In the month of March 2023, the Finance Ministry amended the Prevention of Money Laundering Act (PMLA) and rules in line with the recommendations of the FATFwhich is the global money laundering and terrorist financing watchdog.
In India, the Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, as amended from time to time, were enacted to prevent money laundering and to provide for confiscation of property derived from or involved in, money-laundering. The above acts provide the legal framework for Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT).
Internationally, the Financial Action Task Force (FATF) which is an inter-governmental body established in 1989 by the Ministers of its member jurisdictions, sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. India, being a member of FATF, is committed to upholding measures to protect the integrity of the international financial system. India, being a member of FATF, is committed to upholding measures to protect the integrity of the international financial system.
The Regulated Entities (REs) like banking companies, financial institutions, and intermediaries are required to follow certain customer identification procedures while undertaking a transaction either by establishing an account-based relationship or otherwise, and monitor their transactions. The new rules require reporting entities like financial institutions, banking companies, or intermediaries to disclose beneficial owners in addition to the current KYC requirements through documents like registration certificates and PAN (Permanent Account Number).
The Prevention of Money Laundering (Maintenance of Records) Amendment Rules, 2023 were introduced by the Department of Revenue under the Ministry of Finance, in March 2023. These rules may be called the Prevention of Money-laundering (Maintenance of Records) Amendment. Rules, 2023. According to amendment 2023, the ambit of reporting entities widened under money laundering provisions to incorporate more disclosures for non-governmental organisations and defining politically exposed persons (PEPs) under the PMLA in line with the recommendations of the FATF. As per the new rules 2023, Practicing CA, CS, and CWA’s are also brought under the Prevention of Money-laundering Act, 2002 (PMLA), if they enter into financial transactions on behalf of the client. Hence, they are required to follow certain customer identification procedures while undertaking a transaction either by establishing an account-based relationship or otherwise, and monitor their transactions.
According to the latest amendment, businesses involved in providing services related to Virtual Digital Assets (VDA), including cryptocurrencies, will now be under the ambit of anti-money laundering law (AML). As per the new rules, an entity dealing in VDAs will now be considered a ‘reporting entity’ under the PMLA. The amendment will require intermediaries in the crypto ecosystem, such as crypto exchanges, wallets, and other service providers, to establish and implement PMLA measures and systems. These measures include conducting KYC checks during customer onboarding, retaining customer data for a specified period, monitoring and reporting suspicious transactions, and having policies for tracking transactions.
To know the ‘Video based Customer Identification Process’ click:’V-CIP‘
To know the latest changes in KYC click: Amendment
To know the ‘KYC amendment related to customer due diligence click: CDD
Other Related articles:
- What are CFT and FATF in banking?
- What are the RBI norms for periodical updating of KYC?
- What are the core components of KYC/AML guidelines?
- KYC documents for current accounts of all varieties
- How do you open bank accounts under the e-KYC process?
- What are the valid address proof documents for KYC?
- What is the relaxed KYC norm for proprietary concerns?
- KYC/AML guidelines for opening bank account made simple
- What is Central KYC Records Registry (CKYCR)?
- Many changes were made to KYC in the latest MD
The Directorate of Enforcement in the Department of Revenue, Ministry of Finance is responsible for investigating the offenses of money laundering under the PMLA. The authority has the power to carry out measures like survey, search, and seizure, and arrest the accused. If the authority suspects that assets found by them are the proceeds of a crime, the same can be confiscated. The offence of money laundering is cognizable which means an arrest can be made without a warrant. To know more about the obligations of Regulated Entities under the PML Act: Read –Obligations and Punishment under the PML Act.
Read: Other related articles pertaining to amendments to KYC regulations
AMENDMENT TO KYC: MEASURES WHILE DEALING WITH THE WIRE TRANSFER
LATEST KYC AMENDMENT RELATED TO CUSTOMER DUE DILIGENCE (CDD)
To know the ‘Video based Customer Identification Process’ click:’V-CIP‘
MANY CHANGES WERE MADE TO KYC IN THE LATEST MD AMENDMENT
Other related articles:
- What are CFT and FATF in banking?
- What are the RBI norms for periodical updating of KYC?
- What are the core components of KYC/AML guidelines?
- KYC documents for current accounts of all varieties
- How do you open bank accounts under the e-KYC process?
- What are the valid address proof documents for KYC?
- What is the relaxed KYC norm for proprietary concerns?
- KYC/AML guidelines for opening bank account made simple
- What is Central KYC Records Registry (CKYCR)?
