India regulates money laundering through the Prevention of Money-laundering Act, 2002, in force since 1 July 2005, with detailed obligations in the 2005 Maintenance of Records Rules. Reporting entities file with FIU-IND, sector supervision sits with the Reserve Bank of India, SEBI and IRDAI, and enforcement runs through the Enforcement Directorate.
Key takeaways
- Cash transactions above rupees ten lakh are reportable by the 15th day of the following month. Suspicious transaction reports have no threshold and are due within seven working days.
- India uses a beneficial ownership test of more than 10 percent, not the 25 percent used in the United States and the European Union.
- Section 13(2)(d) of the PMLA caps administrative penalties at one lakh rupees for each failure, but failures are counted individually, so aggregate orders run far higher.
- Virtual digital asset service providers have been reporting entities since 2023. FIU-IND imposed Rs 18.82 crore on Binance on 19 June 2024 for operating without registering.
- FATF placed India in the regular follow-up category at its June 2024 plenary, a category then shared with only four other G20 countries.
What law criminalises money laundering in India, and what are the penalties?
The Prevention of Money-laundering Act, 2002 is the operative statute. It came into force on 1 July 2005 by notification G.S.R. 436(E), and it has been amended repeatedly since, most substantially by the Finance Acts of 2013, 2015 and 2019.
Criminal exposure sits in section 4 of the Act, which prescribes rigorous imprisonment of not less than three years and up to seven years, plus a fine. Where the proceeds of crime relate to an offence specified in paragraph 2 of Part A of the Schedule, which covers narcotics offences under the Narcotic Drugs and Psychotropic Substances Act, 1985, the seven-year ceiling is replaced by ten years.
Asset recovery is the part compliance teams underestimate. Section 5 lets the Director provisionally attach property for a period not exceeding 180 days from the date of the order, before an adjudicating authority confirms or releases it. Attachment can precede conviction, which is why an Indian investigation is felt commercially long before any trial concludes.
Who counts as a reporting entity under the PMLA?
The term is defined in section 2(1)(wa) and is wider than banking. It captures banking companies, financial institutions and intermediaries, and it also captures persons carrying on a designated business or profession under section 2(1)(sa), which is the hook the government uses to add sectors by notification rather than by amending the Act.
Virtual digital asset service providers were added through that route in 2023. FIU-IND's order against Binance records that the exchange fell within section 2(sa)(vi) of the Act as a virtual digital asset service provider, and was liable for failures under section 12(1) read with the Maintenance of Records Rules despite having no physical presence in India.
Two consequences follow. Sector scope in India can change without parliamentary action, so a scope check has to look at gazette notifications rather than the bare Act. And offshore providers serving Indian customers are in scope on a service-delivery test, not an establishment test.
What must be reported to FIU-IND, and by when?
FIU-IND was created by an Office Memorandum dated 18 November 2004 as the central national agency for receiving, processing, analysing and disseminating information on suspect financial transactions, reporting to the Economic Intelligence Council chaired by the Finance Minister. The reporting set below is restated in chapter VIII of the RBI's KYC Directions.
| Report | Trigger | Threshold | Deadline |
|---|---|---|---|
| Cash Transaction Report | Cash transactions | More than rupees ten lakh | 15th day of the succeeding month |
| Suspicious Transaction Report | Reasonable grounds of suspicion | None | Seven working days from establishing suspicion |
| Cross Border Wire Transfer Report | Cross-border wire transfers | More than rupees five lakh | As prescribed in the 2005 Rules |
| Non-Profit Organisation Transaction Report | Receipts by a non-profit organisation | More than rupees ten lakh | 15th day of the succeeding month |
| Counterfeit Currency Report | Forged or counterfeit notes | None | As prescribed in the 2005 Rules |
Record retention runs on two different clocks under section 12. Transaction records are kept for five years from the date of the transaction, while identity records are kept for five years after the business relationship ends or the account is closed, whichever is later.
Which regulator supervises which sector?
