NISM Series IFSCA-01 · Chapter 1: Introduction to Anti Money Laundering (AML), Combating the Financing of Terrorism (CFT) and Proliferation Financing (PF)

L1 · Foundation

Introduction to AML, CFT and Proliferation Financing

What money laundering is, the three stages and the four trade-based techniques, the global initiatives from the Bank Secrecy Act to FATF, the IMF, BIS and the Vienna Convention, and the Indian framework — UAPA sections 35 and 51A, FEMA, the PMLA, FIU-IND and mandatory FINGate 2.0 registration, the AML and CFT guidelines, the WMD Act, and the IFSC, GIFT City and IFSCA framework.

20 min read · Worth 10% of the paper · Written from pages 10–22 of the official NISM workbook · Updated 18 September 2026

What this chapter covers

Chapter 1 carries 5 marks out of 50 — 10% of the paper.

Learning Objective- After studying this chapter, you should know about: Detailed concept of Money Laundering and Combating the Financing of Terrorism · Global and Indian Initiatives to combat money laundering.

And the examination as a whole seeks to create a common minimum knowledge benchmark for the capital market intermediaries about Anti Money Laundering (AML) and Counter Terrorist Financing regulations in IFSC ecosystem.

1.1 The concept of money laundering

A large number of criminal acts aim to generate a profit for the individual or group that carries out the act. Money laundering is the process of these criminal proceeds to disguise their illegal origin.

This process is of critical importance, as it enables the criminal to enjoy these profits without jeopardizing their source.

That sentence explains the whole offence — the crime is not making the money, it is making the money usable.

Where the money comes from: illegal arms sales, smuggling, and the activities of organised crime, including drug trafficking and prostitution rings, can generate huge amounts of proceeds. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to "legitimize" the ill-gotten gains through money laundering.

How it is done: when a criminal activity generates substantial profits, the individual or group involved must find a way to control the funds without attracting attention to the underlying activity or the persons involved. Criminals do this by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract attention.

Practice of or engagement in any of such activities is known as Money Laundering.

Three techniques — disguise the source, change the form, move the funds. The workbook's first sample question asks which of those criminals practise. The answer is all of them.

1.1.1 Why AML laws exist

Anti-money laundering (AML) laws are important and much required because they help preventing criminals from hiding illegally obtained money and the financial impact of money laundering on a country, thus safeguarding the financial system from crimes.

The idea is simple. If criminals cannot hide their money, crime pays less. And the financial system stays safe.

The second sample question tests exactly this.

How the global framework arose: anti-money laundering guidelines came into prominence globally as a result of the formation of the Financial Action Task Force (FATF) and the promulgation of an international framework of anti-money laundering standards. These standards began to have more relevance in 2000 and 2001, after FATF began a process to publicly identify countries that were deficient in their anti-money laundering laws and international cooperation.

In plain words: FATF wrote the rules. The rules began to bite in 2000 and 2001, when FATF started to name the countries that fell short.

1.2 The three stages

There are typically three stages of the money laundering process to release laundered funds into the legal financial system: Placement · Layering · Integration/extraction.

Stage	What the workbook says happens	In plain words
Placement	When the illegally obtained funds are introduced in the financial system, often by breaking up large amounts of cash into less conspicuous smaller sums	Dirty cash goes into the system.
Layering	When the launderer moves the money through a series of financial transactions with the goal of making it difficult to trace the original source, using widely scattered accounts... in jurisdictions that do not cooperate with AML investigations	The money is moved again and again, so the trail goes cold.
Integration	The final step... when the launderer attempts to integrate illicitly obtained funds into the legitimate financial system, through real estate, luxury assets, or business ventures	The money comes back looking clean.

Placement is the risky step for the criminal. It is full of challenges for the criminals as it involves placing money into the legal system without causing any suspicion. The third sample question asks for this stage by name.

And a caution on the model: while not all money laundering cases will use all the three-stage process – they could be combined or stages repeated several times, thus the rule of three stages of money laundering frames the thinking of many compliance teams.

