What changed
The Government of India amended the Prevention of Money-laundering Rules, 2005, via notification dated February 12, 2010. Banks must now maintain records of all transactions with sufficient detail to reconstruct individual transactions. A new explanation of 'beneficial owner' was inserted, 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
Urban Co-operative Banks must enhance their KYC and transaction monitoring systems to capture and retain detailed records for every transaction. The beneficial owner definition requires banks to look through legal entities to identify the natural persons behind them, increasing due diligence obligations. Non-compliance could expose banks to regulatory action under PMLA.
What you must do
- Update your AML/KYC policy to include the new beneficial owner definition and transaction record requirements.
- Train staff on identifying and documenting beneficial owners for all clients, especially juridical persons.
- Ensure your transaction monitoring system can capture and store all details needed to reconstruct individual transactions as per Rule 4.
- Conduct a gap analysis of current record-keeping practices against the amended rules and rectify deficiencies immediately.
Who it affects
All Primary (Urban) Co-operative Banks, Compliance and AML teams, Branch operations staff handling account opening and transactions
What is the deadline for compliance with these amended rules?
The amendment was notified on February 12, 2010, and the RBI circular was issued on June 15, 2010, advising banks to strictly follow the amended provisions and ensure meticulous compliance. Banks should implement these changes urgently.