What changed
The Government of India amended the Prevention of Money-laundering Rules, 2005, effective February 12, 2010. RRBs must now maintain records of all transactions as per rule 3(1) and include information specified by the regulator to reconstruct individual transactions under rule 4. A new explanation in rule 9(1A) defines 'beneficial owner' as the natural person who ultimately owns or controls a client or on whose behalf a transaction is conducted.
What it means for you
RRBs face stricter KYC and record-keeping obligations, requiring them to identify and document beneficial owners for all clients. This enhances anti-money laundering compliance but increases operational burden, as banks must now look beyond the immediate client to the natural person behind the transaction. Non-compliance could invite regulatory action.
What you must do
- Update internal AML policies and procedures to incorporate the new beneficial owner definition.
- Train staff on identifying and documenting beneficial owners for all client accounts and transactions.
- Ensure transaction records include all details needed to reconstruct individual transactions as per rule 4.
- Acknowledge receipt of this circular to your respective RBI Regional Office.
- Conduct a compliance audit to verify adherence to the amended PMLA Rules.
Who it affects
All Regional Rural Banks (RRBs), AML compliance teams at RRBs, Branch managers and KYC officers at RRBs
What is a 'beneficial owner' under the amended rules?
It is the natural person who ultimately owns or controls a client, or on whose behalf a transaction is conducted, including anyone exercising ultimate effective control over a juridical person.
What records must RRBs maintain now?
RRBs must maintain records of all transactions as per rule 3(1), containing all necessary information specified by the regulator to permit reconstruction of individual transactions, as detailed in rule 4.
When did these amendments take effect?
The Government of India notification was issued on February 12, 2010, and RBI's circular was dated May 6, 2010, requiring immediate compliance.