official reports and guidance that are not binding rules but shape how a mutual fund or AMC reads its risk and the wider enforcement picture.

FIU-IND Annual Report 2024-25

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

Directorate of Enforcement Annual Report 2025-26

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

It provides the broader counter-terrorism policy and institutional context for the sanctions and terrorist financing obligations that mutual funds and AMCs must implement under the UAPA and related framework.

International Standards

The global standards India’s framework is built to meet, and against which a mutual fund or AMC’s controls are ultimately judged.

FATF Recommendations

The Recommendations provide the international baseline for AML, CFT and CPF. For mutual funds and AMCs, Recommendations 9 to 23 are particularly relevant, as they establish preventive measures for financial institutions and intermediaries. The recommendations were last updated in June 2026, including an update to Recommendation 6 relating to targeted financial sanctions, which is relevant to sanctions screening obligations of reporting entities.

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

The assessment report of India’s AML and CFT regime, which found India largely compliant and set the direction of movement that continues to shape the supervision of mutual funds and AMCs and other securities intermediaries.

IOSCO Objectives and Principles of Securities Regulation

The International Organisation of Securities Commissions standards for securities regulators, the global benchmark SEBI’s own conduct and AML expectations for mutual funds and AMCs are built to meet.

Basel Committee, Sound Management of Risks Related to Money Laundering and Financing of Terrorism (2020)

The Basel Committee’s sound management guidance, a supervisory benchmark for embedding AML risk management that informs a mutual fund or AMC’s own framework, even though it is bank-facing in origin.

Allied Laws

The wider body of law that defines the securities statutes, the predicate offences and enforcement machinery around money laundering. A mutual fund or AMC 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 most relevant to mutual funds and AMCs arise from the securities, financial, criminal, tax, foreign exchange and asset forfeiture frameworks that interact with the AML, CFT and CPF regime, Key statues include the Securities and Exchange Board of India Act, 1992, which registers and empowers SEBI over mutual funds and AMCs, the Securities Contracts (Regulation) Act, 1956, which governs stock exchanges and securities contracts, the Companies Act, 2013, where corporate structure and governance are subjected.

The broader risk framework also draws on the Foreign Exchange Management Act, 1999, the Bharatiya Nyaya Sanhita, 2023 and the Bharatiya Nagarik Suraksha Sanhita, 2023, the Benami Transactions (Prohibition) Act, 1988, the Prevention of Corruption Act, 1988, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Fugitive Economic Offenders Act, 2018, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Foreign Contribution (Regulation) Act, 2010, the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, the Arms Act, 1959, the Chemical Weapons Convention Act, 2000 and the Central Vigilance Commission Act, 2003.

These laws address underlying predicate offences, illicit proceeds, sanctions, asset forfeiture, foreign exchange and other risks that mutual funds and AMCs may need to consider in their AML, CFT and CPF controls.

Core AML/CFT/CPF Obligations for Mutual Funds and AMCs in India

Across that framework, the regulations require a mutual fund and its AMC 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 mutual fund 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 to be 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 AMC’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 mutual fund business, robust investor identification at volume, beneficial-owner identification for corporate and non-individual investors, and controls over third-party payments and redemptions are central.
Ongoing monitoring and periodic updation. Monitor subscriptions, switches and redemptions across folios on an ongoing basis, and refresh KYC at least once every 2, 8 and 10 years for high, medium and low-risk investors respectively. Review each investor’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 and distributors by role to apply the controls and recognise red flags in mutual funds, such as third-party payments and redemptions, benami folios, structuring of investments below thresholds, and quick redemption soon after a large subscription.
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 AMC 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 mutual funds and asset management companies. It does not provide a control-by-control compliance manual, and it does not restate the SEBI (Mutual Funds) Regulations or the scheme and valuation rules except where they bear on the AML duties. For implementation, a mutual fund and its AMC separately document investor onboarding, KYC and CDD procedures, beneficial owner identification, third-party and channel controls, sanctions screening, transaction monitoring, suspicious transaction reporting, staff and distributor training, audit testing and board reporting. Those controls are the subject of the companion compliance guide.

To see how the mutual fund 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 only the starting point. For a mutual fund and its AMC, compliance depends on translating these requirements into risk-based programme covering risk assessment, policies and procedures, investor due diligence, monitoring, screening, reporting, training and independent review. Particular attention should be given to investor KYC, beneficial owner identification, third-party and channel controls and monitoring across transactions and folios. Understanding the stages of money laundering and how the sanctions screening process works provides a useful foundation for building these controls.

Frequently Asked Questions

What is a mutual fund and its AMC?

A mutual fund is a trust registered under the SEBI (Mutual Funds) Regulations, 1996 that pools investor money into schemes, and the asset management company is the entity appointed to manage those schemes and onboard investors. Both are intermediaries and reporting entities under the PMLA, and the AMC carries the day-to-day AML responsibility.

Are mutual funds and AMCs reporting entities under the PMLA?

Yes. Mutual funds and their AMCs are intermediaries associated with the securities market and registered under section 12 of the SEBI Act, so they fall within section 2(1)(n) and are reporting entities under section 2(1)(wa). No separate designation notification is needed.

Which SEBI and industry instruments apply to a mutual fund?

The SEBI Master Circular for Mutual Funds, also applicable to AMCs, updated on 20 March 2026, is the consolidated conduct rulebook, given operational effect by the AMFI Minimum Standards Recommendations on AML, CFT and KYC of January 2024, and read with the SEBI AML/CFT Guidelines of 6 June 2024 and the SEBI Master Circular on KYC Norms for the Securities Market of 12 October 2023.

What are the main AML risks for a mutual fund?

Mutual fund schemes onboard very large numbers of investors through distributors and online channels, so their main AML risks are weak identity or beneficial owner verification at volume, third-party payments and redemptions to accounts other than the investor’s own, benami folios, and structuring of investments below thresholds. Robust investor KYC, third-party controls and folio-level monitoring are the core defences.

What must a mutual fund report to FIU-IND?

Suspicious transaction reports of any value, cash transaction reports where cash exceeding 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 mutual funds and AMCs?

Yes. The screening duties under Section 51A of the UAPA and Section 12A of the WMD Act apply to every mutual fund and AMC. They screen investors and their beneficial owners against the United Nations and domestic designated lists at onboarding and on an ongoing basis and act on and report any match without delay.

Official sources and review

Last reviewed: July 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

SEBI Master Circular for Mutual Funds, also applicable to AMCs, 20 March 2026 (SEBI)

AMFI Minimum Standards Recommendations on AML, CFT and KYC, January 2024 (AMFI)

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

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

FATF Recommendations

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)

Why work with AML India

AML India helps mutual funds and asset management companies meet their PMLA and SEBI obligations, from risk assessment, policy and procedure to investor due diligence, screening, monitoring, reporting, training and independent review.

Industries we serve: Mutual Funds and Asset Management Companies, Portfolio Managers, Alternative Investment Funds, Stock Brokers, Registrars, Custodians 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 Mutual Funds, the AMFI standards and the AML/CFT Guidelines and build a proportionate investor due diligence and monitoring programme for your mutual fund 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