Anti-Money Laundering (AML) in India

What Is the AML Regulatory Framework in India?

India’s anti-money laundering (AML) framework is based on the Prevention of Money Laundering Act (PMLA) of 2002. The act says that money laundering is an offense that should lead to penalties like fines and imprisonment, while also supporting authorities to seize assets that are linked to illicit funds. On top of this, there is PMLA rules which support the framework. The rules require institutions like banks, financial firms, intermediaries, and other designated businesses to conduct customer due diligence (CDD), maintain records, and file suspicious transaction reports (STRs) with the Financial Intelligence Unit-India (FIU-IND). Sector regulators like the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and Insurance Regulatory and Development Authority of India (IRDAI) create guidelines for the entities they’re supervising. In this blog post, we’ll be talking more about AML efforts in India, how they’re aligning themselves with the FATF standards, and the recent developments regarding AML in the country.

Who Regulates AML Compliance in India?

There are several regulatory bodies making sure companies are compliant with regulations in India. The FIU-IND is the central body when it comes to receiving and then analysing STRs. The RBI deals specifically with banks and NBFCs. The SEBI regulates stockbrokers, mutual funds, and other capital market participants. The IRDIA is tasked with supervising insurance companies to make sure they’re adhering to AML/KYC rules. When it comes to enforcement and investigations regarding financial crimes, the Enforcement Directorate (ED) handles the cases of money laundering, as well as prosecutions and  asset seizures. These authorities come together to make sure your company is reaching AML compliance and financial crimes are prevented.

What Are the Main AML Laws and Rules in India?

India has several laws when it comes to anti-money laundering. The most important one is the one we’ve mentioned before, the PMLA 2002. This act defines money laundering offenses, enables the seizure of assets, and sets penalties. The PMLA Rules accompanies this act by enforcing CDD within your company, filing of STRs, and record-keeping for potential investigations and regulatory reviews. Sources from AML Intelligence say that over 5,000 cases under the PMLA were registered in the last decade, but only 40 convictions were made.  FIU-IND collects and analyses STRs and shares intelligence. Regulators like the RBI, SEBI, and IRDAI deal with the sectoral rules of the country’s AML efforts. The ED is tasked with investigating and prosecuting PMLA cases. India is a member of the FATF, and with the help of other laws like the UAPA, FEMA, and the Income Tax Act, the country continues to strengthen their AML/KYC frameworks.

Which Entities Are Subject to AML Obligations in India?

AML obligations affect lots of entities operating in India. Banks, NBFCs, and stockbrokers are subject to these regulations, as well as payment wallets, fintech firms, and cryptocurrency platforms. The RBI and specific sectoral rules are used for these sectors. Non-financial firms like real estate firms, lawyers, and accountants are also included since they deal with large sums of money and transactions. These sectors and companies should be complying with AML regulations to make sure they’re not involved in financial crime.

What Are AML Compliance Requirements in India?

Mostly led by the PMLA and sectoral regulations, AML compliance requirements in India have a wide coverage. Your company should be conducting CDD/KYC to verify PAN and Aadhaar against ID checks. A risk based approach is needed to divide customers into low, medium, and high risk levels. On top of this, ongoing monitoring of these customers is recommended and risk levels help with determining the amount of scrutiny each customer needs to be put under. For high-risk customers like politically exposed persons (PEPs) or complex structures, conducting enhanced due diligence (EDD) is recommended for your company. Filing of STRs and CTRs with FIU-IND is essential to figure out suspicious activity and prevent money laundering. Relevant records should be kept for at least five years to make sure your company is ready for regulatory reviews and potential investigations.

In June 2024,  Binance was fined ₹18.82 crore by the FIU-IND because of their deficiencies in AML regulations under the Prevention of Money Laundering Act. This shows the importance of compliance in India.

What Are the AML Obligations for UPI and Payment Aggregators?

