CAIIB · Banking Regulations & Business Laws · Module B — Important Acts/Laws & Legal Aspects of Banking Operations, Part A
CAIIB BRBL Unit 8 — The Prevention of Money Laundering Act, 2002: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper IV of the December 2026 cycle (Sunday 20 December 2026)
This is the free practice page for CAIIB BRBL Unit 8 — The Prevention of Money Laundering Act, 2002 (Module B — Important Acts/Laws & Legal Aspects of Banking Operations, Part A). The CAIIB Mock Centre holds 179 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
BRBL · Module B179 MCQs in the Mock Centre5 free belowPaper on 20 December
Key facts examiners test from this unit
The PMLA: offence, punishment and the Director — the PMLA (in force 1 July 2005) punishes any knowing involvement with proceeds of crime, with 3 to 7 years' RI and an unlimited fine, and lets the Director, FIU-IND fine reporting entities for each failure.
Obligations of reporting entities — Section 12 makes every reporting entity keep transaction and identity records, report prescribed transactions to the Director, and keep them confidential for set periods, with Section 14 protecting good-faith reporting.
Enhanced due diligence — Section 12AA (2019) requires extra checks before a specified transaction (identity, ownership, finances, sources of funds and purpose), refusal if the client fails them, and closer monitoring if it looks suspicious.
Changed since the textbook
Enforcement data in Parliament (1 December 2025). The Minister of State for Finance told the Lok Sabha that the ED had filed 6,312 cases under the PMLA, with 120 convictions, in about 11 years and 7 months. Source: Deccan Herald (PTI)
New RBI KYC Directions (28 November 2025). The RBI (Commercial Banks – Know Your Customer) Directions, 2025 replaced the KYC Master Direction of 2016, stating that Aadhaar is not mandatory except for benefits under the Aadhaar Act; a 29 December 2025 amendment set CKYCR verification duties. Source: JSA Prism
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 179 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
What is the minimum term of rigorous imprisonment for money laundering under Section 4?
Why (b): Section 4 provides rigorous imprisonment for not less than three years, which may extend to seven years, and fine. (a) is wrong: The minimum term is three years. (c) is wrong: One year is below the statutory minimum. (d) is wrong: Two years is below the statutory minimum.
Question 2 of 5
Under Section 12AA(4), information obtained during enhanced due diligence is kept for five years from when?
Why (b): Section 12AA(4) requires EDD information to be maintained for five years from the date of the transaction between the client and the reporting entity. (a) is wrong: Closure is the test for identity records, not EDD information. (c) is wrong: Risk classification is not the starting point. (d) is wrong: The Director's inquiries do not set the period.
Question 3 of 5
Under Rule 3 of the PML (Maintenance of Records) Rules, which cash transactions must be recorded under its first clause?
Why (a): The first clause of Rule 3(1) covers all cash transactions of a value of more than ₹10 lakh or its equivalent in foreign currency, deposits and withdrawals alike. (b) is wrong: ₹50,000 plays no part in this clause. (c) is wrong: Withdrawals above ₹10 lakh are covered; there is no ₹1 crore test. (d) is wrong: The cash test is more than ₹10 lakh, not ₹5 lakh.
Question 4 of 5
Rule 4 of the PML (Maintenance of Records) Rules requires transaction records to contain the information needed to reconstruct each transaction. Which of these does it NOT list?
Why (a): Rule 4 requires each transaction record to show its nature, the amount and currency, the date and the parties, so that the transaction can be reconstructed. The customer's income belongs to the KYC profile kept under the identity-record rules, not to the record of each transaction. (b) is wrong: The nature of the transaction is listed. (c) is wrong: The amount and its currency are listed. (d) is wrong: The parties are listed.
Question 5 of 5
For an unincorporated association, what must the bank obtain to establish its standing?
Why (a): For an unincorporated association, the bank obtains the managing body's resolution, a power of attorney to the person transacting, and information to establish its legal existence. (b) is wrong: An unincorporated association has no certificate of incorporation. (c) is wrong: A partnership deed is for firms. (d) is wrong: A trust deed is for trusts.
0 of 5 answered.
Traps in this unit
The Central Government, not the RBI, appoints the Director.
The ₹10,000 to ₹1 lakh range applies to each failure.
Attempted transactions are covered too.
Practise all 179 questions on Unit 8. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the BRBL Online Mock Centre unlocks all 5,800+ BRBL questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.