Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2023
Guidance Note: Amendment to Know Your Customer (KYC) / Anti Money Laundering (AML) Policy
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;
“Non-profit organization” means any entity or organisation, constituted for religious or charitable purposes referred to in clause (15) of section 2 of the Income-tax Act, 1961 (43 of 1961), that is registered as a trust or a society under the Societies Registration Act, 1860 (21 of 1860) or any similar State legislation or a Company registered under the section 8 of the Companies Act, 2013 (18 of 2013);”
All banking companies or financial institutions or intermediaries should register the details of its client, in case of client being a non-profit organisation, on the DARPAN Portal of NITI Aayog, if not already registered, and maintain such registration records for a period of 5 (five) years after the business relationship between a client and a reporting entity has ended or the account has been closed, whichever is later.
- The definition of the term “Group” has been provided under the amendment having its meaning assigned under Section 286 of the Income Tax Act 1961 (IT Act). As per IT Act, “group” includes a parent entity and all the entities in respect of which, for the reason of ownership or control, a consolidated financial statement for financial reporting purposes, –
- is required to be prepared under any law for the time being in force or the accounting standards of the country or territory of which the parent entity is resident; or
- would have been required to be prepared had the equity shares of any of the enterprises were listed on a stock exchange in the country or territory of which the parent entity is resident.
As per Rule 3A of the PMLR Amendment, groups are required to implement group-wide policies for the purpose of discharging obligations under the provisions of Chapter IV of the Prevention of Money Laundering Act 2002 (PMLA) which deals with obligations of banking companies, financial institutions and intermediaries.
- For opening an account of a Company, certified copies of each of the following additional documents thereof shall be obtained:
- the names of the relevant persons holding senior management position; and
- the registered office and the principal place of its business, if it is different.
- For opening an account of a Partnership Firm, the certified copies of each of the following additional documents thereof shall be obtained:
- the names of all the partners and address of the registered office, and the principal place of its business, if it is different.”;
- For opening an account of a Trust, certified copies of each of the following documents or the equivalent e-documents thereof shall be obtained:
- the names of the beneficiaries, trustees, settlor and authors of the trust and the address of the registered office of the trust; and
- list of trustees and documents as are required for individuals under sub-rule (4) for those discharging role as trustee and authorised to transact on behalf of the trust.”
- The PMLR Amendment has also lowered the shareholding threshold for reporting entities to identify beneficial owners, where the client is a company acting on behalf of its beneficial owner. The earlier prescribed threshold for identifying a ‘beneficial owner’ based on controlling ownership interest was 25% of shares or capital or profit of the company, which has been further lowered to shareholding threshold for determining controlling ownership interest of a company to 10%
Notes:
1. Where the client has submitted any documents for the purpose of client due diligence, it shall submit to the reporting entity any update of such documents, for the purpose of updating the records within 30 days of such updation.
2. As per Explanation given under Section 178 of Companies Act, 2013 The expression Senior Management‘‘ means personnel of the company who are members of its core management team excluding Board of Directors comprising all members of management one level below the executive directors, including the functional heads.
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