Rules 1 and 3-8 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 3 of the Maintenance of Records Rules lists the transactions every reporting entity must record. Rules 4 and 5 say what a record must contain and how information is maintained, rule 7 gives the Principal Officer the duty to report to the Director, and rule 8 fixes the dates. These rules put into practice sections 12 and 15 of the Act, on records and on the procedure for maintaining and furnishing information.
This article reads the rules as per the consolidated Rules consulted (amendments listed up to 19 July 2024). The Rules were made under the Act, whose own text consulted shows amendments only up to 1 August 2019, so later changes to either should be checked. For a reporting entity setting up its record and reporting routine, legal consultation on the current rules and the regulator's directions is the practical start.
Every reporting entity must keep a record of all transactions, including cash transactions of more than ten lakh rupees, linked cash transactions with a monthly aggregate above ten lakh rupees, receipts by non-profit organisations above ten lakh rupees, forged-currency or forgery cases, suspicious transactions, cross-border wire transfers above five lakh rupees and immovable property purchases and sales valued at fifty lakh rupees or more (rule 3). The Principal Officer reports to the Director: monthly by the 15th of the next month for most classes, quarterly for property transactions, and promptly for suspicious transactions (rule 8). Rule 6 is omitted.
Where the rules come from and what they implement
The notification, G.S.R. 444(E) of 1 July 2005, says the Rules are made under sub-section (1), read with clauses (h), (i), (j) and (k) of sub-section (2), of section 73 of the Act. In the Act text consulted, clauses (h), (j) and (jj) of section 73(2) are printed as omitted, and clause (i) and clause (k) remain; the Rules' preamble is quoted as printed and is not reconciled here.
The Rules implement two sections: section 12 (the reporting entity's duty to maintain records) in our article on section 12, and section 15 (procedure and manner of maintaining and furnishing information) in our article on sections 14 and 15.
Rule 1: short title and commencement
The Rules may be called the Prevention of Money-laundering (Maintenance of Records) Rules, 2005; the title's words "Maintenance of Records" are shown as substituted by an amendment marker (marker 7, G.S.R. 481(E) dated 24.06.2011). They came into force on the date of their publication in the Official Gazette.
Rule 2: the definitions these rules lean on
Four definitions matter most here.
| Clause | Term | As printed (summarised) |
|---|---|---|
| 2(1)(ba) | Designated Director | A person designated by the reporting entity to ensure overall compliance with the obligations under Chapter IV of the Act and the Rules; includes the Managing Director or a whole-time Director duly authorised by the Board for a company, the managing partner of a partnership firm, the proprietor of a proprietorship concern, the managing trustee of a trust, and a person who controls and manages the affairs of an unincorporated association or body of individuals; in an International Financial Services Centre, the person heading the reporting entity in India; and such other persons as may be notified |
| 2(1)(f) | Principal Officer | An officer designated by a reporting entity; the proviso (marker 34) says the officer shall be an officer at the management level |
| 2(1)(g) | Suspicious transaction | A transaction referred to in clause (h), including an attempted transaction, whether or not made in cash, which to a person acting in good faith (a) gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified in the Schedule to the Act, regardless of the value involved; or (b) appears to be made in circumstances of unusual or unjustified complexity; or (c) appears to have no economic rationale or bonafide purpose; or (d) gives rise to a reasonable ground of suspicion that it may involve financing of activities relating to terrorism; with an Explanation on funds linked to terrorism |
| 2(1)(h) | Transaction | A purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof, including opening of an account; deposits, withdrawal, exchange or transfer of funds in whatever currency; use of a safety deposit box; entering into any fiduciary relationship; any payment made or received in whole or in part of any contractual or other legal obligation; payment in respect of playing games of chance for cash or kind including casino activities; and establishing or creating a legal person or legal arrangement |
The "Schedule to the Act" in clause (g) is explained in our articles on the Schedule. Clause (2) of rule 2 adds that words defined in the Act and not in the Rules carry their Act meaning.
Rule 3: which transactions are recorded
Every reporting entity shall maintain a record of "all transactions including the record of" the following.
| Clause | Transactions as printed |
|---|---|
| (A) | All cash transactions of the value of more than ten lakh rupees or its equivalent in foreign currency |
| (B) | All series of cash transactions integrally connected to each other which have been individually valued below ten lakh rupees or its equivalent in foreign currency, where such series have taken place within a month and the monthly aggregate exceeds ten lakh rupees or its equivalent |
| (BA) | All transactions involving receipts by non-profit organisations of value more than ten lakh rupees, or its equivalent in foreign currency |
| (C) | All cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine or where any forgery of a valuable security or a document has taken place facilitating the transactions |
| (D) | All suspicious transactions whether or not made in cash, by way of the modes in sub-clauses (i) to (v): deposits, credits and withdrawals (cheques, pay orders, demand drafts, travellers cheques, transfers, any other mode); credits or debits to non-monetary accounts such as d-mat accounts; money transfers and remittances (payment orders, wire transfers, internet transfers, Automated Clearing House remittances, and others); loans, advances, investments and contingent liability (debt instruments, bills, foreign exchange contracts and derivatives, letters of credit, guarantees); and collection services |
| (E) | All cross border wire transfers of the value of more than five lakh rupees or its equivalent in foreign currency where either the origin or destination of fund is in India |
| (F) | All purchase and sale by any person of immovable property valued at fifty lakh rupees or more that is registered by the reporting entity, as the case may be |
Printing points: clause (A) is printed "ten lakhsrupeesor" with run-together words, quoted as read; clause (BA) is inserted by marker 3 (G.S.R. 816(E) dated 12.11.2009); clauses (E) and (F) and the word "individually" in (B) carry marker 8 (G.S.R. 576(E) dated 27.08.2013). The opening words "all transactions including the record of" carry marker 4 (G.S.R. 76(E) dated 12.02.2010).
The lakh figures are as printed. This article gives no thresholds from outside the Rules, and no regulator direction.
Rule 3A: group-wide programmes
Rule 3A (markers 33 and 35: G.S.R. 1074(E) dated 07.03.2023 and G.S.R. 745(E) dated 17.10.2023) says every reporting entity which is part of a group shall implement group-wide programmes against money laundering and terror financing, including group-wide policies for sharing information required for client due diligence and money laundering and terror finance risk management. The programmes shall include adequate safeguards on confidentiality and use of information exchanged, including safeguards to prevent tipping-off. Groups must implement group-wide policies for discharging obligations under Chapter IV of the Act.
Rule 4: what a record contains
The records in rule 3 shall contain "all necessary information specified by the Regulator to permit reconstruction of individual transaction" (marker 4) and the following: (a) the nature of the transactions; (b) the amount of the transaction and the currency; (c) the date on which it was conducted; and (d) the parties to the transaction.
"Regulator" is defined in rule 2(1)(fa) as a person, authority or Government vested with power to license, authorise, register, regulate or supervise the activity of reporting entities, or the Director as notified; the clause also names the Reserve Bank of India for the Central KYC Records Registry, and the Central Board of Indirect Taxes and Customs for dealers in precious metals and precious stones and for real estate agents. The Rules' definition is used as printed.
Rule 5: procedure and manner of maintaining information
- (1) Every reporting entity shall maintain information on transactions with its client referred to in rule 3 in accordance with the procedure and manner as may be specified by its Regulator from time to time.
- (2) It shall evolve an internal mechanism for maintaining such information in such form and at such intervals as may be specified by its Regulator.
- (3) It is the duty of every reporting entity, its designated director, officers and employees to observe the procedure and manner so specified.
The Rules do not set out the procedure themselves; they hand it to the Regulator. Rule 6 is printed as omitted.
Rule 7: furnishing information, the Principal Officer's role
- (1) Every reporting entity shall communicate to the Director the name, designation and address of the Principal Officer.
- (2) The Principal Officer shall furnish the information referred to in clauses (A), (B), (BA), (C) and (D) of rule 3(1) to the Director on the basis of information available with the reporting entity, and retain a copy for official record.
- (3) Every reporting entity shall evolve an internal mechanism, having regard to any guidelines issued by the Director in consultation with its regulator, for detecting the transactions in those clauses and for furnishing information about them in such form as may be directed.
- (4) It is the duty of every reporting entity, its designated director, officers and employees to observe the procedure and manner of furnishing information.
Rule 8: when to report
| Sub-rule | Transactions | Timing as printed |
|---|---|---|
| (1) | Clauses (A), (B), (BA), (C) and (E) of rule 3(1) | Every month, to the Director, by the 15th day of the succeeding month |
| (2) | Clause (D): suspicious transactions | Promptly, in writing by fax or electronic mail, on the principal officer being satisfied that the transaction is suspicious |
| (3) | Clause (F): immovable property | Every quarter, to the Director, by the 15th day of the month succeeding the quarter |
| (4) | Delay in reporting or in rectifying a mis-reported transaction beyond the time limit | Each day's delay is a separate violation |
| (5) | Months March, April and May 2020 for clauses (A), (B), (BA), (C), (E), and the quarter January-March 2020 for clause (F) | By 30 June 2020 (markers 29 and 30) |
| (6) | Fact of maintenance of records and furnishing of information | Every reporting entity, its Directors, officers and all employees shall keep it confidential; the proviso permits sharing under rule 3A of any analysis of unusual transactions and activities |
For suspicious transactions the Rules print "promptly" and no number of days. Reporting formats and portals are not in the Rules and this article does not describe them. See the site's guides on cash transaction reports and suspicious transaction reports for their own accounts of reporting.
A worked example
Rangoli Cooperative Bank (invented) has a customer, Mr Tarun Bhatia (invented), who deposits cash in five instalments of nine lakh rupees each in one month. Each instalment is below ten lakh rupees, but they are integrally connected and the monthly aggregate exceeds ten lakh rupees: that is clause (B) of rule 3(1). The bank records it, and its Principal Officer furnishes it to the Director by the 15th of the next month under rule 8(1). If staff also form a reasonable suspicion on the pattern, clause (D) is engaged and rule 8(2) requires prompt written information by fax or electronic mail. If the bank misses the date, each day of delay is a separate violation under rule 8(4). The bank's staff must not disclose the fact of reporting to the customer (rule 8(6)).
The consequences of failure by a reporting entity under the Act, including the monetary penalty, are in section 13; see our article on section 13.
Need help building the record and reporting routine?
A reporting entity needs a named Principal Officer, a clear map of rule 3 clauses to its own products and a calendar for rule 8. Our team supports this through legal consultation, starting from your product list and your Regulator's directions.
Key takeaways
- Rule 3 requires a record of all transactions, including cash transactions above ten lakh rupees, linked cash transactions with a monthly aggregate above ten lakh rupees, non-profit receipts above ten lakh rupees, forgery cases, suspicious transactions, cross-border wire transfers above five lakh rupees and property transactions of fifty lakh rupees or more.
- Records contain the nature, amount and currency, date and parties of the transaction, plus information the Regulator specifies.
- The Principal Officer, an officer at the management level, furnishes the information to the Director.
- Monthly reports are due by the 15th of the succeeding month; property transactions quarterly by the 15th of the month succeeding the quarter; suspicious transactions promptly.
- Each day of delay is a separate violation, and the fact of reporting must be kept confidential.
- Rule 6 is omitted.
Read next
- Rule 9 PML Rules: client due diligence, Central KYC registry and beneficial owner
- Rule 9 PML Rules: KYC documents by client type and ongoing due diligence
- Rules 9A-11 PML Rules: Central KYC registry, record retention and audit
- Reporting entity obligations under PMLA
Disclaimer: Based on the consolidated text of the Prevention of Money-laundering Act, 2002 published by the Enforcement Directorate, showing amendments up to Act 23 of 2019 (1 August 2019), and on the Department of Revenue consolidated copy of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 listing amendments up to 19 July 2024, as consulted on 2 October 2026. Later amendments, notifications, other rules and regulator directions should be checked. This article is general information, not legal advice; check the official text before acting.