SEBI Proposes Mandatory NISM AML and CFT Certification for Principal Officers of Market Intermediaries — November 6, 2026

In a bid to reinforce compliance frameworks and tackle illicit financial flows within the domestic securities ecosystem, the Securities and Exchange Board of India (SEBI) has proposed making Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) certification mandatory for principal officers of all registered market intermediaries.

The proposal was detailed in a consultation paper aimed at standardising professional competence across brokerage firms, asset management companies, depository participants, and other registered entities operating in Indian capital markets.

Proposed Timelines and NISM Certification

Under the regulatory framework outlined in the paper, designated principal officers will be required to clear the National Institute of Securities Markets (NISM) Series-XXIV certification examination titled Anti-Money Laundering and Combating the Financing of Terrorism Provisions in Securities Markets.

SEBI has laid down distinct timelines for compliance:

• Existing Principal Officers: Must complete and obtain the certification within six months from the date of issuance of the final regulatory requirement.
• New Appointees: Must clear the certification examination within six months from the date of their appointment.
• Validity Requirements: Officers will be required to maintain the validity of the certification throughout their tenure in the designated role.

Closing the Knowledge Disparity

Currently, SEBI guidelines mandate registered market intermediaries to appoint an executive at the management level as a principal officer to oversee compliance with the Prevention of Money Laundering Act (PMLA), 2002, and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. However, existing regulations do not specify any mandatory qualification or formal AML/CFT certification for the post.

The market regulator noted that the absence of a mandatory benchmark has led to varying levels of expertise and awareness across intermediaries. Because principal officers act as the primary liaison with statutory authorities—such as the Financial Intelligence Unit-India (FIU-IND)—and are tasked with identifying and reporting suspicious transactions, SEBI highlighted that establishing a baseline standard of knowledge is essential.

Significance for the Indian Capital Market

Principal officers are tasked with critical gatekeeping functions under India’s anti-money laundering framework. Their responsibilities include monitoring high-value and unusual order patterns, recording rationales for flagging transactions, and transmitting Suspicious Transaction Reports (STRs) to FIU-IND.

By instituting a mandatory certification benchmark through NISM, SEBI seeks to ensure that compliance executives possess thorough comprehension of beneficial ownership tracking, customer due diligence, proliferation financing risks, and statutory record-keeping norms. For Indian investors and market institutions, tighter compliance standards are intended to bolster market integrity, reduce systemic risks from money laundering conduits, and align India's securities market infrastructure with evolving global enforcement standards.