For Prelims: Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), Principal Officer, Prevention of Money Laundering Act (PMLA), 2002, Regulator, Certification Body, Certification Exam, Compliance Timeline
For Mains: Regulatory standardisation, market integrity, financial crime prevention, compliance framework
Source:
The Hindu
5 facts for one-day exams
SSC, railway, police and teaching exams ask direct questions like these.
- SEBI proposed mandatory AML/CFT certification for principal officers of market intermediaries.
- The certification will be conducted by the National Institute of Securities Markets (NISM).
- NISM launched the Series-XXIV AML/CFT certification examination in February 2025.
- Principal officers report suspicious transactions to the Financial Intelligence Unit-India.
- Existing and new principal officers have six months to comply with the certification requirement.
Why in the news?
SEBI has proposed making AML/CFT certification mandatory for principal officers of all registered market intermediaries to standardise expertise in anti-money laundering and counter-terrorism financing compliance. The certification, developed with NISM, covers PMLA, customer due diligence, beneficial ownership, and transaction monitoring.
Summary
- SEBI proposes mandatory AML/CFT certification for principal officers of all registered intermediaries.
- Principal officers are responsible for identifying suspicious transactions, maintaining records, and reporting to Financial Intelligence Unit-India.
- The certification covers Prevention of Money Laundering Act, customer due diligence, beneficial ownership, risk-based classification, and transaction monitoring.
Highlights
Mandatory Certification for Principal Officers
SEBI proposes AML/CFT certification for principal officers of all registered intermediaries to ensure uniform expertise in detecting money laundering and terror financing.
NISM to Conduct Certification Exam
SEBI has collaborated with NISM, which launched the Series-XXIV AML/CFT exam in February 2025, to develop the certification.
Six-Month Compliance Window
Both existing and newly appointed principal officers must obtain the certification within six months of the framework's implementation.
Background
Currently, SEBI mandates appointment of a principal officer at management level for registered intermediaries, but there is no specific AML/CFT certification requirement. This leads to varying levels of expertise across intermediaries in handling anti-money laundering and counter-terrorism financing compliance.
Key Analysis and Impact
The proposal standardises the knowledge base of principal officers covering PMLA, customer due diligence, beneficial ownership, risk-based classification, enhanced due diligence, transaction monitoring, targeted financial sanctions, and reporting obligations. This strengthens the regulatory framework and reduces compliance gaps.
Way Forward
SEBI has sought public comments on the proposal till November 27, 2026. After finalisation, existing and new principal officers will have six months to obtain the NISM Series-XXIV AML/CFT certification, enhancing the integrity of India's securities market.
Background GK
Textbook concepts you need to understand this news
- Anti-Money Laundering (AML)
- Set of laws, regulations, and procedures aimed at preventing criminals from disguising illegally obtained funds as legitimate income.
- Countering the Financing of Terrorism (CFT)
- Measures to detect and prevent the flow of funds to terrorist organisations, including freezing of assets and reporting suspicious transactions.
- Principal Officer
- An official appointed at management level by a registered intermediary, responsible for compliance with AML/CFT norms, identifying suspicious transactions, and reporting to the Financial Intelligence Unit.
- Prevention of Money Laundering Act (PMLA), 2002
- India's primary legislation to prevent money laundering, provide for confiscation of property derived from money laundering, and establish the Financial Intelligence Unit.
Facts to remember
Tap a card to see the answer. Try to recall it first.
How exams will ask this
- Data: Six months compliance timeline for certification
- Nodal Body: Securities and Exchange Board of India (SEBI)
- Legal Point: Prevention of Money Laundering Act (PMLA)
Don't make this mistake!
Trap: Confusing SEBI with RBI or IRDAI as the regulator proposing this certification. The certification is from NISM (National Institute of Securities Markets), not from SEBI directly. Also, the compliance timeline is six months, not one year.
Write these in mains answers
- Regulatory standardisation, market integrity, financial crime prevention, compliance framework
Stuck? Get it in one tap
SEBI wants all stockbrokers, mutual funds, and other market intermediaries to have a specially trained officer who knows how to spot money laundering and terror financing. That officer, called the principal officer, must pass a test developed by NISM. This test covers the anti-money laundering law, how to check who a client really is, and how to report suspicious activity. Existing officers and new ones must pass this test within six months.
- SEBI proposed mandatory AML/CFT certification for principal officers of market intermediaries.
- The certification will be conducted by the National Institute of Securities Markets (NISM).
- NISM launched the Series-XXIV AML/CFT certification examination in February 2025.
- Principal officers report suspicious transactions to the Financial Intelligence Unit-India.
- Existing and new principal officers have six months to comply with the certification requirement.
- Economy: Securities market and regulatory bodies
- Governance: Financial regulation and anti-money laundering framework
Related concepts: Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), Principal Officer, Prevention of Money Laundering Act (PMLA), 2002
Practice questions
Pick an answer, then read the explanation.
- Q1Easy
Which regulatory body proposed making AML/CFT certification mandatory for principal officers of market intermediaries?
Explanation: SEBI is the market regulator that proposed the mandatory AML/CFT certification. RBI regulates banking and monetary policy, IRDAI regulates insurance, and the Ministry of Finance is the parent ministry, not the direct regulator for market intermediaries.
- Q2Hard
Consider the following statements regarding SEBI's proposal on AML/CFT certification:
- 1.The certification will be conducted by the Financial Intelligence Unit-India.
- 2.Principal officers are responsible for reporting suspicious transactions to the Financial Intelligence Unit-India.
- 3.Existing principal officers will have one year to comply with the certification requirement.
Which of the statements given above is/are correct?
Explanation: Statement 1 is incorrect because the certification is developed by NISM, not FIU-India. Statement 2 is correct as principal officers report suspicious transactions to FIU-India. Statement 3 is incorrect because the compliance timeline is six months, not one year.
- Q3Medium
What is the compliance timeline proposed by SEBI for principal officers to obtain the mandatory AML/CFT certification?
Explanation: SEBI has proposed a timeline of six months for both existing and newly appointed principal officers to comply with the certification requirement. Three months is too short, nine months and one year are longer than the proposed timeline.
- Q4Medium
What is the primary objective of SEBI's proposal to mandate AML/CFT certification for principal officers?
Explanation: The proposal aims to ensure principal officers possess adequate knowledge and competence in AML/CFT norms, including identifying suspicious transactions and assessing money-laundering risks. Revenue generation, reducing intermediaries, and transferring powers are not objectives of this proposal.
Frequently asked questions
1. What is SEBI's proposal regarding AML/CFT certification?
SEBI has proposed making Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) certification mandatory for principal officers of all registered market intermediaries.
2. Which body will conduct the AML/CFT certification examination?
The National Institute of Securities Markets (NISM) will conduct the certification examination, having launched the Series-XXIV AML/CFT certification exam in February 2025.
3. What is the compliance timeline for principal officers under SEBI's proposal?
Both existing and newly appointed principal officers must obtain the certification within six months of the framework's implementation.
4. What topics are covered in the proposed AML/CFT certification?
The certification covers the Prevention of Money Laundering Act, customer due diligence, beneficial ownership requirements, risk-based classification of clients, enhanced due diligence, transaction monitoring, targeted financial sanctions, and reporting obligations.
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- Original6 November 2026 · Read story
