What changed
The Government of India amended the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005, vide Notification No. 7/2010-E.S.F.No.6/8/2009-E.S dated February 12, 2010. Banks must now maintain records of all transactions including those detailed in rule 3 sub-rule (1) and ensure records contain all necessary information specified by the Regulator to permit reconstruction of individual transactions including the information detailed in rule 4. A new explanation in rule 9 sub-rule (1A) defines 'beneficial owner' as the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person.
What it means for you
Banks and All India Financial Institutions must enhance their record-keeping systems to capture and store detailed transaction data for potential reconstruction. The explicit definition of beneficial owner strengthens KYC norms, requiring banks to identify and verify the natural person behind legal entities. Non-compliance with these amended rules could attract regulatory action.
What you must do
- Update internal AML policies and procedures to align with the amended PMLA Rules, including the new beneficial owner definition.
- Enhance transaction monitoring systems to capture and retain all data needed for individual transaction reconstruction as per rule 4.
- Train staff on identifying and documenting beneficial owners for all client relationships and transactions.
- Conduct a compliance audit to ensure current record-keeping meets the amended requirements.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), All India Financial Institutions, Local Area Banks
What is the key change in the definition of 'beneficial owner'?
The amendment defines 'beneficial owner' as the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person.
What records must banks now maintain under these rules?
Banks must maintain records of all transactions including those detailed in rule 3 sub-rule (1), and ensure records contain all necessary information specified by the Regulator to permit reconstruction of individual transactions including the information detailed in rule 4.