What changed
The Prevention of Money Laundering (Amendment) Act, 2012 amended Section 13(2) of PMLA, 2002, explicitly empowering the Director to impose fines ranging from ₹10,000 to ₹1 lakh for each failure by a reporting entity or its designated director/employee to comply with KYC/AML/CFT obligations. Earlier, the penalty framework was less specific. RBI now advises authorised persons to nominate a designated director on their board to ensure compliance under the amended Act.
What it means for you
Banks and authorised persons in money changing must now formally designate a board-level director responsible for PMLA compliance. The clear fine band (₹10,000–₹1 lakh per failure) increases accountability and regulatory risk for non-compliance. This aligns India's AML framework with international standards and strengthens enforcement against lapses in customer due diligence and reporting.
What you must do
- Consider nominating a designated director on your board to oversee PMLA compliance for money changing activities.
- Update internal KYC/AML policies to reflect the amended Section 13(2) penalty provisions.
- Train staff on the new fine structure and the director's accountability for compliance failures.
- Review and strengthen reporting mechanisms to ensure timely submission of prescribed reports to the Director.
Who it affects
All authorised persons (banks, forex dealers, money changers) handling money changing activities, Board of directors of authorised persons, Compliance and AML/KYC teams in banks and financial institutions
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 KYC/AML/CFT obligations under PMLA.
Who must be appointed as the designated director?
Authorised persons may nominate a director on their board as the 'designated director' to ensure compliance with PMLA obligations for money changing activities.
Does this circular apply to all authorised persons or only those in money changing?
It specifically applies to authorised persons engaged in money changing activities, as referenced in the earlier circular of November 2009.