SEBI Proposes Mandatory AML Certification for Key Officers
The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing that Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) certification becomes mandatory for Principal Officers of all intermediaries registered with the regulator. The proposal aims to standardize the professional competence of officers responsible for implementing critical financial compliance measures in the securities market.
Under the draft guidelines, Principal Officers will be required to obtain the National Institute of Securities Markets’ (NISM) Series XXIV certification, specifically titled "Anti-Money Laundering and Combating the Financing of Terrorism Provisions in Securities Markets." Both existing officers and those newly appointed to the role will be given a six-month period to complete this certification.
Addressing Variability in Expertise
SEBI noted that while its existing regulations mandate intermediaries to appoint a Principal Officer at the management level, there is currently no specific certification requirement tied to AML/CFT knowledge. The regulator observed that this gap leads to significant variation in the level of expertise and professional capacity among Principal Officers across different firms.
The certification is intended to establish a common minimum knowledge benchmark. SEBI stated that the requirement is designed to strengthen the ability of these officers to effectively implement AML/CFT compliances, ensuring they are adequately equipped to handle the complexities of modern financial crimes.
Scope of Responsibilities and Knowledge
Principal Officers play a pivotal role in enforcing the Prevention of Money Laundering Act (PMLA), 2002, and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. Their duties include identifying suspicious transactions, maintaining relevant records, and ensuring timely reporting to the Financial Intelligence Unit-India (FIU-IND).
The proposed certification covers a broad range of topics essential for this role, including: * Customer due diligence and beneficial ownership requirements. * Risk-based classification of clients and enhanced due diligence. * Confidentiality requirements and prohibitions against tipping off clients. * Targeted financial sanctions under the Unlawful Activities (Prevention) Act. * Proliferation financing requirements under the Weapons of Mass Destruction Act. * FATF high-risk jurisdictions and emerging risks from new technologies.
Certification Details and Timeline
The NISM Series XXIV examination was developed by SEBI in collaboration with NISM and was launched in February 2025. The exam assesses knowledge of PMLA provisions, SEBI’s AML/CFT guidelines, KYC requirements, scheduled offences, and relevant case studies.
SEBI has also proposed that Principal Officers must maintain the validity of their certification throughout their tenure. While the mandate is for Principal Officers, the regulator suggested that other employees handling AML/CFT-related activities may also be encouraged to undertake the examination.
Public Consultation
The consultation paper seeks public feedback on three key aspects: the necessity of making the certification mandatory for all Principal Officers, the prescription of the NISM Series XXIV exam for this purpose, and the appropriateness of the six-month compliance timeline. Stakeholders are invited to submit their comments by November 27, 2026.