What changed
The Prevention of Money Laundering (Amendment) Act, 2012 amended Section 13(2), empowering the Director to impose fines on reporting entities or their designated directors for non-compliance. RBI has now directed NBFCs to formally nominate a director on their Board as the 'designated director' to oversee AML/CFT obligations.
What it means for you
NBFCs must now assign a specific Board-level director to own and enforce KYC/AML compliance, making accountability clear at the top. Failure to comply can result in fines ranging from ₹10,000 to ₹1 lakh per instance, directly impacting the entity or the designated director. This tightens regulatory oversight and raises the stakes for compliance lapses.
What you must do
- Nominate a director on your NBFC's Board as the 'designated director' for PMLA compliance and document the appointment.
- Ensure the designated director is fully briefed on KYC/AML obligations under the amended Act and RBI guidelines.
- Review your compliance framework to align with the enhanced penalty provisions under Section 13(2).
- Update internal policies and training programs to reflect the designated director's role and accountability.
Who it affects
All Non-Banking Financial Companies (NBFCs), Board of Directors of NBFCs, Compliance officers and AML teams at NBFCs
What is the penalty range for non-compliance under the amended Section 13(2)?
The fine shall not be less than ₹10,000 and may extend up to ₹1 lakh for each failure, as per the amended Act.
Who can be appointed as the designated director?
Any director on the NBFC's Board can be nominated as the designated director to ensure compliance with PMLA obligations.