In another measure to tighten the anti-money laundering provisions, the Union Finance Ministry has amended the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, making reporting obligations more stringent for various entities like banks, stock brokers, and insurers.
As per an official notification recently released by the Revenue Department, anyone holding more than a 10 percent equity stake in a company will be classified as a 'Beneficial Owner'. Earlier, the threshold stood at 15 per cent. Notably, the move has been taken in order to ensure more effective compliance with the reporting requirements under the Prevention of Money Laundering Act 2002.
According to the Money-Laundering (Maintenance of Records) Second Amendment Rules, released by the Revenue Department, the “principal officer of a reporting entity”, the “beneficial owner” of partnership firms, and the list of records are to be maintained physically by the reporting entities.
The principal officer will remain responsible for furnishing the information to the Financial Intelligence Unit.
Prior to this, while the reporting entity had the privilege of appointing any officer as the 'Principal Officer', the amendment now mandates that only an officer at the management level can be appointed to the post.
In the case of a trust, the amendment has mandated that the trustees disclose their status at the time of commencing an account-based relationship or when carrying out specified transactions. In this regard, the amendment will also seek to improve transparency among clients of reporting entities such as banks and financial institutions to determine whether a client is acting on behalf of a beneficial owner.
The Central government in recent months has been taking various measures to tighten its anti-money laundering provisions ahead of the assessment by the Financial Action Task Force (FATF) on legal measures regarding terror financing and money laundering. The agency is set to conduct a thorough assessment of how anti-money laundering and counter-terror financing standards are being implemented in India.
In May this year, the government made a few other changes to the PMLA rules. Under the changes, chartered and cost accountants and company secretaries were made liable under the anti-money laundering law for carrying out certain specified financial transactions on behalf of their clients.
(Edited by : Sudarsanan Mani)
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