Central Government Notifies Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2023
On 7th March, 2023, the Ministry of Finance, Department of Revenue, Government of India notified the 2023 Amendment to the Prevention of Money-laundering (Maintenance of Records) Rules, 2005. The rules have been made in exercise of power vested in the Central Government under Section 73 of the Prevention of Money-Laundering Act, 2002. By inserting Clause (cba), ‘Group’ has been defined...
On 7th March, 2023, the Ministry of Finance, Department of Revenue, Government of India notified the 2023 Amendment to the Prevention of Money-laundering (Maintenance of Records) Rules, 2005. The rules have been made in exercise of power vested in the Central Government under Section 73 of the Prevention of Money-Laundering Act, 2002.
By inserting Clause (cba), ‘Group’ has been defined to have the same meaning as in Section 286(9)(e) of the Income Tax Act, 1961, which reads as under -
“e) “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,—
(i) 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
(ii) 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;”
Definition of “non-profit organisation” has been amended to mean any entity or organisation constituted for religious or charitable purposes as referred to in Section 2(15) of the Income Tax Act, 1961 and is registered as a trust or a society under the Societies Registration Act, 1860 or any similar State legislation or company registered under Section 8 of the Companies Act, 2013. Prior to the amendment the ‘non-profit organisation’ was defined as any entity or organisation registered as a trust or a society under the Societies Registration Act, 1860 or any similar State legislation or a company registered under section 8 of the Companies Act, 2013.
The 2023 Amendment defines Politically Exposed Persons (PEP) 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.
Certain amendments have been carried out in Rule 9, which deals with client due diligence.
Sl. No. | Provision | Unamended Rule | Amendment |
1. | Explanation to Rule 9(3)(a) - Determining beneficial owner | "Controlling ownership interest" means ownership of or entitlement to more than twenty-five per cent. of shares or capital or profits of the company | "Controlling ownership interest" means ownership of or entitlement to more than ten per cent. of shares or capital or profits of the company |
2. | Rule 9(3)(e) - Determining Beneficial Owner | The beneficial owner for the purpose of sub-rule (1) shall be determined as under- [...] (e) where the client is a trust, the identification of beneficial owner(s) shall include 'identification of the author of the trust, the trustee, the beneficiaries with fifteen per cent. or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership; and | The beneficial owner for the purpose of sub-rule (1) shall be determined as under- [...] (e) where the client is a trust, the identification of beneficial owner(s) shall include 'identification of the author of the trust, the trustee, the beneficiaries with ten per cent. or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership; and |
3. | Rule 9(6)(iv) - Documents to be submitted to reporting entity when the client is a company | (6) Where the client is a company, it shall for the purposes of sub-rule (I), submit to the reporting entity the certified copies of the following documents - [...] (iv) (a) Aadhaar number; and (b) Permanent Account Number or Form 60 as defined in the Income-tax Rules, 1962… | (6) Where the client is a company, it shall for the purposes of sub-rule (I), submit to the reporting entity the certified copies of the following documents - [...] (iv) (a) Aadhaar number; [and] omitted (b) Permanent Account Number or Form 60 as defined in the Income-tax Rules, 1962. |
4. | Rule 9(6)(v) - Documents to be submitted to reporting entity when the client is a company | (i) Certificate of incorporation; (ii)MemorandumandArticlesofAssociation; (iii) A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf: (iv) (a) Aadhaar number; and (b) Permanent Account Number or Form 60 as defined in the Income-tax Rules, 1962… | Added to the list of documents “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.”; |
5. | Rule 9(7)(iii) - Documents to be submitted to reporting entity when the client is a partnership firm | Where the client is a partnership firm, it shall, for the purposes of sub- rule (I), submit to the reporting entity the certified copies of the following documents:- . (i) registration certificate; (ii) partnership deed; and (iii) (a) Aadhaar number; and (b) Permanent Account Number or Form 60 as defined in the Income- tax Rules, 1962,... | Where the client is a partnership firm, it shall, for the purposes of sub- rule (I), submit to the reporting entity the certified copies of the following documents:- . (i) registration certificate; (ii) partnership deed; and (iii) (a) Aadhaar number; [and] omitted (b) Permanent Account Number or Form 60 as defined in the Income- tax Rules, 1962, |
6. | Rule 9 (7)(iv) - Documents to be submitted to reporting entity when the client is a partnership firm | Where the client is a partnership firm, it shall, for the purposes of sub- rule (I), submit to the reporting entity the certified copies of the following documents:- . (i) registration certificate; (ii) partnership deed; and (iii) (a) Aadhaar number; and (b) Permanent Account Number or Form 60 as defined in the Income- tax Rules, 1962,... | Added to the list of documents the names of all the partners and address of the registered office, of its business, if it is different. |
7. | Rule 9(8)(iii) - Documents to be submitted to reporting entity when the client is a trust | Where the client is a trust, it shall, for the purposes of sub-nile (1) submit to the reporting entity the certified copies of the following documents:- (i) registration certificate: (ii) trust deed; and (iii) (a) Aadhaar number; and (b). Permanent Account Number or Form 60 as defined in the Income- tax Rules, 1962,... | Where the client is a trust, it shall, for the purposes of sub-nile (1) submit to the reporting entity the certified copies of the following documents:- (i) registration certificate: (ii) trust deed; and (iii) (a) Aadhaar number; [and] omitted (b). Permanent Account Number or Form 60 as defined in the Income- tax Rules, 1962, |
8. | Rule 9(8)(iv) - Documents to be submitted to reporting entity when the client is a trust | Where the client is a trust, it shall, for the purposes of sub-nile (1) submit to the reporting entity the certified copies of the following documents:- (i) registration certificate: (ii) trust deed; and (iii) (a) Aadhaar number; and (b). Permanent Account Number or Form 60 as defined in the Income- tax Rules, 1962,... | Added to the list of documents 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 |
9. | Rule 9(10) - When client purports to act on behalf of juridical person or individual or trust | Where the client is ‘a juridical person’, the reporting entity shall verify that any person purporting to act on behalf of such client is so authorized and verify the identity of that person. . | Where the client ‘purports to act on behalf of a juridical person or individual or trust’, the reporting entity shall verify that any person purporting to act on behalf of such client is so authorized and verify the identity of that person. |
By way of the amendment, the requirement of additional documents have been stated in Rule 9(6), 9(7) and 9(8), which is to be submitted by the client to the reporting entity.
After Rule 9(9), two sub-rules, namely Rule 9(9A) and Rule 9(9B) are inserted. Rule 9(9A) requires every Banking Company or Financial Institution or intermediary to register the details of a client, which is a non-profit organisation and not already registered, on the DARPAN Portal of NITI Aayog. The registration record to be maintained for a period of five years after the business relationship between a client and a reporting entity has ended or the account has been closed, whichever is later. Rule 9(9B) contemplates that the client submits updates of the already submitted documents under Rule 9(4), Rule 9(5), Rule 9(6), Rule 9(7), Rule 9(8) and Rule 9(9) with the reporting entity, within 30 days of the updation.