Know the Laws & Regulations
A. Laws
- PMLA 2002
- Unlawful Activities (Prevention) Act, 1967
- Weapons of Mass Destruction and Their Delivery Systems (Prohibition of Unlawful Activities) Act
- Income Tax Act
- Foreign Contribution Regulation Act
- Prohibition of Benami Properties Transactions Act
- Companies Act 2013
- Bharatiya Nagarik Suraksha Sanhita (BNSS)
- Digital Personal Data Protection Act, 2023
1. The Prevention of Money-Laundering Act, 2002 (PMLA)
(https://www.indiacode.nic.in/bitstream/123456789/2036/5/A2003-15.pdf)
To prevent ML and to provide for confiscation of ML related property.
Main aspects:
- ML a punishable offence
- Various predicate offences listed. (Offences under BNSS, 2023 not yet specified)
- Powers of authorities for adjudication, attachment and confiscation
- Obligations of Reporting Entities
- Penal measures for violation of obligations
- Appellate Tribunals and Special Courts
- Authorities empowered under the Act
- Reciprocal arrangement with other countries for assistance in AML
- Detailed obligations of Reporting Entities prescribed in Prevention of
- Money Laundering (Maintenance of Records) Rules , 2005 (PMLR)
(https://fiuindia.gov.in/files/AML_Legislation/notification.html)
Main aspects: - Maintenance of records of transactions and client identity/ other documents
- Furnishing information and report to FIU-Ind Director
- Client due diligence and Digital KYC Process
- Functions of CKYCR
2. Unlawful Activities (Prevention) Act, 1967 (UAPA)
(https://www.indiacode.nic.in/bitstream/123456789/1470/1/a1967-37.pdf)
For effective prevention of certain unlawful activities of individuals and associations and dealing with terrorist activities
Main aspects:
- Unlawful associations
- Offences and penalties for unlawful associations/ activities
- Terrorist offence and punishment for terrorist activities
- Forfeiture of terrorism related property proceeds
- Terrorist organisations and individuals
- Schedules pertaining to:
- Designated terrorist organisations
- UN Conventions ratified by India
- Security features for high quality FICN
- Designated terrorist individuals
3. The Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (WMDPA)
(https://www.indiacode.nic.in/bitstream/123456789/2017/1/a2005-21.pdf)
To prohibit unlawful activities, in relation to weapons of mass destruction and their delivery systems.
Main aspects:
- Prohibitions relating to:
- Weapons of mass destruction, non-State actor or terrorist
- Intimidating acts
- Export, brokering, transfer, retransfer, financing these
- Punishments for violations, offences and for aiding these activities
4. Income Tax Act, 1961
(https://www.indiacode.nic.in/bitstream/123456789/2435/1/a1961-43.pdf)
To enable levying of taxes on income and other receipts as gains, etc.
Basic provisions for income tax on various types of incomes, deductions, etc. covered
Detailed provisions and procedures laid down in Income Tax Rules, 1962
(https://incometaxindia.gov.in/pages/rules/income-tax-rules-1962.aspx)
Several aspects serve as mitigation for ML:
- PAN mandatory for certain transactions and purposes
- Restrictions on receipts and payments in cash
- Obligations under FATCA and CRS
- Tax on capital gains on assets
- Linking of Aadhaar and PAN
5. Foreign Contribution Regulation Act, 2010 (FCRA)
(https://www.indiacode.nic.in/bitstream/123456789/2098/1/a2010-42.pdf)
- To regulate the acceptance and utilisation of foreign contribution or hospitality by certain individuals or associations or companies
- Covers foreign contribution received by NGOs
- Prescribes specific procedure for this purpose, thus limits the scope of TF through NGOs
6. Foreign Exchange Management Act, 1999 (FEMA)
(https://www.indiacode.nic.in/bitstream/123456789/1988/1/A1999_42.pdf)
For facilitating external trade and payments and for promoting the orderly
development and maintenance of foreign exchange market
Main Aspects:
- Regulation and management of foreign exchange transactions
- Authorised persons for dealing in foreign exchange
- Penalties for violation of provisions
- Adjudicating and Appellate authority
Enforcement Directorate – investigating and prosecuting authority
7. The Prohibition of Benami Properties Transactions Act, 1988 (PBPTA)
(https://www.indiacode.nic.in/bitstream/123456789/1840/6/A198845.pdf)
To prohibit benami transactions and right to recover property held benami
Main aspects:
- Prohibition of benami transactions
- Adjudicating authority
- Powers of adjudication, attachment and confiscation
- Appellate Tribunal and Special Courts
- Offences and prosecution
8. The Companies Act, 2013 (TCA)
(https://www.indiacode.nic.in/bitstream/123456789/2114/5/A2013-18.pdf)
Main Aspects:
- Incorporation of companies and producer companies
- Prospectus and allotment of securities
- Share capital, debentures, and acceptance of deposits
- Registration of charges
