What changed
The Government of India amended the Prevention of Money-Laundering Rules, 2005 via Notification No. 7/2010 dated February 12, 2010. The key change for co-operative banks is the insertion of an explanation of 'beneficial owner' in rule 9, sub-rule (1A), defining it as the natural person who ultimately owns or controls a client or on whose behalf a transaction is conducted.
What it means for you
State and Central Co-operative Banks must now identify and verify the beneficial owner behind every client, not just the legal entity. This tightens AML/KYC norms, requiring banks to look through corporate structures to find the real individual. Non-compliance could invite regulatory action, so updating internal processes is critical.
What you must do
- Update your AML/KYC policies to incorporate the new beneficial owner definition from the 2010 amendment.
- Ensure transaction records include all details specified by the regulator to allow reconstruction of individual transactions.
- Train compliance staff on identifying and documenting beneficial owners for all client accounts.
- Review and revise client onboarding forms to capture beneficial owner information as per the amended rules.
Who it affects
State Co-operative Banks (StCBs), Central Co-operative Banks (DCCBs), Compliance and AML teams at co-operative banks, Branch managers handling client onboarding
What exactly is a 'beneficial owner' under the amended PMLA Rules?
The amendment defines beneficial owner as the natural person who ultimately owns or controls a client, or the person on whose behalf a transaction is conducted, including anyone exercising ultimate effective control over a juridical person.
Do these rules apply only to co-operative banks?
The circular specifically addresses State and Central Co-operative Banks, but the PMLA amendment applies to all banking companies, financial institutions, and intermediaries as per the original rules.
What records must co-operative banks maintain under the amended rules?
Banks must maintain records of all transactions as detailed in rule 3 sub-rule (1), containing all necessary information specified by the regulator to permit reconstruction of individual transactions, including details from rule 4.