What changed
The Prevention of Money Laundering (Amendment) Act, 2012 amended Section 13(2) of PMLA, 2002, empowering the Director to levy fines on reporting entities for non-compliance. RBI now requires RRBs and cooperative banks to appoint a designated director on their Board to oversee compliance with these obligations.
What it means for you
Banks must formally designate a Board-level director responsible for AML/CFT compliance, making accountability explicit. Non-compliance can now attract monetary penalties ranging from ₹10,000 to ₹1 lakh per failure, increasing the financial and reputational risk for lenders. This aligns RRBs and cooperative banks with the stricter enforcement framework applicable to other reporting entities.
What you must do
- Nominate a director on your Board as the 'designated director' for PMLA compliance and communicate the appointment to RBI.
- Ensure the designated director understands their responsibility for overseeing KYC/AML/CFT obligations under the amended Act.
- Review and update internal policies to reflect the new penalty provisions and compliance monitoring mechanisms.
- Train Board members and senior management on the implications of Section 13(2) amendments.
Who it affects
Regional Rural Banks (RRBs), State Cooperative Banks (StCBs), Central Cooperative Banks (CCBs), Board of Directors of these banks, Compliance and AML teams
What is the penalty range for non-compliance under the amended Section 13(2)?
The Director can levy a fine of not less than ₹10,000 and up to ₹1 lakh for each failure to comply with PMLA obligations.
Who must be nominated as the 'designated director'?
A director on the Board of the RRB or cooperative bank must be nominated to ensure compliance with PMLA obligations.
Does this circular apply to all cooperative banks?
Yes, it applies to State Cooperative Banks and Central Cooperative Banks, in addition to Regional Rural Banks.