Scope and applicability
Key points



With the chief objective of fighting money laundering activities in India and preventing the reintroduction of criminal proceeds into the regular economy, the government had previously introduced a series of targeted measures by enacting the Prevention of Money Laundering Act 2002 (PMLA) and the Prevention of Money Laundering (Maintenance of records) Rules 2005 thereunder (PML rules). This framework imposed various obligations on banking companies, financial institutions and various intermediaries to verify the identity and source of funds of their customers, maintain records and furnish information in the prescribed form to the financial intelligence unit of India (FIU-IND).

In exercise of its powers as a regulatory authority under the PMLA and PML rules, the Insurance Regulatory and Development Authority (IRDAI) has, from time to time, issued guidelines on anti-money laundering for insurers. On 1 August 2022, the IRDAI released the Master Guidelines on Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) 2022 (the AML guidelines 2022), further to an exposure draft issued on 1 June 2022.

The AML guidelines 2022 come into force on 1 November 2022 and have consolidated and updated the earlier guidelines for general (including health) and life insurers, under the Anti-Money Laundering/Counter Financing of Terrorism – Guidelines for General Insurers of 7 February 2013 (the 2013 guidelines) and the Master Circular on Anti Money Laundering/Counter Financing of Terrorism – Guidelines for Life Insurers of 28 September 2015 (the 2015 guidelines). In addition, the AML guidelines 2022 repeal various IRDAI circulars on the subject of money laundering and terrorism financing.

Scope and applicability

The AML guidelines 2022 are applicable to insurers carrying on all classes of life, general or health insurance business, except "re-insurance business carried out by the 'Indian Insurance company' or 'foreign company' in India".

Key points

A summary of the salient points, as well as some key changes under the AML guidelines 2022, is set out below:

  • The AML guidelines 2022 entrust the insurer's senior management with establishing "internal policies, procedures, controls and compliance arrangement" for the prevention of money laundering and terrorist financing and to ensure their effectiveness and compliance. These policies and procedures include a client due diligence programme, maintenance of records, and compliance with relevant statutory and regulatory requirements. They also specify the role of the internal audit or compliance function in ensuring compliance with AML/CFT policies.
  • The AML guidelines 2022 expand upon the know-your-customer (KYC) norms for establishing customers' identity as stipulated under the 2013 guidelines and the 2015 guidelines, and, among other things, include various KYC processes such as:
    • electronic-KYC authentication;
    • video-based identification process; and
    • retrieval from the central KYC records registry.
  • The AML guidelines 2022 require insurers to conduct client due diligence as follows:
    • new customers – insurers are now required to follow identification procedures (ie, KYC for all customers at the time of commencement of the account-based relationship with the customer) and monitor their transactions on an on-going basis. Earlier, for certain kinds of policies, client due diligence was required to be followed at the time of a claim or pay-out stage;
    • existing customers – if KYC documents are not available for existing clients, they are required to be collected within two years (for low-risk customers) and within one year (for high-risk customers); and
    • ongoing due diligence – besides verifying the customer's identity at the time of initial issuance of the contract, risk assessment and on-going due diligence should be carried out at times when additional or subsequent remittances are made.
  • At the time of making pay-outs or claims (ie, redemption, surrender, partial withdrawal, maturity, death, refunds or reimbursements), additional verification must be carried out. No payments should be made to third parties except as provided for in the contract or in cases such as superannuation or gratuity accumulations and payments to beneficiaries, or legal heirs or assignees in the case of death benefits.
  • The AML guidelines 2022 specify that along with classifying customers into high-risk and low-risk categories, insurers may follow a "simplified due diligence" process where the aggregate insurance premium is not more than 10,000 rupees and may mandatorily carry out an "enhanced due diligence" where high risk categories of customers are involved.
  • KYC and underwriting procedures should ensure higher verification and counter-checks for high-risk profiles, such as for customers that are:
    • non-residents;
    • high-net-worth individuals;
    • trusts;
    • charities;
    • non-governmental organisations and organisations receiving donations;
    • companies having close family shareholding or beneficial ownership;
    • firms with sleeping partners;
    • politically exposed persons (PEPs); and
    • those with dubious reputation (as per available public information) who need higher due diligence.
  • An annual compliance certificate must be submitted to the IRDAI within 45 days of the end of every financial year as proof of a robust AML/CFT programme.
  • For group insurance (life, general or health), insurers are required to carry out KYC of the group master policy holder, juridical person or legal entity, and the respective beneficial owners.
  • Insurers are required to regularly monitor their transactions and ensure that suspicious transactions are regularly reported to the director of the FIU-IND. Additionally, insurers must have robust software systems to track suspicious transactions and categorise risks.
  • The AML guidelines 2022 update the procedures specified earlier for implementation of section 51A of the Unlawful Activities (Prevention) Act 1967 to bring them in line with the government's order of 2 February 2021 regarding a procedure for the implementation of section 51A of the Unlawful Activities (Prevention) Act 1967.


The AML guidelines 2022 bring about a significant overhaul to the existing measures aimed at preventing money laundering and terrorist financing activity. They are expected to have a considerable impact on the operational set-ups and KYC processes that most insurers have in place at present.

Press reports also indicate that insurers have already commenced a review of their existing board policies and upgrade of their technical systems and related infrastructure for complying with these new or additional obligations.

For further information on this topic please contact Celia Jenkins, Anuj Bahukhandi or Shikha Gupta at Tuli & Co by telephone (+91 11 2464 0906) or email ([email protected], [email protected] or [email protected]). The Tuli & Co website can be accessed at