AML Laws and Regulations for Stock Exchanges in India

Last Updated on: 2nd September 2026 | Last Reviewed on: 2nd September 2026

Key Takeaways at a Glance

Who is covered: recognised stock exchanges, including equity and commodity derivatives exchanges, recognised by SEBI under the Securities Contracts (Regulation) Act, 1956, are covered as reporting entities under the PMLA.

Why they are covered: a recognised stock exchange is expressly included within the definition of an intermediary under section 2(1)(n) of the PMLA and therefore qualifies as a reporting entity under section 2(1)(wa). No separate designation under section 2(1)(sa) is needed.

Governing laws: the PMLA, 2002 and the PML (Maintenance of Records) Rules, 2005; the SEBI AML/CFT Guidelines, 2024, the commodity derivatives AML circular and the SEBI KYC Master Circular; the UAPA 1967 (Section 51A) and the WMD Act, 2005 (Section 12A).

Supervisor: the Securities and Exchange Board of India (SEBI). Reports go to the Financial Intelligence Unit – India (FIU-IND); the Enforcement Directorate (ED) enforces the PMLA.

Core duties: an internal risk assessment, member and participant due diligence, market surveillance for suspicious trading, beneficial owner identification, prescribed transaction reporting, five-year record-keeping and sanctions screening.

This guide is general information on Indian law, not legal advice. For your business-specific position, speak to a qualified AML professional.

Recognised stock exchanges are reporting entities under the Prevention of Money Laundering Act, 2002. A stock exchange is a recognised body that provides the trading platform for securities or commodity derivatives, admits and oversees trading members, and runs the surveillance that keeps the market fair. Its AML, CFT and CPF duties flow from the PMLA, the PML (Maintenance of Records) Rules, 2005, the SEBI AML/CFT Guidelines for securities market intermediaries, the SEBI master circular on preventing money laundering in the commodity derivatives market, the SEBI KYC Master Circular, Section 51A of the UAPA, Section 12A of the WMD Act, and the FIU-IND reporting framework. SEBI supervises stock exchanges, and reports are filed with FIU-IND. This guide sits within the wider set of guides for securities market intermediaries.

The core instruments at a glance

Instrument	What it does for a stock exchange
PMLA, 2002	The core legal statute. Includes the recognised stock exchange within the intermediary definition and creates the duties of due diligence, record-keeping and reporting.
PML (Maintenance of Records) Rules, 2005	The rules formatted under the PMLA, it sets out what to report and when, how members identify clients and beneficial owners, and the duty to appoint officers.
SEBI AML/CFT Guidelines	The working AML rulebook for every securities market intermediary, including exchanges and their members.
Commodity derivatives AML circular (4 February 2026)	The SEBI master circular on preventing money laundering and terrorism financing in the commodity derivatives market.
UAPA Section 51A and WMD Act Section 12A	Impose targeted financial sanctions for terrorism and proliferation financing.
FATF Recommendations	The international preventive measure standards for financial institutions that India’s framework is built to meet.

What counts as a stock exchange in India?

A stock exchange is a body recognised by SEBI under the Securities Contracts (Regulation) Act, 1956 that provides and maintains a platform for trading in securities or, in the case of a commodity derivatives exchange, in commodity derivatives. It admits trading and clearing members, sets and enforces the rules of the market, and runs the surveillance systems that monitor trading for manipulation and abuse. The exchange does not usually onboard individual investors directly, since that is done by its member brokers, but it sits at the centre of the market as a first-level regulator of its members and a reporting entity under the PMLA.

The money laundering risk of a stock exchange is a market-integrity risk seen from the centre. It sits in the trading of its members and their clients, where manipulative patterns such as circular, synchronised or reversal trading can be used to move or launder value; in the admission and conduct of members, whose fitness and beneficial ownership matter; and in the flow of trades across segments and connected accounts that the exchange is uniquely placed to see. The AML framework therefore leans on the exchange’s member due diligence and its market surveillance, which lets it detect and report suspicious trading that individual members might miss.

Are stock exchanges reporting entities under the PMLA?

