AML Laws and Regulations for Underwriters in India

Last Updated on: 16th September 2026 | Last Reviewed on: 16th September 2026

Key Takeaways at a Glance

Who is covered: underwriters registered with SEBI under the SEBI (Underwriters) Regulations, 1993, and stock brokers and merchant bankers acting as underwriters, as reporting entities under the PMLA.
Why they are caught: an underwriter 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 Underwriters, 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 counterparties, beneficial owner identification, source of funds scrutiny on devolvement, 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.

Underwriters are reporting entities under the Prevention of Money-Laundering Act, 2002. An underwriter is registered with the Securities and Exchange Board of India to underwrite an issue of securities and agrees to subscribe to any securities not taken up by the public, ensuring the issue is fully subscribed.

Its AML, CFT and CPF duties flow from the PMLA, the PML (Maintenance of Records) Rules, 2005, the SEBI Master Circular for Underwriters, 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 underwriters, 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 an underwriter
PMLA, 2002	The parent anti money laundering legislation. It includes an underwriter within the definition of intermediary and establishes the statutory framework for customer due diligence, record keeping and reporting by reporting entities.
PML (Maintenance of Records) Rules, 2005	Provide the operational requirements for customer identification, beneficial owner identification, transaction reporting, record keeping and the appointment of the Designated Director and Principal Officer.
SEBI Master Circular for Underwriters (11 May 2018)	Compiles the applicable SEBI circulars and directions governing underwriters and their regulatory responsibilities.
SEBI AML/CFT Guidelines (6 June 2024)	Provide the principal AML and CFT requirements applicable to securities market intermediaries, including underwriters.
UAPA Section 51A and WMD Act Section 12A	Provide the statutory framework for targeted financial sanctions relating to terrorism and proliferation financing.
FATF Recommendations	Set out international standards covering preventive measures applicable to financial institutions and designated non financial businesses and professions, including customer due diligence, record keeping, suspicious transaction reporting and measures relating to terrorist financing.

What Counts as an Underwriter in India?

An underwriter is a person engaged in the business of underwriting an issue of securities and registered with SEBI under the applicable regulatory framework. Under the SEBI (Underwriters) Rules, 1993, underwriting means an agreement to subscribe to the securities of a body corporate when the existing shareholders or the public do not subscribe to the securities offered.

A person cannot act as an underwriter without the required SEBI registration. However, a stock broker or merchant banker holding a valid SEBI registration may undertake underwriting activities without obtaining a separate underwriter certificate, subject to the applicable rules and regulations.

The money laundering risk associated with underwriting is principally linked to the issuer, the parties involved in the issue and any securities that devolve on the underwriter.

Risks may arise where a shell or connected issuer uses an issue to raise or move illicit funds, where underwriting arrangements obscure the parties providing the economic funding, or where securities devolve on the underwriter in circumstances that raise questions about the source of funds or the parties behind the transaction. The AML framework therefore requires a risk based approach to customer and counterparty due diligence, beneficial ownership identification and ongoing monitoring.

Are Underwriters Reporting Entities Under the PMLA?

Yes. The Prevention of Money-Laundering Act, 2002 creates the offence of money laundering and places core duties on reporting entities. Under section 2(1)(wa) a reporting entity includes an intermediary, and section 2(1)(n) expressly names an underwriter as an intermediary associated with the securities market and registered under section 12 of the SEBI Act, 1992. An underwriter is therefore a reporting entity by virtue of its registration.

This places an underwriter 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 underwriting business, but the reporting entity status is not optional.

Supervisory Authority for Underwriters in India

The supervisor for underwriters is the Securities and Exchange Board of India, which registers them under the SEBI (Underwriters) Regulations, 1993, sets the AML rules they work from and inspects their compliance. The consolidated conduct rulebook is the SEBI Master Circular for Underwriters, updated on 11 May 2018, 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 counterparty due diligence, source of funds, monitoring, record-keeping and reporting duties into the language of the underwriting business.

The Financial Intelligence Unit – India receives, analyses and disseminates the reports an underwriter 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.

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AML Regulatory Requirements for Underwriters in India

The law that governs an underwriter does not sit in one place. It is a layered framework, which 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 Underwriters and the SEBI AML/CFT Guidelines translate both into instructions an underwriter 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 is the thread that runs through it all.

