Home › Circulars › RBI/2013-14/642

KYC/AML: Designated Director & Penalty Powers

Current · Source: Reserve Bank of India · RBI/2013-14/642 · issued 16 Jun 2014 · ~1 min read
Quick answerRBI updates PMLA rules: Directors can now be fined Rs 10,000–1 lakh per KYC/AML failure. Authorised Persons must nominate a designated Director for compliance.
The rule, in the simplest words
How it plays out — a real example

Rajesh, the compliance head at a Mumbai forex dealer, learns that a customer's identity documents were not verified. He immediately alerts the designated Director, who orders a review and corrective training, avoiding a potential fine of up to Rs 1 lakh.

What changed

The Prevention of Money Laundering (Amendment) Act, 2012 amended Section 13(2), giving the Director the power to impose fines on reporting entities, their designated directors, or employees for non-compliance. Fines range from Rs 10,000 to Rs 1 lakh per failure. Authorised Persons are now advised to nominate a designated Director on their boards to ensure compliance.

What it means for you

Banks and money changers face direct financial penalties for KYC/AML lapses, with personal liability for directors and employees. Having a designated Director signals board-level accountability and helps avoid fines. This strengthens the enforcement framework under PMLA, making compliance a top governance priority.

What you must do

Who it affects

All Authorised Persons (banks, money changers), Designated Directors on boards, Compliance officers and employees handling KYC/AML

❓ Common questions

What is the fine amount for non-compliance?

The fine is not less than Rs 10,000 and can extend up to Rs 1 lakh for each failure.

Who can be fined?

The reporting entity, its designated director on the board, or any employee who fails to comply with PMLA obligations.

Is nominating a designated Director mandatory?

The circular advises Authorised Persons to nominate a designated Director to ensure compliance, but it does not state a penalty for not doing so.

📜 Read the original circular — full text as issued by RBI
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications Withdrawn with effect from November 16, 2021, February 18, 2022, May 02, 2022, May 13, 2022, May 21, 2024, July 12, 2024 & October 01, 2024 ( 539 kb ) Money changing Activities - Powers of Director to impose Fine RBI/2013-14/642 A. P. (DIR Series) Circular No. 143 June 16, 2014 To, All Authorised Persons Madam / Sir, Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/ Combating the Financing of Terrorism (CFT)/ Obligation of Authorised Persons under Prevention of Money Laundering Act (PMLA), 2002 – Amendment to Section 13(2) – Money Changing Activities Please refer to our A.P. (DIR Series) Circular No.17 [A.P. (FL/RL Series) Circular No.04] dated November 27, 2009 on ‘Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT)/Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 - Money changing activities’, as amended from time to time. 2. With the enactment of Prevention of Money Laundering (Amendment) Act, 2012 and amendment to Section 13 of the Act which provides for “Powers of Director to impose fine”, the section 13(2) now reads as under: “If the Director, in the course of any inquiry, finds that a reporting entity or its designated director on the Board or any of its employees has failed to comply with the obligations under this Chapter, then, without prejudice to any other action that may be taken under any other provisions of this Act, he may— issue a warning in writing; or direct such reporting entity or its designated director on the Board or any of its employees, to comply with specific instructions; or direct such reporting entity or its designated director on the Board or any of its employees, to send reports at such interval as may be prescribed on the measures it is taking; or by an order, levy a fine on such reporting entity or its designated director on the Board or any of its employees, which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure.” 3. In view of the above amendment, Authorised Persons may nominate a Director on their Boards as “designated Director” to ensure compliance with the obligations under the Prevention of Money Laundering (Amendment) Act, 2012. 4. The directions contained in this Circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and also under the, Prevention of Money Laundering Act, (PMLA), 2002, as amended from time to time and are without prejudice to permission /approvals, if any, required under any other law. Yours faithfully, (B. P. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/642 · issued 16 Jun 2014. The plain-English explanation above is BankPulse’s own independent summary.
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Topics: KYC / AML
Most relevant forCompliance TeamSenior Management / BoardKYC / AML AnalystBranch Manager — Private Bank / SFBBranch Manager — PSU / Co-op / RRB (sanctioning powers)Teller / Cashier / Customer Service Officer
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Key dataSee the live numbers behind this topic: RBI Penalty Tracker, Bank Health Scores — updated from official RBI data.
Key termsPlain-English definitions of terms in this circular — see the full Indian banking glossary. KYC / AML · Master Direction · Deposit insurance (DICGC)
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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All Authorised Persons (banks, money changers), Designated Directors on boards, Compliance officers and employees handling KYC/AML), your first concrete step on “KYC/AML: Designated Director & Penalty Powers” is: “Nominate a designated Director on your board for PMLA compliance.” (RBI issued this 16 Jun 2014).

  1. Circular: RBI/2013-14/642 -- KYC/AML: Designated Director & Penalty Powers
  2. Issued: 16 Jun 2014
  3. Action required: Nominate a designated Director on your board for PMLA compliance.
  4. Action required: Review and update KYC/AML policies to align with the amended Section 13(2).
  5. Action required: Train staff on compliance obligations to avoid individual fines.
  6. Action required: Ensure reporting mechanisms are robust to meet prescribed intervals if directed.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8941&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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