Yes. A recognised stock exchange is a reporting entity under the Prevention of Money-Laundering Act, 2002. Section 2(1)(wa) defines a reporting entity to include an intermediary, while section 2(1)(n) expressly includes a recognised stock exchange within the definition of intermediary. Accordingly, a recognised stock exchange is a reporting entity in its own right and is subject to the PMLA’s AML obligations. It is also distinct from the member brokers.

This places a stock exchange in the same broad category of reporting entities that file with FIU-IND as banks and other intermediaries, and within the wider AML laws and regulations for intermediaries in India. The obligations are calibrated to the exchange’s central role, but the reporting entity status is not optional.

Supervisory authority for stock exchanges in India

The Securities and Exchange Board of India (SEBI) is the principal regulator and supervisor of stock exchanges in India. It regulates and recognises stock exchanges under the Securities Contracts (Regulation) Act, 1956, prescribes their AML, CFT and CPF requirements and supervises their compliance. The core AML instrument is the SEBI Guidelines on AML Standards and CFT Obligations of Securities Market Intermediaries, updated on 6 June 2024, read with the SEBI Master Circular on KYC Norms for the Securities Market. Together, these carry the member due diligence, surveillance and reporting duties into the language of an exchange.

The Financial Intelligence Unit of India receives, analyses and disseminates the reports a stock exchange files, and the Enforcement Directorate investigates and prosecutes the offence of money laundering under the PMLA. Practically, SEBI sets and inspects the rules, FIU-IND receives the intelligence, and the ED enforces the criminal law.

AML Regulatory Requirements for Stock Exchanges in India

The law that governs a stock exchange does not sit in one place. It is a layered framework, and it helps to see it grouped as the core legislation, the overarching obligations, the sectoral regulator and its instruments, the miscellaneous official reports, the international standards, and the allied laws.

Core Legislation

The primary statutes and rules that create the AML, CFT and CPF obligations, grouped into three subsets.

AML Legislation

Prevention of Money Laundering Act, 2002 (PMLA)

It is India’s principal AML legislation. It defines the offence of money laundering and establishes core obligations for reporting entities, including customer due diligence under Section 11A and record-keeping under Section 12. A recognised stock exchange is covered as a reporting entity through the intermediary definition in Section 2(1)(n), making the PMLA directly applicable to its securities-market activities.

The PML (Maintenance of Records) Rules, 2005 (PMLR)

The rules made to operationalise the PMLA. They set what to report and when (Rule 3 and Rule 8), how to identify clients and beneficial owners (Rule 9), and the duty to appoint officers (Rule 7). For a stock exchange, the relevant Regulator named in Rule 2(1)(fa) is SEBI. The PMLR has been amended through 31 Gazette notifications and orders, set out below as a legal-history timeline.

The 31 PMLR amendment notifications, in date order:

Gazette notification and date	Key change or rule touched
G.S.R. 389(E), 24 May 2007	The founding amendment to the 2005 Rules. It strengthened the Rule 2 test for a suspicious transaction to reach dealings without economic rationale or bona fide purpose and those signalling terrorism financing, revised Rule 3 around cash dealings in forged or counterfeit currency, substituted Rule 8 on furnishing information to the Director, and reduced Rule 9’s certified copy requirement from three to one.
G.S.R. 816(E), 12 November 2009	It introduced the non-profit organisation and Regulator definitions, restated the suspicious transaction, and mandated the reporting of NPO receipts above Rupees 10 lakh. Under Rule 6 it set ten-year record retention, and it revised Rule 9 to demand beneficial owner identification, ongoing due diligence, a ban on anonymous accounts and a Client Identification Programme.
G.S.R. 76(E), 12 February 2010	Amended Rules 3, 4, 5, 7 and 9 to sharpen the record keeping and the reporting references. Added the first Explanation in Rule 9(1A), fixing the beneficial owner as the natural person who ultimately owns or controls a client or on whose behalf a transaction is carried out.
G.S.R. 508(E), 16 June 2010	Revised Rules 2, 9 and 10, refining the provisions on customer due diligence, transaction monitoring, verification of beneficial owners and the obligations of reporting entities when a transaction or customer gives rise to suspicion.
G.S.R. 980(E), 16 December 2010	Inserted the small account regime, defined the Designated Officer and the small account, folding the NREGA job card and the Aadhaar letter into the officially valid documents in Rule 2, and adding Rule 9(2A) on how such an account is opened and monitored.
G.S.R. 481(E), 24 June 2011	Introduced the short title, amending Rule 1 to condense the long 2005 name into the Prevention of Money Laundering (Maintenance of Records) Rules, the PMLR shorthand in use since.
G.S.R. 576(E), 27 August 2013	Revised Rules 2 and 3 and inserted provisions after Rule 10, regarding the cash and suspicious transaction reporting duties and the record maintenance framework so that they match the reporting obligations.
G.S.R. 288(E), 15 April 2015	Amended Rule 2 definitions, since they determine who and what the operative rules reach, the change carried across the framework and opened a run of 2015 updates.
G.S.R. 544(E), 7 July 2015	Revised Rules 2, 9, 10 and inserted Rule 9A on definitions, customer due diligence and record keeping, revising how a reporting entity identifies its customers and what it retains, within a substantial 2015 overhaul of the CDD and records provisions.
G.S.R. 730(E), 22 September 2015	Inserted an explanation under Rule 2, recognising a marriage certificate as a supporting document for a subsequent change of name in an officially valid document.
G.S.R. 882(E), 18 November 2015	Revised the timeline under Rule 9A for the Government to establish a Central KYC Records Registry, extending it from 90 days to 180 days from the date of commencement of 2015 amendments.
G.S.R. 347(E), 12 April 2017	Revised Rule 2 and inserted Rule 9B, introduced the Central KYC Records Registry into the Rules, creating the duty to file customer KYC records centrally and the basis to reuse them, the structural addition behind today’s CKYCR.
G.S.R. 538(E), 1 June 2017	Amended Rules 2 and 9 to include Aadhaar into customer due diligence, prescribing Aadhaar based identification and authentication for KYC, an approach the Supreme Court’s Aadhaar ruling later reshaped.
G.S.R. 1038(E), 21 August 2017	Revised the Rule 2 definitions, updating the defined terms that govern how the operative rules apply, among several definition changes in 2017.
G.S.R. 1318(E), 23 October 2017	Inserted proviso for acceptance of officially valid documents from abroad of a foreign national.
G.S.R. 456(E), 16 May 2018	Inserted a clause under Rule 9 setting out the requirements for incorporating sector specific guidelines and requiring all reporting entities to formulate a Customer Due Diligence (CDD) programme.
G.S.R. 1078(E), 31 October 2018	Revised Rule 9 by extending the timeline for filing electronic records of a customer’s CDD from 3 days to 10 days.
G.S.R. 108(E), 13 February 2019	Amended Rules 2 and 9 on definitions and customer due diligence, after the legislative changes to Aadhaar use, revising the ways identification could be conducted.
G.S.R. 381(E), 28 May 2019	Revised Rule 9, sharpening the identification and verification process and the routes to confirm a customer’s identity, part of the post Aadhaar reshaping of CDD.
G.S.R. 582(E), 19 August 2019	Amended Rules 2 and 9 and annexure after Rule 11, covering definitions, customer due diligence and the supporting provisions on information and records, one of the broader 2019 updates.
G.S.R. 669(E), 18 September 2019	Again, revised Rules 2 and 9, refining the definition and strengthening the customer due diligence framework in relation to depository receipts.
G.S.R. 840(E), 13 November 2019	Amended Rule 9 with further changes to the identification and verification requirements, closing the 2019 run of CDD changes.
G.S.R. 228(E), 31 March 2020	Revised the timeline for small accounts operationalisation for 2020 and further as notified by the government.
G.S.R. 251(E), 13 April 2020	Amended the reporting timeline under Rule 8 for furnishing transaction reports to the FIU.
G.S.R. 254(E), 16 April 2020	Further amended Rule 8 to incorporate a new timeline for report submission for the quarter.
G.S.R. 798(E), 28 December 2020	It introduced Dealers in Precious Metals and Stones and Real Estate Agents as a DNFBP for them to be covered under PMLA.
G.S.R. 575(E), 13 July 2022	Inserted the International Financial Services Centre definition with a tailored beneficial owner provision for entities based in an IFSC and added an IFSC proviso to Rule 9A on the CKYCR, aligning the Rules with the GIFT City regime, of note for an exchange operating a segment in an IFSC.
S.O. 1074(E), 7 March 2023	A major amendment that inserted definitions of politically exposed persons, group and non-profit organisations. Rule 3A duty for group-wide AML policies and cut the company beneficial ownership threshold from 25 to 10 per cent, with a matching change to Rule 9(3)(e), of direct relevance to an exchange overseeing the beneficial ownership of a corporate member.
G.S.R. 652(E), 4 September 2023	The second major 2023 amendment that required the Principal Officer to be at management level, cut the partnership beneficial ownership threshold from 15 to 10 per cent, added an Explanation of control, obliged trustees to disclose their status, and required the results of any Rule 3 and Rule 9 analysis to be kept among the records, all of which bear on an exchange vetting corporate members and their controllers.
G.S.R. 745(E), 17 October 2023	Revised Rules 2, 3, 8 and 9 in one notification, covering definitions, the reporting duties and customer due diligence, adjusting several operative provisions together to close the 2023 changes.
G.S.R. 419(E), 19 July 2024	Amended Rule 9(1C) on the KYC Identifier and set a seven-day deadline to update a CKYCR record after any change, added a duty to fetch the updated record, and refined Rule 9A(2)(g) on filing, retrieving and using registry records, sharpening how current central KYC data is kept.

