TL;DR
- A reporting entity under section 2(1)(wa) of the Prevention of Money-laundering Act 2002 is a banking company, financial institution, intermediary or person carrying on a designated business or profession.
- Designated businesses now include virtual digital asset providers, trust and company service providers, and practising professionals.
- Every reporting entity keeps records for five years and reports cash and certain other transactions to FIU-IND by the 15th of the next month, and suspicious transactions promptly.
Quick Answer: A reporting entity under PMLA is a banking company, financial institution, intermediary or person carrying on a designated business or profession, under section 2(1)(wa). Every reporting entity verifies clients, keeps records for five years and reports prescribed transactions to FIU-IND. Cash transaction reports are due by the 15th of the next month.
The Prevention of Money-laundering Act 2002 (PMLA) places its record-keeping and reporting duties on reporting entities. The Financial Intelligence Unit-India (FIU-IND) receives their reports. The list of designated businesses has grown since 2020, so an entity that was outside PMLA a few years ago may be inside it today.
Reporting entities at a glance
| Class | Who it covers | Provision |
|---|---|---|
| Banking company | Banks, including co-operative banks within the definition | Section 2(1)(e), read with section 2(1)(wa) |
| Financial institution | Includes chit fund companies, housing finance institutions, authorised persons, payment system operators, NBFCs and the Department of Posts | Section 2(1)(l) |
| Intermediary | SEBI-registered market intermediaries, PFRDA-registered intermediaries and recognised stock exchanges | Section 2(1)(n) |
| Designated business or profession | Casinos, notified real estate agents and dealers, and other notified activities | Section 2(1)(sa) |
Who Is a Reporting Entity Under Section 2(1)(wa)?
Section 2(1)(wa) of the Prevention of Money-laundering Act 2002 defines a reporting entity as "a banking company, financial institution, intermediary or a person carrying on a designated business or profession". The fourth class changes most, because the Central Government adds to it by notification, as it did for virtual digital assets in S.O. 1072(E) of 7 March 2023.
Which Designated Businesses and Professions Are Covered?
| Designated business or profession | Condition | Source |
|---|---|---|
| Games of chance for cash or kind, including casinos | All | Section 2(1)(sa)(i) |
| Inspector-General of Registration | As notified | Section 2(1)(sa)(ii) |
| Real estate agents | Annual turnover of ₹20 lakh or above | G.S.R. 798(E), 28 December 2020 |
| Dealers in precious metals and stones | Cash transactions of ₹10 lakh or more with a customer, single or linked | G.S.R. 799(E), 28 December 2020 |
| Multi-State co-operative societies | All registered under the MSCS Act 2002 | G.S.R. 424(E), 4 May 2018 |
| Virtual digital asset service providers | Five activities, including VDA-fiat exchange and safekeeping | S.O. 1072(E), 7 March 2023 |
| Practising CAs, CSs and cost accountants | Five types of financial transaction carried out for a client | Notification of 3 May 2023 |
| Trust and company service providers | Formation agents, persons acting as director, secretary or nominee shareholder for another, registered office providers and trustees of express trusts | S.O. 2135(E), 9 May 2023 |
When Does a Professional Become a Reporting Entity?
Only for specified transactions done for a client. The 3 May 2023 notification covers buying or selling immovable property, managing client money or assets, managing bank or securities accounts, organising contributions for companies, and creating, operating or managing companies, LLPs or trusts, or buying and selling business entities. Audit and advisory work outside those activities does not make the professional a reporting entity. Where an engagement sits near that line, advisory services can help settle whether it is covered.
What Must a Reporting Entity Do Under Section 12?
Section 12 sets the record and reporting duties, and section 11A sets client verification. Client verification is where RegTech platforms matter most in daily operations.
| Duty | Requirement | Provision |
|---|---|---|
| Client verification | Verify the identity of clients and beneficial owners | Section 11A(1) |
| Transaction records | Keep records that allow individual transactions to be reconstructed | Section 12(1)(a) |
| Reporting | Furnish information on transactions, attempted or executed, to the Director within the prescribed time | Section 12(1)(b) |
| Identity records | Keep documents evidencing the identity of clients and beneficial owners, account files and correspondence | Section 12(1)(e) |
| Retention of transaction records | Five years from the date of the transaction | Section 12(3) |
| Retention of identity records | Five years after the relationship ends or the account closes, whichever is later | Section 12(4) |
| Confidentiality | Keep the information confidential | Section 12(2) |
Each reporting entity must also name a Designated Director and a Principal Officer to FIU-IND, explained in the guide to the Principal Officer under PMLA. How the post relates to the wider compliance officer's role is covered separately.
