AML vs CFT vs CPF

AML vs CFT vs CPF: What Is the Difference?

Short answer: AML (anti-money laundering) targets the cleaning of criminal proceeds. CFT (countering the financing of terrorism) targets money, clean or dirty, that is meant to support terrorism. CPF (combating proliferation financing) targets funds that support weapons of mass destruction (WMD), and in FATF's standards it focuses on breaches or evasion of UN-based targeted financial sanctions. They share tools such as KYC and reporting, but the risk each one addresses is different.

Who this is for: beginners and junior compliance staff in India who see "AML/CFT" everywhere and want to know where proliferation financing fits. After reading you should be able to explain the three terms in one sentence each and name the Indian instrument behind each.

Why the three terms get bundled together

The FATF Recommendations are the global standard. They set out measures against money laundering and terrorist financing, as well as the financing of proliferation of WMD [1]. When FATF revised them in February 2012, it fully integrated counter-terrorist financing measures with AML controls and added measures against proliferation financing [2]. That is why compliance teams say "AML/CFT" as one phrase, and why CPF is now treated as a third strand.

AML vs CFT vs CPF at a glance

*Recommendation numbers are from the FATF 2012 framework as commonly cited. Check the current text on fatf-gafi.org, which shows the Recommendations as updated in 2026 [1].

AML: following the money's past

Money laundering is the process of making illegally obtained money look legitimate. The control framework is built around knowing the customer, monitoring transactions, keeping records and reporting suspicious activity. In India the Prevention of Money Laundering Act, 2002 is the base law, and regulators such as the RBI and SEBI issue sector rules under it [3][4].

CFT: following the money's future

Terrorist financing often involves small, legitimate-looking sums, so "dirty money" screening alone can miss it. CFT leans heavily on name screening against designated lists and on freezing without delay. For Indian regulated entities, Section 51A of the UAPA is the freezing and prohibition mechanism, and the RBI KYC rules incorporate it [3].

CPF: the newest strand

FATF's October 2020 revision of Recommendation 1 requires countries, financial institutions, DNFBPs and virtual asset service providers to identify, assess, understand and mitigate their proliferation financing risks [7]. In this context, "proliferation financing risk" refers strictly to the potential breach, non-implementation or evasion of the targeted financial sanctions in Recommendation 7 [8]. Applying Recommendation 7 itself is mandatory in all cases [8].

India added Section 12A to the WMD Act through the 2022 Amendment Act (assented 6 August 2022) [6]. Under the implementing order, the Director of FIU-India is the authority and Central Nodal Officer for Section 12A, and regulated entities must prevent designated persons from transacting and report through a Suspicious Transaction Report [9].

How the Indian regulators fit in

RBI: KYC as the front door

• 2016 Master Direction: the long-standing KYC rulebook for banks and other regulated entities.
• 12 June 2025 amendment: low-risk individual customers could complete periodic KYC updating up to one year after the due date or 30 June 2026, whichever is later, and banks could use authorised Business Correspondents for self-declarations where details are unchanged or only the address changes [10].
• 28 November 2025: RBI repealed the 2016 Master Direction and replaced it with entity-wise KYC Directions, such as the Commercial Banks KYC Directions, 2025. These consolidate existing instructions largely on an "as-is" basis [11][12].

Freshness note: many older articles still cite the 2016 Master Direction as in force. Cite the 2025 directions for your entity type, and treat the 30 June 2026 deadline as already passed.

SEBI: securities market intermediaries

SEBI's Master Circular of 6 June 2024 sets AML/CFT obligations for registered intermediaries under the PMLA and superseded the 3 February 2023 version [13]. It covers client due diligence, beneficial ownership, record keeping, reporting to FIU-IND and group-wide procedures [14]. As of this article's date it appears on SEBI's circular listings as the AML/CFT master circular; confirm on sebi.gov.in before relying on it.

FIU-IND: the receiving hub

FIU-India receives and analyses transaction data from reporting entities relating to money laundering, terrorist financing and proliferation financing [15]. Its Director also exercises the Section 12A powers noted above [9].

Where PEPs fit

FATF's guidance on politically exposed persons (Recommendations 12 and 22) explains the extra AML/CFT measures for PEPs, their family members and close associates [16]. PEP risk is mostly an AML and corruption-risk topic, not a separate regime. FATF also notes that commercial PEP databases help but are not sufficient on their own to comply [16].

Illustrative example (hypothetical, not a real case)

An exporter receives an unusual payment from an unrelated third country for goods whose description does not match its normal business, and the buyer's address resembles that of a listed entity. A trade-based laundering concern asks whether the trade is a cover for moving criminal money (AML). A sanctions-evasion concern asks whether a designated party sits behind it (CFT or CPF, depending on the list). The same red flag can feed all three, which is why one alert often triggers several checks.

This article is general education as of 6 October 2026. It is not legal or compliance advice, and it does not cover every sector regulator (insurance, DNFBPs, virtual digital assets). Rules change often, so verify against the primary sources below.

Sources

1. FATF, The FATF Recommendations (2012, as updated) – fatf-gafi.org/en/publications/Fatfrecommendations/Fatf-recommendations.html
2. FATF, press note on the February 2012 revision (via findknowdo.com/node/135184)
3. RBI, Master Direction – KYC Direction, 2016 (as updated) – rbi.org.in
4. SEBI listing of the AML/CFT Master Circular, 6 June 2024 – sebi.gov.in
5. RBI, KYC annexures on UAPA Section 51A procedure – rbi.org.in
6. WMD Act Amendment Act, 2022 (No. 14 of 2022), inserting Section 12A – thc.nic.in copy
7. FATF, Guidance on Proliferation Financing Risk Assessment and Mitigation, June 2021 (summary via FSB)
8. FATF, Guidance on PF Risk Assessment and Mitigation, public consultation draft – fatf-gafi.org
9. RBI, Order on procedure for implementing Section 12A (annexure) – rbi.org.in
10. RBI KYC (Amendment) Directions, 2025, 12 June 2025, as summarised by Conventus Law and Taxmann
11. JSA Prism FinTech, December 2025: new RBI KYC Master Directions
12. Signzy, RBI KYC Master Directions 2025: key changes
13. SEBI Master Circular SEBI/HO/MIRSD/MIRSDSECFATF/P/CIR/2024/78, 6 June 2024 (NSDL copy)
14. Cyril Amarchand Mangaldas, SEBI AML/CFT guidelines deep dive, 2025
15. FIU-IND Annual Report 2021-22 – fiuindia.gov.in
16. FATF, Guidance: Politically Exposed Persons (Recommendations 12 and 22), 2013