SEBI plans mandatory AML exam for officers

The Securities and Exchange Board of India (SEBI) has proposed making Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) certification mandatory for principal officers of all intermediaries registered in the securities market. The proposal, issued through a consultation paper on November 6, 2026, seeks to strengthen safeguards against money laundering and terrorist financing by setting a uniform knowledge benchmark for officials charged with AML/CFT compliance.

Under the plan, every principal officer would be required to obtain the National Institute of Securities Markets’ (NISM) Series-XXIV certification on AML and Combating the Financing of Terrorism provisions in securities markets. SEBI has proposed that both existing and newly appointed principal officers be given six months to complete the certification once the framework is finalised, and that they maintain the validity of the certification throughout their tenure.

The NISM Series-XXIV AML/CFT certification examination was developed by SEBI in collaboration with NISM and launched in February 2025 as a common knowledge benchmark for employees of securities market intermediaries. The consultation paper proposes using this examination as the compulsory standard for principal officers. SEBI has also indicated that other employees engaged in AML/CFT activities may be encouraged to take the exam, though the mandatory requirement is targeted at principal officers.

Certification content covers key elements of the AML/CFT framework, including customer due diligence, identification of beneficial ownership and risk-based classification of clients. It also addresses enhanced due diligence, transaction monitoring, reporting obligations, record maintenance and confidentiality requirements, as well as the prohibition on tipping off clients about suspicious transaction reports.

Principal officers occupy a central role in implementing requirements under the Prevention of Money Laundering Act, 2002, and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. Their responsibilities include identifying and assessing potentially suspicious transactions, maintaining records of such transactions and ensuring timely reporting to the Financial Intelligence Unit-India. SEBI’s proposal emphasises that these officers should also understand targeted financial sanctions under the Unlawful Activities (Prevention) Act and requirements related to proliferation financing under the Weapons of Mass Destruction Act.

In addition, the proposed certification covers issues such as high-risk jurisdictions identified by the Financial Action Task Force and emerging money laundering and terrorist financing risks stemming from new products, technologies and digital delivery mechanisms. SEBI’s objective is to ensure that principal officers possess adequate expertise to identify suspicious transactions, assess money-laundering risks and comply fully with reporting obligations under the AML/CFT framework.

At present, SEBI’s regulations require every registered intermediary to appoint a principal officer at the management level to oversee compliance with the AML/CFT framework, but there is no specific certification requirement for this role. This has resulted in varying levels of AML/CFT expertise among principal officers across intermediaries. The proposed certification regime is intended to introduce a common minimum standard of knowledge and professional competence for these key officials.

SEBI has invited public comments on three aspects of the proposal: whether certification should be mandatory for all principal officers, whether the NISM Series-XXIV examination should be prescribed for this purpose and whether a six-month compliance window is appropriate for both existing and newly appointed officers. Stakeholders can submit their responses via SEBI’s website until November 27, 2026, after which the regulator may finalise the framework and timelines for implementation.