So a real case may skip a stage or repeat one. The three stages are a way of thinking, not a fixed script.

1.2.2 Trade-based money laundering

For the purpose of this study, trade-based money laundering is defined as the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illicit origin.

How it works: in practice, this can be achieved through the misrepresentation of the price, quantity or quality of imports or exports. In many cases, this can also involve abuse of the financial system through fraudulent transactions involving a range of money transmission instruments, such as wire transfers.

The four basic techniques:

over- and under-invoicing of goods and services.
multiple invoicing of goods and services.
over- and under-shipments of goods and services; and
falsely described goods and services.

Price, count, quantity, quality — one technique for each way a trade can be misrepresented.

However, it may be noted that all of these techniques are not necessarily in use in every country.

This topic returns in Chapter 8, where the FATF material deals with trade-based money laundering and the international trade system in detail.

1.3 Global initiatives

Anti-money laundering Laws are an international web of laws, activities, regulations, and procedures, aimed at uncovering money that has been disguised as legitimate income.

**Their purpose is to help detect and report suspicious activity including the predicate offenses to money laundering and terrorist financing, securities fraud and market manipulation.

Bank Secrecy Act of 1970

The United States was one of the first nations to enact anti-money laundering legislation when it enacted the Bank Secrecy Act (BSA) in 1970. The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act, requires financial institutions in the United States to assist U.S. government agencies in detecting and preventing money laundering.

FATF (1989)

The Financial Action Task Force (on Money Laundering)- FATF... is an intergovernmental organization founded in 1989 with the initiative of the 1989 G7 Summit in Paris. Its mission has five parts:

To devise and promote international standards to prevent the growing problem of money laundering.
To study money laundering trends.
To monitor legislative, financial and law enforcement activities.
To report on compliance.
To issue recommendations and standards.

FATF is the subject of Chapter 8, worth 6 marks.

The IMF, BIS and Vienna Convention

The International Monetary Fund (IMF)... primary purpose is to ensure stability of the international monetary system, and it has helped shape policies on anti-money laundering (AML) combatting the financing of terrorism (CFT) and counter-proliferation financing.

The Bank for International Settlements (BIS)... is an international financial institution which is owned by member banks, and with its establishment in 1930, it is the oldest international financial institution.

The Vienna Convention of 1988 defines money laundering as the conversion or transfer of property, knowing that such property is derived from any offense(s), for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such offense(s) to evade the legal consequences of his actions.

It also establishes the principle that domestic bank secrecy provisions should not interfere with international criminal investigations. Put simply, a bank cannot hide behind secrecy rules when another country is chasing a crime.

Body	Year to remember	Its role
Bank Secrecy Act (USA)	1970	Requires financial institutions in the United States to assist U.S. government agencies in detecting and preventing money laundering
FATF	1989	Devise and promote international standards
BIS	1930	The oldest international financial institution, owned by member banks
Vienna Convention	1988	Defines money laundering; bank secrecy should not interfere with international criminal investigations

1.4 Indian initiatives

Anti-money laundering laws in India are a critical aspect of the country's financial and economic framework. They are designed to prevent the illegal flow of funds through the banking and financial system and to promote transparency and accountability in financial transactions.

1.4.1 UAPA, 1967

The Unlawful Activities Prevention Act (UAPA) provides prevention of certain unlawful activities of individuals and associations, and for dealing with terrorist activities, and for matters connected therewith. The act empowers the government to ban organizations involved in terrorist activities and freeze their assets. It also provides for severe punishment for those involved in such activities.

Section 35 — listing organisations. The Central Government acts by notification in the Official Gazette. It may do four things:

	The power
(a)	add an organisation to the First Schedule
(b)	add also an organisation to the First Schedule, which is identified as a terrorist organisation in a resolution adopted by the Security Council under Chapter VII of the Charter of the United Nations, to combat international terrorism
(c)	remove an organisation from the First Schedule
(d)	amend the First Schedule in some other way

In short, Section 35 lets the government add an organisation to the First Schedule, remove one from it, or change the Schedule in some other way.

