IFSCA AML/CFT/KYC Guidelines 2022: Comprehensive FAQ Guide for Regulated Entities in GIFT-IFSC
The International Financial Services Centres Authority (IFSCA) has released an official FAQ document addressing the practical implementation of the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022. These FAQs are designed to assist Regulated Entities (REs) operating within the International Financial Services Centre (IFSC) framework in understanding and fulfilling their compliance obligations. The following is a structured breakdown of those clarifications across key compliance domains.
Important Disclaimer: The FAQs published by IFSCA are intended solely as guidance documents. In case of any inconsistency between these FAQs and the provisions of applicable Acts, Rules, Regulations, or Guidelines, the latter shall take precedence. For specific queries, entities may reach out to the Division of AML/CFT at IFSCA directly.
I. Applicability of the IFSCA (AML/CFT/KYC) Guidelines, 2022
Who Must Comply?
As stipulated under clause 1.2 of Chapter-I of the Guidelines, every entity that has been licensed, recognized, registered, or authorized by IFSCA qualifies as a Regulated Entity (RE) and falls within the ambit of these Guidelines. Additionally, the provisions extend to the Financial Group of each Regulated Entity, to the extent specified under Chapter XII of the Guidelines.
This broad applicability ensures that the AML/CFT/KYC compliance framework covers the entire ecosystem of regulated financial services operating out of GIFT-IFSC.
II. Appointment of Designated Director and Principal Officer
Key Personnel Requirements
One of the foundational compliance requirements under the Guidelines relates to the appointment of a Designated Director (DD) and a Principal Officer (PO). The following clarifications are essential:
Separate Individuals Required: The Designated Director and the Principal Officer must be two distinct individuals — they cannot be the same person.
Designated Director Eligibility: As per the Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2022, notified vide gazette notification dated 13th July 2022, any person heading a reporting entity located in IFSC is eligible to be appointed as Designated Director.
Principal Officer Eligibility: Under clause 8.2(c) and (f) of Chapter-I of the Guidelines, the Principal Officer must be a sufficiently senior and authoritative individual within the RE, and must be entirely separate from the internal audit and business line functions.
Only Natural Persons Eligible: Neither the Designated Director nor the Principal Officer can be a legal entity or any other juridical person. These roles must be held by natural persons.
FME-Specific Appointments
The relationship between the IFSCA (Fund Management) Regulations, 2021 (FM Regulations) and the AML/CFT/KYC Guidelines creates specific nuances for Fund Management Entities (FMEs):
The Principal Officer of an FME under the FM Regulations cannot be designated as Principal Officer under the AML/CFT/KYC Guidelines, since such a person is embedded in the business line — which conflicts with the independence requirement under clause 8.2(f).
However, if the Principal Officer of an FME under the FM Regulations also serves as the head of the Regulated Entity, they may be designated as Designated Director, by virtue of the Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2022.
Personnel holding the roles of Designated Director and Principal Officer at an onshore India parent entity are not eligible to hold the equivalent roles for the IFSC-based Regulated Entity. The IFSC RE must have its own designated personnel with actual seniority and authority within the IFSC unit.
AIF-Level Appointments
The Designated Director and Principal Officer appointed by an FME registered with IFSCA for purposes of the Guidelines may also serve in those capacities for the Alternative Investment Funds (AIFs) managed by that FME.
III. AML/CFT/KYC Policy Framework
Policy Formulation Mandate
Every entity granted any form of authorization by IFSCA is required to formulate a comprehensive AML-CFT-KYC policy in accordance with clause 1.5 of Chapter-I of the Guidelines. This policy must receive formal approval from the Governing Body or a duly delegated committee thereof.
Governing Body — Definition
Under clause 1.3.20 of the Guidelines, the term "Governing Body" is defined differently depending on the legal form of the entity:
| Entity Type | Governing Body |
|---|---|
| Company | Board of Directors |
| Partnership Firm | Partner(s) |
| LLP | All partners, including designated partners |
| Trust | Managing Trustee(s) |
| Unincorporated Association | Committee of Management |
| Branch | Branch-level committee authorized by parent's Governing Body |
Existing AML Policies
An RE that already has a functional AML/CFT/KYC policy under the Prevention of Money Laundering Act, 2002 need not necessarily draft a completely fresh policy. If the existing policy already incorporates the key principles and elements of the IFSCA Guidelines, it may be continued as-is. However, if it falls short, the RE must update and supplement the existing policy accordingly and obtain fresh approval from the Governing Body.
IV. FIU-IND FINGate 2.0 Registration
Registration Obligations
All Regulated Entities licensed, registered, recognized, or authorized by IFSCA are required to register on the FIU-IND FINGate 2.0 portal, with the sole exception of AIFs managed by FMEs registered with IFSCA.
This registration is mandated under Clause 10.3 of the Guidelines, which requires REs to furnish information to the Director, Financial Intelligence Unit-India (FIU-IND) as per Rule 3 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, and in compliance with Rule 7 thereof.
Registration Process
The registration procedure is a two-step process:
- Step 1: Registration of the Regulated Entity
- Step 2: Registration of the Designated Director and Principal Officer