The PML (Manner of Receiving the Records Authenticated Outside India) Rules, 2005

Rules governing the acceptance of officially valid documents issued or authenticated outside India, relevant to stock exchanges when onboarding non-resident clients or foreign portfolio investors and relying on identification documents executed or issued abroad.

CFT Legislation

The Unlawful Activities (Prevention) Act, 1967 (UAPA)

The counter-terrorism law. Section 51A requires stock exchanges to screen relevant persons and entities against the designated lists and, where a match is identified, freeze funds and securities without delay in accordance with the prescribed procedure. These obligations apply to stock exchanges as reporting entities and form part of their targeted financial sanctions controls.

Procedure for implementation of Section 51A of the UAPA (order dated 2 February 2021; corrigendum dated 15 March 2023 and 29 August 2023)

The official procedure for implementing section 51A, including the steps a stock exchange must follow when a person or entity matches a designated list. SEBI’s applicable guidelines incorporate these screening, reporting and freezing steps into the stock exchange’s targeted financial sanctions.

CPF Legislation

The Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (WMD Act)

The proliferation-financing law. Section 12A provides the legal basis for targeted financial sanctions relating to the financing of weapons of mass destruction, requiring covered financial institutions, including stock exchanges, to implement the prescribed screening, freezing and reporting measures.

Procedure for implementation of Section 12A of the WMD Act (dated 1 September 2023)

The official procedure for applying Section 12A, setting out the screening, reporting and freezing measures that stock exchanges must follow for suspected proliferation financing links.

The WMD and their Delivery Systems (Prohibition of Unlawful Activities) Implementation Rules, 2016

Rules implementing the WMD Act and supporting the proliferation financing controls a stock exchange must align its operations with.

Overarching Obligations

The supporting systems and procedures that sit above any single regulator and carry a stock exchange’s KYC data and reports.

CERSAI Central KYC Records Registry (CKYCR) Operating Guidelines, 2025

The PMLR provides for the central KYC records registry, while these guidelines set out how KYC records are submitted, stored, retrieved and updated. For a stock exchange, the framework enables submission and retrieval of KYC records through the CKYCR, supporting consistent customer identification, reducing duplication and ensuring that updated KYC information is maintained across the financial system.