With a condition: the central government exercises its power in respect of an organisation only if it believes that it is involved in terrorism. It may also add to or remove or amend the Second Schedule or Third Schedule.

Section 51A — three powers over money and movement. The Central Government has power to:

Power	The workbook's words	In plain words
Freeze	freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of the individuals or entities listed in the Schedule to the Order, or any other person engaged in or suspected to be engaged in terrorism	Lock their money.
Prohibit	prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of such persons	Stop anyone from giving them money or services.
Prevent	prevent the entry into or the transit through India of individuals listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism	Keep them out of India.

Each power reaches beyond the listed names. It also covers any other person engaged in or suspected to be engaged in terrorism. A name does not have to be on the list.

1.4.2 FEMA, 1999

This Act consolidates and amends the laws relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. The act regulates foreign exchange transactions and prohibits money laundering and financing of terrorism through such transactions.

1.4.3 PMLA, 2002

In India, Prevention of Money Laundering Act, 2002 (PMLA) was enacted to fight against the criminal offence of legalizing the income/profits from an illegal source. The act provides for the prevention, detection, and prosecution of money laundering activities. It requires financial institutions to maintain records of all transactions and report any suspicious activity to the authorities.

And it reaches the property: the Prevention of Money Laundering Act, 2002 enables the government or the public authority to confiscate the property earned from the illegally gained proceeds.

1.4.4 FIU-IND

Financial Intelligence Unit – India (FIU-IND) was set by the Government of India vide O.M. dated 18th November 2004 as the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspected financial transactions.

FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and financing of terrorism. FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the finance minister.

The main functions of FIU-IND are to receive cash/suspicious transaction reports, analyse them and, as appropriate, disseminate valuable financial information to intelligence/enforcement agencies and regulatory authorities.

The fourth sample question asks which organisation does this — FIU-IND, not RBI, SEBI or IRDAI.

Its six functions:

Function	What FIU-IND does
Collection of Information	Act as the central reception point for receiving Cash Transaction reports (CTRs), Non-Profit Organisation Transaction Report (NTRs), Cross Border Wire Transfer Reports (CBWTRs), Reports on Purchase or Sale of Immovable Property (IPRs) and Suspicious Transaction Reports (STRs) from various reporting entities
Analysis of Information	Analyze received information in order to uncover patterns of transactions suggesting suspicion of money laundering and related crimes
Sharing of Information	Share information with national intelligence/law enforcement agencies, national regulatory authorities and foreign Financial Intelligence Units
Act as Central Repository	Establish and maintain national data base on the basis of reports received from reporting entities
Coordination	Coordinate and strengthen collection and sharing of financial intelligence through an effective national, regional and global network
Research and Analysis	Monitor and identify strategic key areas on money laundering trends, typologies and developments

Five report types to remember: CTRs, NTRs, CBWTRs, IPRs and STRs. FIU-IND takes in the reports, studies them and passes on what matters.

1.4.5 FINGate registration — mandatory for IFSCA entities

All regulated entities licensed with IFSCA are mandatorily required to register with the Financial Intelligence Unit of India (FIU-IND) by completing the enrolment on the FINGate 2.0 Portal.

The fifth sample question asks which portal — FINGate 2.0.

What the registration involves. The entity gives details of three things: its business, its Principal Officer and its Designated Director. In the workbook's words: the registration process involves furnishing the details about the business, the Principal Officer, and the regulated entity's Designated Director, who shall take care of the AML program within the organisation.

And the consequence of not doing it: non-registration with FIU-IND is treated as non-compliance with the IFSCA (AML, CFT, and KYC) Guidelines.

Registration on FIU-IND FINGate 2.O portal is a two-step procedure. The first step is Regulated Entity registration, and second step is Designated Director and Principal Officer registration.

Two steps: the entity, then its two officers.