Core Legislation

The primary statutes and rules that create the AML, CFT and CPF obligations are grouped into the following 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. An underwriter is a reporting entity by virtue of the intermediary definition in section 2(1)(n), so the Act applies to an underwriting 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 an underwriter, 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 lacking an apparent economic rationale or having links to terrorist financing. The amendment also widened reportable cash transactions to include forged currency and documents, specified reporting timelines 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	Introduced the definitions of non profit organisation and Regulator and further widened the scope of suspicious transactions to include transactions involving unusual complexity, lack of 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	Strengthened the framework for record keeping and reporting under Rules 3, 4, 5 and 7 of the PML Rules, 2005. The amendment also inserted an Explanation to Rule 9(1A) clarifying that the beneficial owner is the natural person who ultimately owns or controls the client or on whose behalf a transaction is conducted.
G.S.R. 508(E), 16 June 2010	Revised Rules 2, 9 and 10 of the PML Rules, 2005 to enhance provisions relating to definitions, customer due diligence and record keeping. The changes further developed customer identification procedures and reinforced the requirement for reporting entities to maintain and preserve relevant records.
G.S.R. 980(E), 16 December 2010	Introduced the small account framework by adding the definitions of Designated Officer and small account. The amendment also expanded the list of officially valid documents to include the NREGA job card and Aadhaar letter and inserted Rule 9(2A) prescribing conditions for opening, operating and monitoring small accounts.
G.S.R. 481(E), 24 June 2011	Changed the short title of the Rules through an amendment to Rule 1 by adopting the title Prevention of Money Laundering Maintenance of Records Rules, 2005. The amendment established the shortened title subsequently used for 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 purposes under the PML Rules, 2005.
G.S.R. 544(E), 7 July 2015	Added the definition of Central KYC Records Registry and amended Rules 9 and 10 of the PML Rules, 2005 to strengthen the KYC framework. The amendment also facilitated the centralised collection, maintenance and management of KYC records by reporting entities.
G.S.R. 730(E), 22 September 2015	Revised various definitions under Rule 2 and introduced corresponding amendments to the PML Rules, 2005 to align the framework with evolving KYC requirements. The changes provided greater clarity on key regulatory terms and strengthened customer identification and due diligence provisions.
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 fulfil the applicable procedural and reporting requirements.
G.S.R. 347(E), 12 April 2017	Introduced provisions relating to the definition of Regulator and inserted Rule 9B to strengthen the customer due diligence framework under the PML Rules, 2005. The amendment also enhanced requirements concerning customer identification and verification.
G.S.R. 538(E), 1 June 2017	Modified Rules 2 and 9 of the PML Rules, 2005 by introducing additional provisions to strengthen the operational AML framework. The changes further developed customer identification, due diligence and compliance procedures applicable to reporting entities.
G.S.R. 1038(E), 21 August 2017	Updated the definitions under Rule 2 of the PML Rules, 2005 by introducing provisions to clarify key terms used within the regulatory framework. The amendments supported 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 need for appropriate procedures 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 developed Rule 9 through amendments to the customer due diligence framework. The changes introduced additional requirements relating to customer identification and verification and strengthened the overall 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 annual submission of a proof of address certificate issued by the same authority.
G.S.R. 582(E), 19 August 2019	Enabled 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 introduced 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 exemptions in certain cases for listed companies and their subsidiaries from identifying and verifying individual shareholders or beneficial owners.
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 scheduled for closure due to pending customer due diligence requirements. The amendment allowed 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	Extended the deadline for reporting entities to submit prescribed transaction reports under Rule 8. The temporary measure allowed eligible reports to be submitted by 30 June 2020 in response to the operational difficulties faced during the COVID 19 pandemic.
G.S.R. 254(E), 16 April 2020	Clarified the transaction reports covered by the temporary extension under Rule 8. The 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 until 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. The amendment brought qualifying real estate agents within the reporting entity framework and subjected them 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 relating to group wide AML policies. The amendment also added definitions for group, politically exposed person and non profit organisation, strengthened customer due diligence requirements for legal persons and trusts and introduced 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, enhanced due diligence requirements for legal persons and trusts and introduced additional registration requirements for eligible non profit organisations.
G.S.R. 745(E), 17 October 2023	Reinforced customer due diligence requirements by requiring customer identity to be verified through reliable and independent sources. The amendment also strengthened group wide AML programmes, required suspicious transaction reports to be submitted within the prescribed period 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 also restricted requests for duplicate KYC documents to specified circumstances, introduced a seven day period 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 an underwriter 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 an underwriter 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 underwriter, 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 an underwriter follows to apply Section 51A, including how to act on a designated list match. The SEBI guidelines fold these steps into the underwriter 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 underwriters 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 an underwriter must operate.

Overarching Obligations

The cross cutting systems and procedures that sit above any single regulator and carry an underwriter’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. An underwriter 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 an underwriter 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 underwriters use Aadhaar based verification for resident clients within the statutory and Supreme Court limits, giving a lawful digital onboarding route.

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Sectoral

The market regulator and the instruments it issues. This is the sector specific layer, and the SEBI Master Circular for Underwriters and the SEBI AML/CFT Guidelines are the instruments an underwriter works from most closely.

Securities and Exchange Board of India (SEBI)

SEBI Master Circular for Underwriters

The star instrument for an underwriter. This Master Circular consolidates the conduct requirements for underwriters, from registration and capital adequacy to underwriting agreements, obligations on devolvement and reporting, and it is the document into which the KYC and AML obligations are read for the underwriting business. It is where an underwriter should look first for a rule that applies to how it underwrites and to whom it becomes exposed.

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 an underwriter 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 set how an underwriter 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 an underwriter 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 an underwriter 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 an underwriter 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 an underwriter must apply.

