Govt Approves Aadhaar Authentication by 3 Firms for Section 11A of Money-laundering Act

On September 6, 2023, the Ministry of Finance in India made a significant announcement, authorizing three reporting entities to carry out Aadhaar authentication for the purposes of Section 11A of the Money-laundering Act, 2002. This move comes after consultation with the Unique Identification Authority of India and the Reserve Bank of India.

The Government’s Notification: The Indian government’s notification clearly identifies the reporting entities as Fedbank Financial Services Limited, Amrit Malwa Capital Limited, and Nissan Renault Financial Services India Private Limited. The government’s decision comes after ensuring that these entities meet the standards of privacy and security as laid out under the Aadhaar Act.

Section 11A of Money-laundering Act: Section 11A primarily focuses on the prevention of money laundering, requiring financial entities to adopt stringent authentication and verification procedures. Aadhaar authentication has been recognized as a reliable means to achieve this objective.

Implications for Financial Services: With this approval, the three named financial entities are now legally enabled to use Aadhaar-based authentication for verifying the identity of their customers, thereby streamlining the KYC (Know Your Customer) process. This is likely to make the onboarding process more efficient and secure.

Privacy and Security Concerns: The notification specifies that the entities have been permitted this capability after demonstrating compliance with privacy and security norms. This implies that customers can expect a high level of confidentiality and data protection during the authentication process.

Role of Regulatory Bodies: The decision was made after consultation with the Unique Identification Authority of India (UIDAI) and the Reserve Bank of India (RBI). These institutions play a vital role in maintaining the balance between technological advances and data protection rights of individuals.

Public Awareness: The public should be made aware of these new developments as they might experience changes in the way they interact with financial services, specifically in the domains of loans, investments, and other financial products.

Conclusion: The Indian government’s decision to permit three reporting entities to perform Aadhaar authentication for the purposes of Section 11A of the Money-laundering Act is a significant move. It not only simplifies the authentication process but also adds an extra layer of security and efficiency. While data protection and privacy remain paramount, the involvement of regulatory bodies like UIDAI and RBI adds credibility to this development. As financial institutions begin to implement these changes, it is crucial for the general public to be aware and informed about how this affects their interaction with financial services.

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MINISTRY OF FINANCE
(Department of Revenue)
NOTIFICATION
New Delhi, the 6th September, 2023

S.O. 3965(E).—In exercise of the power conferred by proviso to sub-section (1) of section 11A of the Prevention of Money-laundering Act, 2002 (15 of 2003) (hereinafter referred to as the Money-laundering Act) , the Central Government being satisfied that the reporting entities mentioned in the TABLE below shall comply with the standards of privacy and security under the Aadhaar (Targeted Delivery of Financial and Other Subsides, Benefits and Services) Act, 2016 (18 of 2016) (hereinafter referred to as the Aadhaar Act), and it is necessary and expedient to do so, after consultation with the Unique Identification Authority of India established under sub-section (1) of section 11 of the Aadhaar Act and the appropriate regulator, namely, the Reserve Bank of India, hereby permits the said reporting entities to perform authentication under the Aadhaar Act for the purposes of section 11A of the Money-laundering Act, namely:-

TABLE

[F. No. P-12011/11/2021-ES Cell-DOR-Part(1)]

MANOJ KUMAR SINGH, Director (Headquarter)