The Ministry of Finance has revised the Prevention of Money Laundering (Maintenance of Records) Rules for expanding the scope of KYC standards. File | Photo Credit: The Hindu
The Ministry of Finance has amended the Prevention of Money Laundering (Maintenance of Records) Rules for expanding the scope of Know your Customer (KYC) standards to include Politically Exposed Persons (PEPs), non- profit organizations (NPOs) and those dealing in virtual digital assets (VDA) as reporting entities.
The decision was taken ahead of the expected Financial Action Task Force (FATF) assessment of India later this year.
Through a notification, the Ministry has made exchanges and intermediaries dealing in VDA, such as cryptocurrency, reporting entities under the Prevention of Money Laundering Act (PMLA), thus making it mandatory for them to comply with client/user KYC requirements.
Under the Act, reporting entities are required to keep all relevant records of their beneficial owners and transactions for at least five years.
The Ministry issued another notification, which defines PEPs as individuals entrusted with prominent public functions of a foreign country, including heads of State or government, senior politicians, senior government or judicial officials or military, senior executives of state property. corporations and important political party officials.
“In such cases, transactions of ₹10 lakh and above have to be reported to the Financial Intelligence Unit,” said a government official.
Non-profit organizations formed for religious or charitable purposes, and registered as trusts or societies, are also added to the list.
According to the notification, every banking company, financial institution or intermediary has to register the details of a non-profit organization client on NITI Aayog’s Darpan portal. They will also be required to keep such registration records for five years after the business relationship between a client and a reporting entity ends or the account is closed, whichever is later.
Another important decision concerns the lowering of the ownership threshold from the previous 25% to 10%, thereby treating any individual or group holding 10% ownership in a reporting entity as a “beneficial owner” for the purpose of the PMLA rules.