The AML obligations for UPI providers and payment aggregators are decided by the RBI’s KYC Master Direction and the PMLA framework. These providers should ensure full KYC using Aadhaar, PAN, and real IDs. They are required to monitor transactions for fraud, unusual velocity, and geo-risk patterns. This way, anomalies can be flagged and investigated further. Regularly reporting to FIU-IND and following RBI guidelines is also recommended.

What Are the Recent AML Updates in India (2024–2025)?

There have been many changes in the AML compliance environment of India in the recent years. In March 2024, virtual digital assets (VDAs) and cryptocurrency platforms were brought under the PMLA umbrella. This means that these companies are now subject to AML obligations. Another update is about the usage of video KYC (Know Your Customer). With the rising popularity of digital onboarding used by financial and crypto firms, the online version of the KYC process is attracting more users as well. One other update is about offshore trust managers and chartered accountants (CAs). These entities are now included in the groups that adhere to PMLA regulations. The final update regarding AML in India from 2024 and 2025 is about how SEBI AML/CFT guidelines have been tightened. The threshold used for beneficial ownership has been lowered to 10%, making companies update their UBO and IBO detection efforts. 

Is India on Any FATF or International AML Watchlists?

India is not greylisted or blacklisted by the FATF. The country has been a member of the FATF since 2010 and has been setting an example about effective AML/CFT regulations. Even though the neighbouring countries like Pakistan and Myanmar have been facing FATF monitoring, India is not included. The mutual evaluation report done by the FATF in 2024 has shown that despite the size of the country and the financial crime risks this large of a population brings, the country has been making efforts in bettering their compliance even more. 

3 High-Profile Money Laundering Cases from India

Even though the AML compliance efforts are improving every year in India, there have been scandals involving money laundering. The first one is the Punjab National Bank fraud case and it occurred in 2018. Nirav Modi and his uncle Mehul Choksi were involved in obtaining unauthorised credit from PNB’s Brady House branch in Mumbai. The funds were laundered through shell companies. The ED attached assets worth ₹2,203 crores, including properties linked to the accused.  The next case is the ABG Shipyard case, which was reported in 2022. The company’s management allegedly redirected funds of around ₹22,482 crore from public sector banks for personal gains. The case is still ongoing with six accused as well as 19 companies involved.  The last case we’ll mention is the Paytm Payments Bank case. FIU-IND fined Paytm Payments Bank ₹54.9 million for alleged AML violations. The bank allowed entities involved in illegal online gambling to use its accounts; the funds were routed through accounts and monitoring as well as reporting was insufficient. 

Other Money Laundering Cases in India

What Are the AML Obligations for Banks, Crypto, Payment Firms, and Fintechs in India?

The obligations set forth for companies vary depending on the sector, and we’d like to clarify further for our readers. When it comes to banks, compliance with the RBI KYC Master Direction is important. An AML policy and compliance team is also essential, helping you adhere to another requirement, which is filing STRs and CTRs when needed. Cryptocurrency platforms and VASPs have been covered by the PMLA since 2023. Therefore, these firms are required to register with FIU-IND, conduct full KYC, monitor transactions, and file STRs. Fintechs and NBFCs follow the CKYC system. These companies verify clients via the Aadhaar authentication, perform risk scoring, and keep an AML officer.

What Are the Penalties for AML Non-Compliance in India?

The penalties for AML non-compliance are severe in India. Financial firms or people can get fines of up to ₹5 lakh or more for their violations. For more serious breaches, there can be prosecution, asset seizures, and arrests. Regulators can revoke your company’s licenses and impose audits. The most important of all, non-compliance can lead to reputational damage. Customer trust and investor confidence is at risk if you’re not compliant enough with regulations in India.

How Can Sanction Scanner Help With AML in India?

Our experts in Sanction Scanner help firms in India better their AML compliance with our solutions that are aligned with requirements of PMLA, RBI, and FIU-IND. We provide real-time screening against both global and local sanctions lists. Sanction Scanner performs PEP checks and adverse media reviews during onboarding to figure out which customers are of high-risk. Moreover, our solution also maintains audit-ready case management, helping you document findings, reach compliance, and show reports if there were ever investigations.