FINnet 2.0 reporting formats (2024) and the FINGate 2.0 user manuals

Define the electronic reporting formats and filing mechanism through which a stock exchange submits cash transaction, suspicious transaction and other prescribed reports to FIU-IND, using the current FINnet 2.0 and FINGate 2.0 reporting environment.

eKYC and Section 11A Aadhaar authentication for the securities market

SEBI’s circular on the eKYC authentication facility under Section 11A of the PMLA enables stock exchanges to use Aadhaar-based authentication for eligible resident clients, subject to statutory requirements and applicable Supreme Court limits, providing a permitted digital route for customer identification and onboarding.

Sectoral Guidelines

The market regulator and the instruments it issues. This is the sector-specific layer that stock exchanges must rely upon for compliance fulfilment.

Securities and Exchange Board of India (SEBI)

SEBI Guidelines on AML Standards and CFT Obligations of Securities Market Intermediaries (6 June 2024)

The principal AML, CFT and CPF framework for SEBI-registered securities market intermediaries, issued on 6 June 2024. It sets out requirements on customer due diligence, risk assessment and categorisation, beneficial ownership, ongoing monitoring, record-keeping, reporting and sanctions. It consolidates and supersedes the earlier 2010 and 2014 AML master circulars. For a stock exchange, it provides the detailed AML, CFT and CPF obligations that operate alongside its broader regulatory and conduct requirements.

SEBI Master Circular on KYC Norms for the Securities Market (12 October 2023)

The consolidated KYC framework for the securities market, read with subsequent modifications and SEBI’s clarification on the use of technology for KYC. It sets out how securities market intermediaries identify and verify clients, conduct KYC, and maintain and share KYC records through the KYC registration agencies. For a stock exchange, it provides the operational KYC requirements that support its broader AML, CFT and CPF obligations.

eKYC, KYC clarification circulars and SEBI FAQs

SEBI’s circular on the eKYC authentication facility under Section 11A (5 November 2019), the clarification on the use of technology for KYC (24 April 2020) and the frequently asked questions on KYC norms give a stock exchange practical guidance on digital onboarding and record-keeping.

Miscellaneous

Official reports and guidance that are not binding rules but shape how a stock exchange reads its risk and the wider enforcement picture.

FIU-IND Annual Report 2024-25

The Financial Intelligence Unit’s yearly account of reporting volumes, typologies and enforcement trends, useful for a stock exchange calibrating what unusual client or trading activity looks like across the market.

Directorate of Enforcement Annual Report 2025-26

The ED’s yearly summary of PMLA investigations, attachments and prosecutions, a reminder of how the criminal side of the regime operates.

FIU-IND and its Core Functions and FAQs

FIU-IND’s explanation of its own role and a set of frequently asked questions, an explanatory reference on registration and reporting expectations.

MHA National Counter Terrorism Policy and Strategy

The statement of national counter terrorism policy, by the Ministry of Home Affairs. It provides background that frames the UAPA sanctions obligations a stock exchange must apply.

International Standards

The global standards India’s framework is built to meet, and against which a stock exchange’s controls are ultimately judged.

FATF Recommendations

The forty Recommendations that provide international AML, CFT and CPF standards which underpin the framework applicable to stock exchanges. Recommendations 9 to 23 establish preventive measures relevant to financial institutions and securities-market intermediaries. These standards provide the international benchmark that informs India’s obligations for recognised stock exchanges.

FATF Mutual Evaluation Report on India, 2024 (and Executive Summary)

The peer assessment of India’s AML and CFT regime, which found India largely compliant with the standards and assessed the effectiveness of its preventive measures and supervision. It set the direction for strengthening the supervision of stock exchanges and other securities intermediaries.

Basel Committee, Sound Management of Risks Related to Money Laundering and Financing of Terrorism (2020)

The Basel Committee’s sound management guidance, a supervisory benchmark for embedding AML risk management that informs a stock exchange’s own framework, even though it is bank-facing in origin.