What Must Be Reported to FIU-IND and By When?
Rule 3 of the PML (Maintenance of Records) Rules 2005 lists the transactions to be recorded, and Rules 7 and 8 require them to be reported and set the deadlines.
| Report | What triggers it | Deadline | Provision |
|---|---|---|---|
| Cash transaction report | Cash transactions of more than ₹10 lakh, or integrally connected cash transactions aggregating more than ₹10 lakh in a month | By the 15th of the succeeding month | Rules 3(1)(A)-(B), 8(1) |
| Non-profit organisation report | Receipts by an NPO of more than ₹10 lakh | By the 15th of the succeeding month | Rules 3(1)(BA), 8(1) |
| Counterfeit currency report | Counterfeit or forged notes, or forged valuable security | By the 15th of the succeeding month | Rules 3(1)(C), 8(1) |
| Cross-border wire transfer report | Transfers of more than ₹5 lakh with origin or destination in India | By the 15th of the succeeding month | Rules 3(1)(E), 8(1) |
| Suspicious transaction report | Any suspicious transaction | Promptly, once the Principal Officer is satisfied it is suspicious | Rules 3(1)(D), 8(2) |
| Immovable property report | Purchase or sale valued at ₹50 lakh or more, registered by the entity | Quarterly, by the 15th of the month after the quarter | Rules 3(1)(F), 8(3) |
Is There Still a Seven-Day Limit for STRs?
No. G.S.R. 745(E) of 17 October 2023 substituted Rule 8(2) and removed the "seven working days" limit. A suspicious transaction is now reported promptly, once the Principal Officer is satisfied. Older guidance documents that still mention seven days predate the amendment.
Does Each Day of Delay Count Separately?
Yes. Rule 8(4) treats each day of delay in reporting, or in rectifying a mis-reported transaction, as a separate violation. Consistent compliance reporting across entities shows which monthly reports are still open before the 15th.
What Happens If a Reporting Entity Fails to Comply?
The Director, FIU-IND may act against the reporting entity, its designated director or any of its employees under section 13(2).
| Action | Provision |
|---|---|
| A warning in writing | Section 13(2)(a) |
| Directions to comply with specific instructions | Section 13(2)(b) |
| Directions to send reports at prescribed intervals | Section 13(2)(c) |
| Monetary penalty of not less than ₹10,000, up to ₹1 lakh for each failure | Section 13(2)(d) |
The Director may also order an audit of the entity's records under section 13(1A), with the cost borne by the Central Government under section 13(1B).
How Is PMLA Compliance Tracked Inside a Reporting Entity?
Most PMLA duties recur monthly, which makes them easy to miss in a busy compliance team. A compliance management platform holds each report as a dated obligation with an owner and the FIU-IND acknowledgement as evidence.
LexComply does not file reports with FIU-IND; the reporting entity's Principal Officer does. You can get in touch to see how a PMLA calendar would be tracked.
Common Mistakes to Avoid
- Working to a seven-day STR limit. G.S.R. 745(E) of 17 October 2023 replaced it in Rule 8(2) with "promptly".
- Citing section 12 for client verification. Clauses (c) and (d) of section 12(1) were omitted in 2019, and the duty now sits in section 11A(1).
- Assuming every real estate agent is covered. G.S.R. 798(E) captures agents with annual turnover of ₹20 lakh or above.
- Treating all CA or CS work as covered. The 3 May 2023 notification reaches only five types of financial transaction carried out for a client.
- Keeping identity records for five years from the transaction. Section 12(4) runs five years from the end of the relationship or closure of the account, whichever is later.
- Ignoring the property report. Rule 3(1)(F) and Rule 8(3) require a quarterly report of property transactions of ₹50 lakh or more registered by the entity.
Legal Disclaimer
This article is general information on Indian anti-money-laundering law, current as at the date shown above. It is not legal advice and does not take account of any particular entity's facts. Obtain professional advice before acting on any position described here.