Govt Amends Anti-Money Laundering Rules, 'Politically Exposed Persons', NGOs Brought Under PMLA

The amended rules require financial institutions or reporting agencies to collect information on the financial transactions of non-profit organisations under PMLA.

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New Delhi: The government has modified rules under the anti-money laundering law, making it mandatory for banks and financial institutions to record financial transactions of politically exposed persons (PEP), news agency PTI reported.

Under the new Prevention of Money Laundering Act (PMLA) Rules, the Finance Ministry defined politically exposed persons 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.”

The amended rules require financial institutions or reporting agencies to collect information on the financial transactions of non-profit organisations under PMLA.

The institutions will also have to register the details of their NGO clients on Darpan portal of Niti Aayog and maintain the record for five years after the agreement between a client and a reporting entity has ended or the account has been closed.

Under the revised rules, banks and financial institutions will also have to share the records of financial transactions with the Enforcement Directorate.

The amendments also include tightening of definition of beneficial owners under anti-money laundering law and mandating reporting entities to collect information from their clients.

Notably, as per the amendments, any individual or group holding 10 per cent ownership in the client of a 'reporting entity' will be considered a beneficial owner against 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, intermediaries in casinos and crypto or virtual digital assets.

So far, these entities were required to maintain KYC details or records of documents bearing the identity of their clients and account files and business correspondence relating to clients. They are now required to maintain a record of all transactions, including the record of all cash transactions of more than Rs 10 lakh.