IOSCO Objectives and Principles of Securities Regulation

The International Organisation of Securities Commissions standards for securities regulators, the global benchmark, and SEBI’s own conduct and AML expectations for stock exchanges are built to meet these standards.

Allied Laws

The wider body of law that defines the securities statutes, offences and enforcement machinery around money laundering. Stock exchanges operate under the securities statutes, while the predicate and enforcement Acts shape the risk it must assess and the conduct it may need to report.

The allied laws most relevant to a stock exchange’s financial crime and regulatory include the Securities and Exchange Board of India Act, 1992, which establishes SEBI and provides the framework for its regulatory oversight of stock exchanges; the Securities Contracts (Regulation) Act, 1956: which governs recognised stock exchanges and securities contracts, the Depositories Act, 1996: which provides the legal framework for holding and transferring securities in dematerialised form.

Other relevant legislation includes the Companies Act, 2013, the Foreign Exchange Management Act, 1999, the Bharatiya Nyaya Sanhita, 2023 and the Bharatiya Nagarik Suraksha Sanhita, 2023, the Benami Transactions (Prohibition) Act, 1988, the Prevention of Corruption Act, 1988, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Fugitive Economic Offenders Act, 2018, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Foreign Contribution (Regulation) Act, 2010, the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA), the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976(SAFEMA), the Arms Act, 1959, the Chemical Weapons Convention Act, 2000 and the Central Vigilance Commission Act, 2003.

Core AML/CFT/CPF Obligations for Stock Exchanges in India

Across that framework, the regulations require a stock exchange to do the following. This article keeps each at the level required by law; a compliance requirements guide explains how to do each.

Register with FIU-IND. Enrol on the FINnet 2.0 / FINGate 2.0 portal so the exchange can file its reports.

Appoint officers. Appoint a Designated Director and a management-level Principal Officer under Rule 7 of the PMLR and the SEBI Guidelines. The same person cannot hold both roles, and both are to be informed to FIU-IND and, where applicable, SEBI.

Conduct the internal risk assessment. Run an ML and TF risk assessment across clients, products, channels and geographies, document it, and take its outcome to the board, as the SEBI AML/CFT Guidelines require.

Document AML policy, controls and procedures. Adopt a board-approved policy that turns the risk assessment into the exchange’s operating procedures.

Member due diligence and oversight. Vet the trading and clearing members it admits, including their fitness and the beneficial owners who control them, more than 10 per cent for a company or partnership and more than 15 per cent for an unincorporated body, with the separate trust test, under Rule 9 of the PMLR and the SEBI framework. The exchange oversees that its members carry out client due diligence, while it itself focuses on member integrity and market conduct.

Ongoing monitoring and periodic updates. Run market surveillance on an ongoing basis to detect manipulative or suspicious trading, and review each member’s risk categorisation periodically, keeping member records current as fitness and ownership change.

Sanctions screening. Screen members and, through its systems, the traded universe against the designated lists under Section 51A of the UAPA and Section 12A of the WMD Act, and report and act on any match, verifying the relevant UNSC and domestic lists daily.

Regulatory reporting. File cash transaction reports for cash above Rupees 10 lakh, suspicious transaction reports of any value, non-profit organisation receipt reports and counterfeit-currency reports under Rule 3 and Rule 8 of the PMLR. Cash and related reports are filed monthly, by the 15th day of the succeeding month; suspicious transaction reports are filed promptly once the Principal Officer is satisfied, through FINnet 2.0.

Record management, CKYCR and FINnet 2.0. Keep transaction records for five years from the date of the transaction, and identity records, account files and correspondence for five years after the relationship ends, under Section 12 of the PMLA. Upload client KYC records to the CKYCR under Rule 9A, and file all prescribed reports through FINnet 2.0.

Training and awareness. Train staff by role to apply the controls and recognise red flags on the exchange, such as circular, synchronised or reversal trading, trading concentrated in connected accounts, and members whose ownership or conduct raises concern.

Independent testing and audit. Test the programme through internal audit, compliance assurance or independent review, and close every finding.