- Management and Administration
- Payment of dividends
- Accounts of companies, audit and auditors
- Directors: appointment, powers and duties
- Appointment and remuneration of management personnel
- Inspection, inquiry and investigation
- Winding up of companies
- Companies incorporated outside India
- Government companies
- Registration offices
- NCLT, Appellate Tribunal and Special Courts
9. The Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS)
(https://www.indiacode.nic.in/bitstream/123456789/20099/3/aa2023-46.pdf)
Law relating to Criminal Procedure
Main Aspects:
- Trial of offences
- Criminal courts and offices, their Powers
- Powers of superior officers of police
- Arrest of persons, Processes to compel appearance, and production of things
- Reciprocal arrangement with other countries for assistance in attachment and forfeiture of property
- Security for keeping peace and good behaviour
- Order for maintenance of wife, children and parents
- Maintenance of public order and tranquility
- Police: preventive actions, powers to investigate, information to
- Criminal courts: jurisdiction in inquiries and trials
- Procedures for proceedings, Charges, Trials before courts
- Provisions for bail and bonds
- Limitation for taking cognizance in certain offences
Judgement and appeals
10. Digital Personal Data Protection Act, 2023 (DPDPA)
(https://www.meity.gov.in/writereaddata/files/Digital%20Perso nal%20Data%20Protection%20Act%202023.pdf)
To provide for processing of personal data – balancing right of individual for its protection and its need for lawful purposes
Main aspects:
- Obligations of Data Fiduciary
- Rights and duties of Data Principal
- Processing outside India
- Data Protection Board of India: To look into complaints of data breach and issue directions
- Appeal to Appellate Tribunal and alternate dispute resolution
Penalties and adjudication
B. Regulations
- RBI Master Directions
- SEBI Guidelines on AML Standards & CFT
- SEBI Master Circular on Know Your Client (KYC) Norms
- IRDAI Master Guidelines on AML/CFT
- PFRDA Master Circular – Guidelines on KYC/AML/CFT
1. RBI: Master Direction - Know Your Customer (KYC) Direction, 2016
(Updated as on November 06, 2024)
(https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11566)
Operating instructions to RBI regulated entities for discharge of obligations under
PMLA/ PMLR
Main Aspects:
- Customer acceptance policy and identification procedure
- Video customer identification procedure (VCIP)
- Risk management and customer due diligence procedure
- Record management
- Reporting to FIU-Indi and under international agreements
- Freezing of funds instructions from MHA and MOF
- Other AML measures
2. SEBI Guidelines on AML Standards & CFT (February 2023)
(https://www.sebi.gov.in/legal/master-circulars/feb-2023/guidelines-on-anti-money-
laundering-aml-standards-and-combating-the-financing-of-terrorism-cft-obligations-
of-securities-market-intermediaries-under-the-prevention-of-money-laundering-act-
2002-a-_67833.html)
Operating instructions for all Intermediaries and Stock Exchanges for discharging
obligations under PMLA/ PMLR
Main aspects:
- Obligations to establish policies and procedures
- Client acceptance policy, identification procedure and due diligence
- Risk Management
- Monitoring of transactions and reporting of suspicious transactions
- Record management
- Freezing of funds, financial assets and economic resources
- Reporting to FIU-India
3. SEBI Master Circular on Know Your Client (KYC) Norms for Securities Market (October 2023)
Operating instructions for KYC to Intermediaries, Stock Exchanges, AMFI, APMI and BASL
Main aspects:
- KYC Requirements: Format, POI/ POA, BOs, etc.
- Digital KYC, KYC App, IPV, e-KYC Authentication
- KYC Registration Agency (KRA) and CKYCR
4. IRDAI Master Guidelines on AML/CFT (August 2022)
(https://irdai.gov.in/document-detail?documentId=1345417)
Operating Guidelines for Insurers for discharge of obligations under PMLA/PMLR.
Main Aspects:
- Internal policies, procedures, controls and compliance arrangement
- KYC Norms and ongoing due diligence
- Video Based Identification Procedure (VBIP)
- Risk assessment/ categorisation
- Enhanced due diligence
- Reporting obligations
- Record Keeping
5. PFRDA Master Circular - Guidelines on KYC/AML/CFT (January 2023)
(https://www.pfrda.org.in/writereaddata/links/circularupl6430b804-6362-46f1-93d3-73c944215a41.pdf)
Operating guidelines for Point of Presence and NPS Trust for discharge of obligations under PMLA/PMLR
Main aspects:
- Internal policies, procedures, controls, responsibility and compliance arrangement
- KYC Norms, Client due diligence
- Video Based Customer Identification Procedure (VCIP) for NPS
- Risk Assessment and Risk Categorization
- Sharing information with CKYCR
- Reporting obligations
- Record Keeping
- Transaction monitoring