The Central Government brought the Real Estate Agents (REAs) into the fold of the Prevention of Money Laundering Act, 2002 (PMLA), notifying* that persons engaged in providing services in relation to the sale or purchase of real estate and having the annual turnover of Rs 20 lacs and above, as a ‘person carrying on designated business or profession’.
By designating REA as a person carrying on ‘designated business or profession’, the real estate agents have become ‘reporting entities’ under the PMLA law. A reporting entity has many obligations under the PMLA and thus should have an anti-money laundering (AML) compliance framework, directing their efforts in detecting and deterring money laundering and terrorism financing.
There are two further related concepts for compliance which are usually associated with the PMLA – the Unlawful Activities (Prevention) Act (UAPA), and the Weapons of Mass Destruction Act (WMD). REAs have compliance obligations under these laws too.
The Directorate General of Audit in the Central Board of Indirect Taxes and Customs** is the designated regulator under the PMLA for the real estate agents and also oversees compliances under the UAPA and the WMD laws.
Through these FAQs, we clarify key concepts in relation to the PMLA law and compliances, and obligations and actions on the part of the REAs. Do note that the PMLA currently applies to all real estate agents, as defined in the PMLA law***, engaged in the sale or purchase of real estate with an annual turnover (which generally means gross income) of Rs 20 lacs or more. However, compliances under the UAPA and the WMD laws apply to all the agents, irrespective of the annual turnover threshold. These two topics are also covered in these FAQs.
1. Who is a real estate agent for the purpose of PMLA?
- Real estate agent means any person, who negotiates or acts on behalf of one person in a transaction of transfer of his plot, apartment or building, as the case may be, in a real estate project, by way of sale, with another person or transfer of plot, apartment or building, as the case may be, of any other person to him;
- The REA receives remuneration or fees or any other charges for his services whether as a commission or otherwise;
- REA also includes –
– a person who introduces, through any medium, prospective buyers and sellers to each other for negotiation for sale or purchase of plot, apartment or building, as the case may be,
– property dealers, property brokers, or such by whatever name called. - Such REAs are having an annual turnover of Rupees twenty lakhs and above.
If you are not covered by the above definition, you will not be a REA for the purpose of PMLA. But do refer teh FAQs below on UAPA and WMD compliances.
2. When did PMLA become applicable to the real estate agents in India?
PMLA obligations started to apply from November 2022, when the Central Government notified real estate agents as ‘Designated Non-Finance Business and Profession’, thus categorising them as ‘Reporting Entities’ under the PMLA.
3. Who is the regulator for real estate agents, for the purpose of the PMLA Act?
The Central Board of Indirect Taxes and Customs (CBIC) is the designated Regulator for the real estate agents for the purpose of the PMLA Act. The guidelines to regulate them are issued by the Directorate General of Audit, CBIC (DGA CBIC).
The PMLA law overall is administered by the Financial Intelligence Unit – India (FIU). FIU oversees the PMLA law, and reportings under the PMLA law are made to the FIU.
4. Does PMLA apply if an REA deals only in rentals or leases?
No. Currently, rental/lease broking transaction is currently outside the scope. Only real estate sale/purchase/transfer transactions are covered.
5. If a REA’s annual earnings as a REA are below ₹20 lakh, am I outside the PMLA?
As per the applicable law, REAs whose annual turnover (which generally means the annual gross income) is less than Rs 20 lacs are not covered in the scope of the PMLA.
However, note that all REAs, irrespective of the turnover, are covered in the scope of the UAPA / WMD related obligations – see FAQs towards the end for the UAPA/WMD compliances. Hence, all REAs must ensure such compliances.
6. Is there a requirement to register under the PMLA?
REAs covered under the PMLA must register on the FIU-IND portal as a Reporting Entity (RE). They also are required to designate a Principal Officer and a Compliance Officer under the PMLA. The REA must also put in place the PMLA compliance framework. However, there is no specific separate registration requirement in relation to compliances under the UAPA/WMD laws.
7. Are real estate agents required to appoint a Principal Officer and designated director?
Yes, all reporting entities must appoint the Designated Director (DD) and the Principal Officer (PO), which must be registered on the FIU-IND portal. Their details must also be informed to the DGA, CBIC and the concerned state RERA.
The DD and PO have responsibility for operationalising and implementing the PMLA compliance framework, and the oversight in the organisation. They are also responsible for regulatory reporting, and formulating and implementing client acceptance policies and client due diligence measures.
8. Do small, individual real estate brokers have the same obligations as large agencies?
Overall – Yes, core obligations (KYC/CDD, STR, record-keeping, FIU reporting) are mandatory for all REAs who are within the scope of the PMLA. However, since the PMLA requires a risk-based compliance framework, the extent and depth of actions may differ on a risk-based proportionality principle for different customers and transactions.
9. What policies and documentation must a real estate agent maintain?
A REA must establish, implement and maintain:
- AML/CFT compliance programme. The programme must be appropriate to the REA’s business, and must be regularly reviewed.
- Know your customer (KYC) / client acceptance policies / Customer Due Diligence (CDD)
Procedures that includes identification and verification of the customers and their beneficial owners, and must be conducted on Money laundering (ML)/Terrorist Financing (TF) risk sensitive basis. - Money laundering (ML)/Terrorist Financing (TF) Risk Assessment to identify, assess, prevent and mitigate ML/TF threats from customers; existing or new product and services; new or developing technologies that might favour anonymity, including Virtual Digital Assets; and take measures to prevent their use in money laundering and terrorism financing.
- a system / process for identifying, monitoring and reporting suspected ML or TF transactions to the law enforcement authorities.
- process to report cash transactions; or use of fake or forged cash notes.
- training and awareness to their staff on AML/PMLA.
- Record-keeping framework, to maintain records of all KYC/CDD, customer transactions, programme, reports etc for 5 years (in case of customer identification records, 5 years from the end of customer relationship).
If the REA is part of a group, then the policies should be implemented on a group-wide basis.
10. Do real estate agents need to undertake KYC of the customers?
Yes. Full KYC/ Customer Due Diligence (CDD) must be done by the REAs:
– at the time of commencement of an account-based relationship; or
– while carrying out occasional transactions of Rs 50,000 or more.
The REA should obtain relevant documents (officially valid documents for identity and address, and other organisation related officially valid documents), and conduct the following:
- Identifying the clients.
- Verifying their identity.
- Obtaining information on the purpose and nature of business relationship.
- Determine if the client is acting on behalf of a beneficial owner/s (BO) (where applicable) and take steps to verify their identity.
- If – for example – a POA holder is involved, identification and verification, and BO checks will apply to such POA holder too.
The KYC / CDD / EDD procedures will vary depending on the category / type / status of customers and services, and may also involve checks and verification of beneficial owners (BOs). They must be able to form a reasonable belief that they know the true identity of each customer. Customer Due Diligence (CDD) measures must be conducted to form these beliefs with the identification and verification of the identity of customers and their beneficial owners.
If the REA cannot apply CDD measures for a client, or cannot identify the client, or any information is suspected to be false or not genuine, they should not go ahead with the transaction, and should file a suspicious transaction report (STR).
REAs can rely on regulated third parties that are reporting entities under the PMLA, for obtaining information and documents. They can also obtain KYC /CDD information from CERSAI (subject to arrangement with them).
CDD must be applied on a risk-sensitive basis.
11. What constitutes “high-risk” customers or transactions in real estate?
Real estate transactions may involve high-risk customers. These can include:
- Clients with dubious reputation
- Politically Exposed Persons (PEPs)
- Transactions involving complex structures or opaque entities
- Clients from high-risk jurisdictions
- Clients which are trusts and charities.
Non-resident buyers/sellers should be subjected to appropriate risk assessment to know their risk level.
Enhanced Due Diligence (EDD) must be applied to the customers in high-risk cases. It involves a deeper / more frequent review of the client, gathering information from the publicly and other available sources, knowing the source of wealth/funds etc.
12. What are Politically Exposed Persons(PEPs)?
Politically Exposed Persons (PEPS) are individuals who have been entrusted with prominent public functions by a foreign country, including the heads of States or Governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials.
In the context of the PMLA, PEP is an important concept. PEPs should be treated as high-risk customers, and subjected to enhanced customer due diligence. Screening of the customer data is essential to identify PEPs.
13. What actions can be taken for enhanced customer due diligence (EDD)?
The objective of the EDD is to get a deeper and more thorough understanding of the customer and his profile, motives of the transactions, the source of funds etc. EDD measures can include one or more of:
– more frequent review of client profile and transactions
– gathering information from public sources (eg: Google search)
– reviewing client information at senior level
– reasonable steps to know source of funds / wealth
– consulting credible database.
If the due diligence exercise raises red flags, those must be reviewed. If following the due diligence exercise, there is a suspicion of the customer or transaction, a suspicious transaction report (STR) may need to be filed with the FIU-IND.
Need to conduct an EDD can also arise later during the ongoing dealings and transactions with/for the customers.
14. Can real estate agents accept cash payments?
Under the PMLA, there is no bar per se against cash payments. But from the PMLA perspective, more or higher the dealing or accepting cash, it increases the money laundering / terrorist financing risks. Further, cash given by the clients can trigger Enhanced Due Diligence obligations under the PMLA or can increase the risk score of the business or the customer.
Thus, depending on the business context, cash payments must be scrutinised and may require filing of a Suspicious Transaction Report (STR) with the FIU-India. Further, if the cash accepted (either under a single transaction or a series of inter-connected transactions) exceed Rs 10 lacs, it will require filing of the Cash Transaction Report with the FIU-India.
However, you must also consider restrictions and conditions under the tax and other laws in relation to cash payments.
15. What records must be maintained and for how long?
Real estate agents must maintain / retain information in respect of dealings and transactions with the clients. This includes customer KYC, CDD, identification, verification etc records, as well as transaction records.
All transaction records must be maintained including records of:
– cash transactions (or a series of integrally connected cash transactions aggregating) of value of more than Rs 10 lacs
– transactions involving receipt by non-profit organisations of Rs 10 lacs or more
– cash transactions involving forged / counterfeit currency notes; or where a transaction involves forged valuable security or documents.
– all suspicious transactions.
Information / records retention period:
- Client records – for 5 years, from the end of client relationship.
- Transaction records & documents – for 5 years after transaction completion.
- Records of all AML compliance programme documents must also be maintained for 5 years.
- Records of all reportings – for 5 years.
16. Which reports must be filed with the FIU-IND?
Real estate agents may need to file:
- Suspicious Transaction Report (STR) – mandatory when the suspicion arises of any customer or transaction. There are no minimum amount thresholds for suspicious transaction reporting, and includes transactions made with virtual digital assets (eg: crypto), if suspicious.
- CTR (Cash Transaction Report) – all cash transactions of ₹10 lakh or more; and all series of integrally cash transactions, where individual transaction may be less than Rs 10 lacs but in aggregate exceed Rs 10 lacs(or equivalent in foreign currency).
- All cash transactions reports where forged / counterfeit currency has been used.
17. When should an STR be filed?
When the REA knows, suspects, or has reasonable grounds to suspect a transaction or a customer (e.g.: the transaction may involve proceeds of crime, tax evasion, layering of funds, or unusual customer behaviour), STR must be filed within 7 working days of forming the suspicion.
Where the suspicion relates to terrorist activity or terrorism financing, the STR should be filed within 24 hours.
18. What obligations apply in regards to the employee due diligence?
Reporting entities should ensure they have a framework for employee due diligence as part of their PMLA compliance framework. This includes adequate screening procedures and assessing suitability and competence of an employee for the position considering the potential ML/TF risks and size of the business.
19. Do real estate agents or their staff need PMLA/AML training?
Training and awareness is an essential component of PMLA compliance framework. The REAs must have an ongoing employee training programme. They should conduct periodic AML/CFT training, at least annually, for staff involved in client interaction, verification, and transaction handling. Focused training programme is essential for certain categories of staff, including those directly interacting with the customers like frontline, customer service and call centre staff, if any.
20. Do real estate agents have obligations under the UAPA (ie the Unlawful Activities Prevention Act, 1967)?
Yes. Under section 51A of the UAPA, no real estate agent may deal with, facilitate transactions for, or provide any service to persons or entities listed on the Sanctions List or banned list under the UAPA. Typically, the list is issued by the Ministry of Home Affairs (MoHA). REAs must check on the MoHA website from time to time for changes and updates. They may also check website of CBIC / DGA / FIU-India for the updates.
REAs must ensure that their customers, and customers’ beneficial owners are not on a sanctions list or UAPA banned list before engaging in a transaction.
These provisions apply to ALL real estate agents, irrespective of their level of turnover and whether or not they are registered with the FIU / RERA.
21. What checks must real estate agents perform under the UAPA?
REAs must conduct sanctions screening of:
- All clients (buyers & sellers).
- Beneficial owners in case of non-individual customers like companies or trusts.
- Formally connected person on any transaction like a PoA holder or authorised representatives.
Screening must be done at onboarding and whenever new information arises or when a transaction takes place. Depending on the risk sensitivity of the case or transaction, more frequent screening may be required.
In regards to their employee due diligence, they must also screen the employees against this database.
A positive match must be reported immediately to the authorities (CBIC has designated a nodal officer for this purpose) and the transaction must be frozen / not progressed. A STR must also be filed with the FIU-India.
22. What is the “WMD Act” and why does it apply to real estate agents?
The Weapons of Mass Destruction and Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (WMD Act) prohibits providing financial services or material support that may contribute to proliferation financing. Section 12A of the WMD Act is relevant for the REAs, and is applicable to ALL REAs irrespective of the PMLA applicability thresholds.
Real estate agents must ensure their services are not used for proliferation financing.
The Central Government publishes the list of designated persons under the WMD Act. REAs must screen against such list of names.
23. What should be done if a sanctioned or proliferation financing client is detected?
1. The transaction should be stopped — no further service should be provided, and funds should be frozen.
2. Check for false positives using additional client documents.
3. If still a match:
-
- File an STR with FIU-IND
- Notify the relevant nodal authority (as per the UAPA/WMD directions) within the DGA, CBIC.
- Movement of funds or assets should not be permitted.
4. Maintain confidentiality; the client must not be tipped off.
22 January 2026
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Regulatory Resources for reference:
• CBIC website – click here for relevant guidelines.
• UAPA related resources – click here.
• WMD related resources – click here.
• FIU-India website – click here.
* Notification GSR 855(E) dated 29-11-2022
** Notification GSR 800(E) dated 28-12-2020, read with CBIC office memorandum of 22-11-2021
*** PMLA law defines real estate agents to mean real estate agents as defined in Sec 65(88) of the Finance Act, 1994.
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Note: The above article is for general informational purposes only and does not constitute professional or legal advice. Please seek specific advice for your situation. We do not warrant on the accuracy or completeness of the subject matter discussed above and disclaim all liability for any losses or damages caused to or incurred by any person. We are not a law firm.
Compliense Advisors is a Compliance Advisory firm providing services throughout India. We advise on compliance and regulatory matters and our subject matter expertise includes Privacy (DPDP), AML (PMLA) and Anti-Financial Crime; and Insurance and Mutual Fund regulations. We can assist in the maters of PMLA compliance framework and obligations. Write to us on info@compliense.com.
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