International Standards

The global standards India’s framework is built to meet, and against which an underwriter’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 underwriters 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. An underwriter 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 an underwriter’s risk are the Securities and Exchange Board of India Act 1992, which establishes SEBI and provides the regulatory framework for securities market intermediaries, including underwriters. The SEBI Intermediaries Regulations 2008 establish the regulatory framework for registration and supervision of securities market intermediaries

The Foreign Exchange Management Act 1999 regulates foreign exchange transactions and cross border flows relevant to underwriting activities involving foreign investors The Bharatiya Nyaya Sanhita 2023 addresses offences including fraud, cheating, forgery, and other financial crimes that may generate illicit proceeds. The Bharatiya Nagarik Suraksha Sanhita 2023 provides the procedural framework for investigation, prosecution and enforcement of criminal offences

The Benami Transactions Prohibition Act 1988 addresses transactions involving property held through concealed beneficial ownership and restrictions on benami property. The Prevention of Corruption Act 1988 addresses corruption offences and financial proceeds arising from bribery and misconduct by public servants

The Narcotic Drugs and Psychotropic Substances Act 1985 regulates offences involving narcotic drugs and psychotropic substances and addresses proceeds arising from related illicit activities. The Fugitive Economic Offenders Act 2018 provides for attachment and confiscation of properties of fugitive economic offenders and recovery of proceeds of specified economic offences

The Black Money Undisclosed Foreign Income and Assets and Imposition of Tax Act 2015 addresses undisclosed foreign income and assets and associated tax liabilities. The Foreign Contribution Regulation Act 2010 regulates the receipt and use of foreign contributions and helps address risks arising from unlawful or unauthorised foreign funding

The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act 1974 provides for preventive measures against smuggling and certain foreign exchange related activities. The Smugglers and Foreign Exchange Manipulators Forfeiture of Property Act 1976 provides for forfeiture of illegally acquired property connected with smuggling and foreign exchange manipulation

The Arms Act 1959 regulates arms and ammunition and addresses illicit activities involving prohibited or unauthorised weapons. The Chemical Weapons Convention Act 2000 implements India’s obligations under the Chemical Weapons Convention and regulates activities involving chemical weapons

The Central Vigilance Commission Act 2003 establishes the Central Vigilance Commission and provides an institutional framework for addressing corruption and related misconduct

Core AML/CFT/CPF Obligations for Underwriters in India

Across that framework, the regulations require an underwriter 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 underwriter 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 underwriter’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 underwriting business, due diligence on the issuer whose securities it underwrites, identifying the beneficial owners behind the parties, and scrutinising the source of funds where securities devolve on the underwriter, are central.
Ongoing monitoring and periodic updation. Monitor underwriting exposures and devolvement 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 underwriting, such as shell or connected issuers, pre arranged or connected party underwriting, unexplained sources of subscription funds on devolvement, and rapid disposal of devolved stock.
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 underwriter 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 underwriters. It does not provide a control by control compliance manual, and it does not restate the SEBI (Underwriters) Regulations or the underwriting and capital rules except where they bear on the AML duties. For implementation, an underwriter separately documents issuer and counterparty due diligence, KYC and CDD procedures, beneficial owner identification, source of funds checks on devolvement, 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 underwriter 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 an underwriter when they are built into a working programme of risk assessment, policy, due diligence, monitoring, screening, reporting, training and independent review. For an underwriter, due diligence on the issuer, identifying the beneficial owners behind the parties and scrutinising the source of funds on devolvement are the controls that matter most. Understanding the stages of money laundering and how the sanctions screening process works is a useful starting point.

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

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Frequently Asked Questions

What is an underwriter?

A person registered with SEBI under section 12 of the SEBI Act, 1992 and the SEBI (Underwriters) Regulations, 1993, who agrees to subscribe to the securities of an issue that are not taken up by the public, guaranteeing that the issue is fully subscribed. Stock brokers and merchant bankers may also underwrite. It is an intermediary and a reporting entity under the PMLA.

Are underwriters reporting entities under the PMLA?

Yes. An underwriter 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 separate designation notification is needed; an underwriter is inside the regime by virtue of its SEBI registration.

Which SEBI instruments apply to an underwriter?

The SEBI Master Circular for Underwriters, updated on 11 May 2018, 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 underwriting business.

What AML risks are specific to an underwriter?

An underwriter guarantees an issue and may end up holding securities on devolvement, so its AML risks sit in shell or connected issuers using an underwritten issue to raise capital, in pre arranged or connected party underwriting, and in the source of the underwriter’s own subscription funds and the disposal of devolved stock. Due diligence on the issuer, beneficial owner checks and source of funds scrutiny on devolvement are the core controls.

What must an underwriter 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 underwriters?

Yes. The screening duties under Section 51A of the UAPA and Section 12A of the WMD Act apply to every underwriter. An underwriter screens issuers, counterparties 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.

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 underwriters meet their PMLA and SEBI obligations, from risk assessment and policy through to issuer and counterparty due diligence, screening, monitoring, reporting, training and independent review.

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

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