- The government has amended rules under the anti-money law, making it mandatory for banks and financial institutions to record financial transactions of politically exposed persons (PEP).
- Financial institutions or reporting agencies will be required to collect information about the financial transactions of non-profit organisations or NGOs under the provisions of the Prevention of Money Laundering Act (PMLA).
- PEP includes individuals who have been entrusted with prominent public functions by a foreign country, 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.
- Banks and financial institutions will now have to not only maintain records of financial transactions of PEPs and NGOs but also share them with the Enforcement Directorate, as and when sought.
The government has amended rules under the anti-money law, making it mandatory for banks and financial institutions to record financial transactions of politically exposed persons (PEP). According to the government, financial institutions or reporting agencies will be required to collect information about the financial transactions of non-profit organisations or NGOs under the provisions of the Prevention of Money Laundering Act (PMLA), also have to register details of their NGO clients on the Darpan portal of the Niti Aayog. Again, they have to maintain the record for 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 amendment said.
Under the modified PML Rules, the Finance Ministry defined PEPs as “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”.
Following this amendment, banks and financial institutions will now have to not only maintain records of financial transactions of PEPs and NGOs but also share them with the Enforcement Directorate, as and when sought.
The amendments to PMLA rules also include tightening the definition of beneficial owners under the anti-money laundering law and mandating reporting entities like banks and crypto platforms to collect information from their clients.
As per the amendments, any individual or group holding 10 per cent ownership in the client of a ‘reporting entity’ will now be considered a beneficial owner against the ownership threshold of 25 per cent applicable earlier. Under the anti-money laundering law, ‘reporting entities’ are banks and financial institutions, firms engaged in real estate and jewellery sectors. They also include intermediaries in casinos and crypto or virtual digital assets.
So far, these entities were required to maintain KYC details or records of documents evidencing the identity of their clients as well as account files and business correspondence relating to clients. They are required to maintain a record of all transactions, including the record of all cash transactions of more than ₹ 10 lakh. They will now have to also collect the details of the registered office address and principal place of business of their clients.