India splits supervision by sector while keeping reporting centralised at FIU-IND. The practical effect is that one group operating a bank, a broking arm and an insurance subsidiary answers to three sets of rules on the same underlying statute.
| Body | Scope | Instrument |
|---|---|---|
| Reserve Bank of India | Banks, co-operative banks, non-banking financial companies, payment system operators | Reserve Bank of India (Know Your Customer) Directions, 2016, last amended 14 August 2025 |
| SEBI | Securities market intermediaries, including brokers, depositories and mutual funds | SEBI AML and CFT master guidelines, June 2024 |
| IRDAI | Insurers and insurance intermediaries | IRDAI AML and CFT guidelines |
| FIU-IND | All reporting entities, for filing and administrative penalties | PMLA sections 12, 13 and the 2005 Rules |
| Enforcement Directorate | Investigation, attachment and prosecution | PMLA sections 5, 17 and 19 |
Our India country coverage page carries the list-level detail, and the RBI's own AML/CTF framework is set out separately because banking obligations go well beyond the statutory minimum.
What beneficial ownership threshold applies in India?
This is the single most common error made by firms extending a global policy into India. The RBI's KYC Directions define controlling ownership interest as ownership of, or entitlement to, more than 10 percent of the shares, capital or profits of a company, and apply the same figure to partnerships. Trust beneficiaries are captured at 10 percent or more interest, and unincorporated associations at more than 15 percent.
A 25 percent global standard therefore under-identifies in India by a wide margin. A shareholder holding 12 percent of an Indian subsidiary is a beneficial owner for Indian purposes and is not one under FinCEN's CDD Rule or the EU's Anti-Money Laundering Regulation.
Where no natural person is identified through ownership, the senior managing official is treated as the beneficial owner, so the control prong is never simply left empty. Structured ownership screening has to run at the lower Indian threshold or the file will not survive an RBI inspection.
How did India perform in its 2024 FATF mutual evaluation?
India has been a FATF member since 2010, having been admitted on 25 June 2010 as the 34th country member after a joint FATF and Asia Pacific Group on-site assessment in late 2009, according to the Department of Economic Affairs. It joined the Egmont Group of financial intelligence units in 2007.
The fourth-round result landed in 2024. FATF adopted India's mutual evaluation report at the plenary held in Singapore from 26 to 28 June 2024 and placed India in the regular follow-up category, a distinction then shared by only four other G20 countries. The Ministry of Finance recorded the outcome in a press release dated 28 June 2024, and the report itself was published on 19 September 2024.
The reasoning matters more than the label. FATF credited India's shift from a cash-based to a digital economy, the traceability created by the Aadhaar and Unified Payments Interface infrastructure, and restrictions on large cash transactions. Regular follow-up is the lightest post-evaluation category, so India reports back on a standard cycle rather than an enhanced one.
What happens when a reporting entity fails to comply?
Administrative enforcement runs through section 13. The Director of FIU-IND may issue a written warning, direct compliance with specific instructions, require periodic reports on remediation, or impose a monetary penalty of not less than ten thousand rupees and up to one lakh rupees for each failure.
The per-failure construction is what makes the numbers large. FIU-IND's order of 19 June 2024 against Binance totalled Rs 18,82,00,000, built from contraventions of section 12(1) read with rules 7(1), 3(1)(D), 7(3) and 8(2) of the 2005 Rules. The exchange had served Indian customers without registering as a reporting entity, and registered only in 2024 after enforcement began.
Criminal and administrative tracks run in parallel. A section 13 penalty does not resolve exposure under section 4, and the Enforcement Directorate's attachment powers under section 5 operate independently of anything FIU-IND does.
What should a business entering the Indian market build first?
Start with scope, because it decides everything downstream. Establish whether the service you sell falls within section 2(1)(wa) or has been notified as a designated business under section 2(1)(sa), then register with FIU-IND and appoint both a principal officer and a designated director before going live rather than after.
Build the beneficial ownership logic to the 10 percent test from the outset. Retrofitting a lower threshold onto an existing book means re-papering every entity customer, and the RBI expects periodic updation at least once every two years for high-risk customers, eight years for medium risk and ten years for low risk.
Then wire reporting to the deadlines rather than to a monthly batch job. Seven working days for a suspicious transaction report is a shorter clock than the 30 days a US filer works to, and the screening and monitoring that generates those alerts has to run continuously to make it. Further jurisdiction guides sit in our jurisdictions and regulation collection.
