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Anti-Money Laundering Legal Framework in India
Anti-Money Laundering Legal Framework in India
Anti-money laundering legal framework is the set of laws, rules, and regulations that are introduced to counter money laundering activities and terrorist financing. Prevention of Money Laundering Act, 2002 (PMLA) and the rules issued thereunder (PML Rules) act as the primary legal framework for AML India. Besides PMLA, several other acts contribute to the legal framework.
The infographic contains the complete list of acts and regulations that regulated entities must comply with to prevent money laundering and terrorist financing.
Non-compliance with these regulations can harm the company’s reputation. It can also lead to regulatory scrutiny and investigation, resulting in criminal charges and penalties on the people held responsible.
AML Compliance department can utilize the anti-money laundering legal framework to create and implement relevant AML/CFT policies and procedures. These policies and procedures safeguard regulatory entities from money laundering and terrorist financing and keep up the company’s positive identity and reputation.
What is the primary AML legislation in India?
The Prevention of Money-Laundering Act, 2002 (PMLA) is India’s primary anti-money laundering legislation, supported by the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 (PMLR). The Act establishes the offence of money laundering and the reporting entity framework, while the rules provide operational requirements relating to customer identification, record-keeping and reporting. Because the PMLA treats money laundering in connection with proceeds of crime arising from scheduled offences, the laws creating those underlying offences also form an important part of the broader AML framework.
What laws and rules make up India’s AML framework?
India’s AML, CFT and CPF framework is primarily governed by the PMLA 2002 and its supporting rules, along with the Unlawful Activities (Prevention) Act (UAPA) and Weapons of Mass Destruction and Their Delivery System (Prohibition of Unlawful Activities) Act; these acts establish the core obligations for the reporting entities.
The requirements notified under the primary legislation are supplemented by sector-specific directions and guidelines issued by the relevant regulators. These include the RBI Master Direction on KYC, SEBI, IRDAI and PFRDA guidelines, and the IFSCA (AML, CFT and KYC) Guidelines, 2022 for GIFT IFSC entities.
Which authorities enforce AML law in India?
AML enforcement in India is divided among different authorities. The Enforcement Directorate (ED) investigates and prosecutes money laundering offences under the PMLA, while FIU-IND receives and analyses reports submitted by reporting entities and the relevant sector regulator supervises the AML compliance of entities within its regulatory jurisdiction.
A reporting entity therefore primarily interacts with its sector regulator for supervision and FIU-IND for reporting, while the Enforcement Directorate becomes involved where a money laundering offence is being investigated. Regulatory compliance action and criminal enforcement are separate processes, so a compliance failure may result in supervisory action even when there is no allegation of money laundering.
We are committed to assisting proper enforcement of AML and CFT regulations to regulated entities in India by designing a personalised AML framework – policies, internal controls, and procedures – and ensuring effective implementation of the same.
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