What FINGate is: FINGate 2.0 is the primary platform through which data associated with money laundering or other crimes is furnished to FIU-IND. FINGate 2.0 is FINNET 2.0's front-end web portal used by regulated entities to report suspicious financial transactions.

1.4.6 The AML and CFT guidelines

The AML & CFT guidelines have been envisaged in the Prevention of Money Laundering Act, 2002 (PMLA). These guidelines specify record keeping and reporting obligations for Financial Institutions and persons carrying on designated business or profession.

Who they reach: persons carrying on designated business or profession are defined in Clause (s) of sub-section (1) of Section 2 of the PMLA. And crucially, sub-clause (vi) of the said clause includes within the ambit of 'person carrying on designated business or profession' such persons who carry on activities as the Central Government may, by notification, designate from time-to-time.

That open sub-clause is how new kinds of business — including virtual digital asset providers — are brought within the Act.

The three statutes summarised:

Short name	Full name
PMLA	The Prevention of Money Laundering Act, 2002 (hereinafter referred to as the "PMLA")
UAPA	The Unlawful Activities (Prevention) Act, 1967 (hereinafter referred to as the "UAPA")
WMDA	The Weapons of Mass Destruction and Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (hereinafter referred to as the "WMDA") and rules there under

Money laundering, terrorist financing, proliferation financing — one statute each.

And for the IFSC specifically: IFSCA has introduced IFSCA (AML, CFT and KYC) Guidelines for the regulated entities of IFSC ecosystem, which has been discussed in detail in Chapter No. 5.

1.4.7 The WMD Act, 2005

The rule in one line: a resident of India must not knowingly help, for payment, with a deal the WMD Act bans or controls. Here is the exact wording.

Under Section 12 of The Weapons of Mass Destruction and Delivery Systems (Prohibition of Unlawful Activities) Act, 2005, no person who is a resident in India shall, for a consideration under the terms of an actual or implied contract, knowingly facilitate the execution of any transaction which is prohibited or regulated under this Act.

Four elements: a resident in India, acting for a consideration under the terms of an actual or implied contract, who knowingly facilitates a transaction prohibited or regulated under the Act.

And a proviso protecting the innocent carrier. Someone who only carries goods or provides a service, without knowing what it is for, commits no offence. The exact words:

a mere carriage, without knowledge, of persons, goods or technology, or provision of services, including by a public or private carrier of goods, courier, tele-communication, postal service provider or financial service provider, shall not be an offence for the purposes of this section.

"Without knowledge" is decisive — a financial service provider that unknowingly carries a payment is not caught.

1.4.8 The IFSC, GIFT City and IFSCA

Financial centres that cater to customers outside their own jurisdiction are referred to as International Financial Centres (IFCs) or Offshore Financial Centers (OFCs). All these centres are 'international' in the sense that they deal with the flow of finance and financial products/services across borders.

The Gujarat International Finance Tec-City (GIFT City) International Financial Services Centre (GIFT IFSC) is a financial centre and special economic zone in GIFT City of India. It was established in 2015 as a financial hub to provide world-class infrastructure and services for financial institutions and companies operating in areas such as banking, insurance, capital markets, and asset management.

GIFT IFSC is regulated by the International Financial Services Centres Authority (IFSCA), an independent regulator exclusive to the zone.

When IFSCA was created: the Government of India established International Financial Services Centres Authority in April 2020 under the International Financial Services Centres Authority Act passed by the Indian Parliament.

And what makes it unusual: for the first time, the regulatory powers of four financial services regulators in India, namely, Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI), Insurance Regulatory Development Authority of India (IRDAI), Pension Fund Regulatory Development Authority of India (PFRDAI), have been vested in IFSCA.

Four regulators' powers in one authority. Inside GIFT IFSC, one regulator does the work that RBI, SEBI, IRDAI and PFRDAI do in the rest of India.

The IFSCA is a unified authority for development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre in India in the areas of banking, insurance, securities and funds management. The IFSCA is committed to provide a comprehensive and consistent regulatory framework based on global best practices with a special focus on ease of doing business.