Run group-wide controls. Where the exchange is part of a group, apply AML and CFT programmes at group level, including for subsidiaries such as clearing corporations, as the SEBI Guidelines require.

What this article does not cover

This article explains the legal and regulatory framework applicable to recognised stock exchanges. It is not intended to serve as a control-by-control compliance manual, nor does it restate the Securities Contracts (Regulation) Act or the exchange and surveillance rules except where they bear on the AML duties. For implementation, an exchange shall separately document member due diligence, market surveillance and alert handling, beneficial owner oversight, sanctions screening, suspicious transaction reporting, staff training, audit testing and board reporting. Those controls are the subject of the companion compliance guide.

To see how the stock exchange framework fits within the sector, see AML laws and regulations for intermediaries in India, and to place it within the national picture, see AML laws and regulations in India.

From Regulation to Compliance: Your Next Step

Knowing the law is step one. Regulatory obligations protect a stock exchange only when they are built into an effective working programme covering risk assessment, policies and procedures, member due diligence, market surveillance, screening, reporting, training and independent review. For a stock exchange, the most critical controls include vetting the members it admits, running effective market surveillance and reporting suspicious trading. Understanding the stages of money laundering and how the sanctions screening process works is a useful starting point.

Frequently Asked Questions

What is a stock exchange for AML purposes?

A body recognised by SEBI under the Securities Contracts (Regulation) Act, 1956 that provides the platform for trading in securities or commodity derivatives, admits and oversees members, and runs market surveillance. A recognised stock exchange is an intermediary and a reporting entity under the PMLA in its own right.

Are stock exchanges reporting entities under the PMLA?

Yes. Stock exchanges are expressly named within the intermediary definition in section 2(1)(n) of the PMLA, so they are reporting entities under section 2(1)(wa). This is separate from and additional to the AML duties its member brokers carry. No section 2(1)(sa) designation is needed.

Which SEBI instruments apply to a stock exchange?

The SEBI Guidelines on AML Standards and CFT Obligations of Securities Market Intermediaries of 6 June 2024 are the central AML rulebook, read with the SEBI Master Circular on KYC Norms for the Securities Market of 12 October 2023 and, for commodity derivatives exchanges, the SEBI master circular on Preventing Money Laundering in the Commodity Derivatives Market of 4 February 2026.

How is an exchange's AML role different from a broker?

A stock exchange does not usually onboard individual investors, since that is done by its member brokers, so its AML role centres on vetting the members it admits, overseeing that they run proper client due diligence, and using its market surveillance to detect and report suspicious or manipulative trading that individual members might not see. It is a reporting entity and a first-level regulator of its members.

What must a stock exchange report to FIU-IND?

Chiefly, suspicious transaction reports of any value arising from its surveillance and member oversight, along with the other prescribed reports where applicable. Suspicious transaction reports are filed promptly once the Principal Officer is satisfied, and any cash and related reports are filed monthly by the 15th of the succeeding month, through FINnet 2.0.

Do the sanctions rules apply to stock exchanges?

Yes. The screening duties under Section 51A of the UAPA and Section 12A of the WMD Act apply to every recognised stock exchange. An exchange screens its members and their beneficial owners against the United Nations and domestic designated lists and reports and acts on any match without delay.

Official sources and review

Last reviewed: July 2026. This guide is grounded in the following primary official sources, linked to their official source where available.

This guide covers money laundering law and compliance, a sensitive area where the rules change; confirm the current position for your firm with a qualified professional before acting.

Why work with AML India

AML India helps stock exchanges and clearing corporations meet their PMLA and SEBI obligations, from risk assessment and policy development to member due diligence, surveillance calibration, screening, reporting, training and independent review.

Industries we serve: Stock Exchanges, Depositories, Stock Brokers, Custodians, Mutual Funds and other Securities Intermediaries, Banks, NBFCs, Insurers, DNFBPs and IFSC and GIFT City entities.

Want to confirm what the SEBI framework means for your firm?

AML India can walk you through the SEBI AML/CFT Guidelines and the commodity derivatives circular and build a proportionate member due diligence and surveillance programme for your exchange.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik