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      Question

      Under Section 12 of PMLA, banking companies, financial

      institutions, and intermediaries are required to maintain records of transactions for a period of:
      A 5 years from the date of the transaction Correct Answer Incorrect Answer
      B 7 years from the date of the transaction Correct Answer Incorrect Answer
      C 10 years from the date of the transaction Correct Answer Incorrect Answer
      D 15 years from the date of commencement of business Correct Answer Incorrect Answer
      E 10 years from the date of cessation of transactions between the client and the institution Correct Answer Incorrect Answer

      Solution

      Section 12(2) of PMLA, 2002 mandates that the records referred to in Section 12(1) - covering transaction records and client identity - shall be maintained for a period of ten years from the date of cessation of the transactions between the clients and the banking company, financial institution, or intermediary. The critical phrase here is 'date of cessation of transactions,' not the date of the transaction itself. This is an important distinction for exam purposes. The ten-year record retention obligation is crucial for anti-money laundering compliance and is also consistent with international FATF recommendations. Failure to comply attracts fine under Section 13 ranging from Rs. 10,000 to Rs. 1,00,000 per failure.

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