Its balance of objectives: as a unified regulator IFSCA is committed to ensuring financial stability and protection of the interests of investors. At the same time, it allows enough space for financial innovations with adequate risk management measures in place.

And on AML specifically: the IFSCA is also committed to ensure that regulatory environment is fully FATF compliant with strong enforcement measures of AML and CFT in place. Following the PMLA and the overall FATF Recommendations, IFSCA has issued the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022.

Note the two sources it acknowledges — the PMLA as domestic law and the FATF Recommendations as the international standard. Those guidelines are Chapter 5.

Why all of this matters together: the prevention of money laundering is essential to combat financial terrorism effectively. The implementation of robust regulations and guidelines, improved collaboration between financial institutions and governments, and the use of technology-driven solutions are considered crucial to prevent the financing of terrorism.

Think of it like this

Trade-based laundering hides money inside an ordinary invoice

A trader who sells a machine worth ten lakh but invoices it at fifty lakh has moved forty lakh across a border without any money transfer looking suspicious. That is the whole technique.

The mechanism: in practice, this can be achieved through the misrepresentation of the price, quantity or quality of imports or exports. In many cases, this can also involve abuse of the financial system through fraudulent transactions involving a range of money transmission instruments, such as wire transfers.

Four basic techniques, each misrepresenting a different element:

Over- and under-invoicing of goods and services — the price is wrong.

Multiple invoicing of goods and services — the same shipment is billed more than once, so payment flows repeatedly for one delivery.

Over- and under-shipments of goods and services — the quantity is wrong, including the phantom shipment where nothing moves at all.

Falsely described goods and services — the quality or nature is wrong, cheap goods described as expensive ones.

Note what makes it hard to detect. Each transaction has a real invoice, a real bank payment and often a real shipment. Nothing in the payment system looks irregular; the falsehood is in the underlying trade documents, which the bank may never see.

And the caveat matters for an examination: all of these techniques are not necessarily in use in every country.

Where it fits in the three-stage model. Trade-based laundering serves mainly the layering stage — the launderer moves the money through a series of financial transactions with the goal of making it difficult to trace the original source — but an over-invoiced export can also achieve integration, since the excess arrives as legitimate export earnings.

The topic returns in Chapter 8, which deals with trade-based money laundering and the international trade system at length, worth 6 marks.

And it is particularly relevant to an IFSC, where all these centres are 'international' in the sense that they deal with the flow of finance and financial products/services across borders.

FINGate registration is the first compliance act of an IFSCA entity

A doctor must be on the register before treating a patient. An IFSCA-regulated entity must be on FIU-IND's register before its AML obligations can even function.

All regulated entities licensed with IFSCA are mandatorily required to register with the Financial Intelligence Unit of India (FIU-IND) by completing the enrolment on the FINGate 2.0 Portal.

And failure is not a technicality: non-registration with FIU-IND is treated as non-compliance with the IFSCA (AML, CFT, and KYC) Guidelines.

The reporting channel and the registration channel are the same system — which is why registration must come first.

Two steps, in order. Registration on FIU-IND FINGate 2.O portal is a two-step procedure. The first step is Regulated Entity registration, and second step is Designated Director and Principal Officer registration.

The entity, then its two named officers.

What is furnished: details about the business, the Principal Officer, and the regulated entity's Designated Director, who shall take care of the AML program within the organisation.

Note the division of roles, which recurs throughout the syllabus. The Designated Director carries responsibility for the AML programme; the Principal Officer is the operational point for reporting.

Why FIU-IND needs to know who they are. Its first function is to act as the central reception point for receiving Cash Transaction reports (CTRs), Non-Profit Organisation Transaction Report (NTRs), Cross Border Wire Transfer Reports (CBWTRs), Reports on Purchase or Sale of Immovable Property (IPRs) and Suspicious Transaction Reports (STRs) from various reporting entities — reports that must come from an identified officer at an identified entity.

