In a recent move, the government has tightened the rules of the Prevention of Money Laundering Act (PMLA), targeting entities like banks, stockbrokers, and insurers.
Key Amendments to Enhance Compliance
The Department of Revenue has introduced the Money Laundering Second Amendment Rules, aimed at ensuring more effective compliance.
Under these updated rules, individuals holding a 10% stake in a company will now fall under the category of beneficial owners, allowing them to reap the company’s benefits. This threshold was previously set at 15%.
Improving Transparency and Accountability
The government has made revisions to the Prevention of Money Laundering Rules-2005.
The principal officer of the reporting entity will now compile a list of records on behalf of the beneficial owners of partnership firms and reporting entities.
The Chief Officer is responsible for reporting information to the Financial Intelligence Unit.
These amendments also intend to enhance transparency for customers of reporting entities, including banks and financial institutions.
Reporting entities must disclose whether a client is acting on behalf of a beneficial owner and verify the beneficial owner’s identity when initiating an account-based relationship.
Inclusion of Stakeholders
It’s worth noting that even those with less than a 10% stake or profits will be encompassed by these changes.
The 10% stake threshold does not guarantee exclusion from the new rules.
Record-Keeping Requirements
To meet the stringent regulations and monitoring, reporting units must maintain records of customer transaction analysis.
Previously, in May 2023, the Finance Ministry had announced changes to PMLA provisions.
These changes made chartered accountants, certified public accountants,
and company secretaries liable under the Anti-Money Laundering Act for specific financial transactions with their clients, including property transactions and bank account management.