And Chapter 7 shows what happens without registration. Bybit Fintech, a virtual digital asset service provider, kept expanding in India without FIU-IND registration and was penalised, its websites blocked.

FIU-IND itself is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the finance minister.

Three Acts for three crimes, and one authority for the IFSC

A hospital treats different diseases with different medicines. India addresses three related financial crimes with three separate statutes, and the IFSC adds a regulator of its own.

Money laundering — the PMLA, 2002. It was enacted to fight against the criminal offence of legalizing the income/profits from an illegal source, providing for the prevention, detection, and prosecution of money laundering activities and enabling the authorities to confiscate the property earned from the illegally gained proceeds.

Terrorist financing — the UAPA, 1967. Section 51A gives power to freeze, seize or attach funds and other financial assets or economic resources, to prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of listed persons, and to prevent the entry into or the transit through India of them. Section 35 lets the government add an organisation to the First Schedule, including one identified as a terrorist organisation in a resolution adopted by the Security Council under Chapter VII of the Charter of the United Nations.

Proliferation financing — the WMDA, 2005. Section 12 provides that no person who is a resident in India shall, for a consideration under the terms of an actual or implied contract, knowingly facilitate the execution of any transaction which is prohibited or regulated under this Act — with a proviso saving a mere carriage, without knowledge... including by a public or private carrier of goods, courier, tele-communication, postal service provider or financial service provider.

The guidelines summarise all three: they aim to provide a summary of the provisions of the applicable anti money laundering, counter-terrorism financing and proliferation financing legislations in India.

And FEMA, 1999 sits alongside, regulating foreign exchange and prohibiting money laundering and financing of terrorism through such transactions.

The IFSC layer is IFSCA's own. Following the PMLA and the overall FATF Recommendations, IFSCA has issued the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022.

Note the two sources acknowledged — domestic statute and international standard. IFSCA is committed to ensure that regulatory environment is fully FATF compliant with strong enforcement measures of AML and CFT in place.

Those guidelines are Chapter 5, worth 8 marks, with KYC in Chapter 6 worth 10.

IFSCA holds the powers of four regulators in one place

In mainland India a bank answers to the RBI, a broker to SEBI, an insurer to IRDAI and a pension fund to PFRDA. Inside GIFT IFSC all four answer to one authority.

GIFT IFSC is regulated by the International Financial Services Centres Authority (IFSCA), an independent regulator exclusive to the zone.

The Government of India established International Financial Services Centres Authority in April 2020 under the International Financial Services Centres Authority Act passed by the Indian Parliament.

And the consolidation is expressly novel: for the first time, the regulatory powers of four financial services regulators in India, namely, Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI), Insurance Regulatory Development Authority of India (IRDAI), Pension Fund Regulatory Development Authority of India (PFRDAI), have been vested in IFSCA.

What an IFSC is for. Financial centres that cater to customers outside their own jurisdiction are referred to as International Financial Centres (IFCs) or Offshore Financial Centers (OFCs). All these centres are 'international' in the sense that they deal with the flow of finance and financial products/services across borders.

Cross-border flow is the defining feature — and also the AML risk. Money moving across jurisdictions is exactly what the layering stage requires, and what the FATF grey and black lists exist to police.

Which is why IFSCA balances two aims. As a unified regulator IFSCA is committed to ensuring financial stability and protection of the interests of investors. At the same time, it allows enough space for financial innovations with adequate risk management measures in place.

And why its AML commitment is stated so firmly: it is also committed to ensure that regulatory environment is fully FATF compliant with strong enforcement measures of AML and CFT in place.

Its scope is set out plainly: a unified authority for development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre in India in the areas of banking, insurance, securities and funds management.

Key terms in this chapter

Bank Secrecy Act, 1970: The US statute, also known as the Currency and Foreign Transactions Reporting Act, requiring financial institutions to assist US government agencies in detecting and preventing money laundering — among the first AML legislation anywhere.
FATF: The Financial Action Task Force, founded in 1989 at the G7 Summit in Paris, which devises and promotes international AML standards, studies trends, monitors national action, reports on compliance and issues recommendations — the subject of Chapter 8.
FINGate 2.0: FINNET 2.0's front-end web portal, the primary platform through which data associated with money laundering or other crimes is furnished to FIU-IND and through which regulated entities report suspicious financial transactions.
FINGate 2.0 registration: The mandatory enrolment of every IFSCA-licensed regulated entity with FIU-IND — a two-step procedure of Regulated Entity registration followed by Designated Director and Principal Officer registration, furnishing business details and both officers. Non-registration is treated as non-compliance with the IFSCA (AML, CFT and KYC) Guidelines.
FIU-IND: The Financial Intelligence Unit – India, established by O.M. dated 18 November 2004 as the central national agency for receiving, processing, analysing and disseminating information on suspected financial transactions — an independent body reporting directly to the Economic Intelligence Council headed by the finance minister.
GIFT IFSC: The Gujarat International Finance Tec-City International Financial Services Centre, a financial centre and special economic zone established in 2015 to provide infrastructure and services for institutions in banking, insurance, capital markets and asset management, regulated exclusively by IFSCA.
IFSCA: The International Financial Services Centres Authority, established in April 2020 under the IFSC Authority Act — a unified regulator for banking, insurance, securities and funds management in the IFSC, in which the powers of the RBI, SEBI, IRDAI and PFRDA have been vested for the first time.
IFSCA (AML, CFT and KYC) Guidelines, 2022: The guidelines IFSCA issued for regulated entities of the IFSC ecosystem, following the PMLA and the overall FATF Recommendations, as part of its commitment to a regulatory environment that is fully FATF compliant with strong AML and CFT enforcement.
International Financial Centre (IFC): A financial centre catering to customers outside its own jurisdiction, also called an Offshore Financial Centre — international in the sense that it deals with cross-border flows of finance and financial products and services.
Money laundering: The process of disguising the illegal origin of criminal proceeds so the criminal can enjoy the profits without jeopardising their source — achieved by disguising the sources, changing the form, or moving the funds somewhere less likely to attract attention.
Persons carrying on designated business or profession: Defined in clause (s) of section 2(1) of the PMLA, with sub-clause (vi) including such persons as the Central Government may by notification designate from time to time — the open-ended provision through which new categories of business become reporting entities.
Section 12, WMD Act, 2005: Prohibits any person resident in India from knowingly facilitating, for consideration under an actual or implied contract, a transaction prohibited or regulated under the Act — with a proviso that mere carriage without knowledge, including by a carrier, courier, telecommunication, postal or financial service provider, is not an offence.
Section 35, UAPA: Empowers the Central Government by notification in the Official Gazette to add an organisation to the First Schedule — including one designated by a UN Security Council resolution under Chapter VII of the Charter — to remove one or otherwise amend the Schedule, exercising the power only where it believes the organisation is involved in terrorism.
Section 51A, UAPA: Gives the Central Government power to freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of listed persons or anyone suspected of terrorism; to prohibit anyone from making funds or related services available for their benefit; and to prevent their entry into or transit through India.
The four trade-based techniques: Over- and under-invoicing of goods and services; multiple invoicing of goods and services; over- and under-shipments of goods and services; and falsely described goods and services — though not all are necessarily in use in every country.
The three stages: Placement, where illegally obtained funds enter the financial system and detection risk is highest; layering, moving money through a series of transactions to obscure its origin; and integration or extraction, bringing the funds back into the legitimate financial system.
Trade-based money laundering: Disguising the proceeds of crime and moving value through trade transactions to legitimise their illicit origin — achieved by misrepresenting the price, quantity or quality of imports or exports, often alongside fraudulent use of money transmission instruments such as wire transfers.

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Original explanatory writing based on the official NISM workbook for Series IFSCA-01, which is published and copyrighted by NISM. Check figures against the current edition at nism.ac.in.

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