What changed
This circular operationalizes Rule 9(1A) of PMLA Rules, 2005, specifying a government-approved procedure for determining beneficial ownership. It supplements earlier KYC guidelines from February 2005 with concrete ownership thresholds and verification steps for juridical persons and trusts.
What it means for you
Banks must now systematically identify and verify the natural person behind corporate or trust clients, using defined ownership percentages. This tightens AML/CFT compliance and reduces opacity in client structures. Exemptions for listed entities simplify KYC for publicly traded companies.
What you must do
- Update your KYC policy to include the beneficial ownership identification procedure as specified.
- Train compliance staff to apply the 25% (company) and 15% (partnership/trust) thresholds correctly.
- For trusts, collect and verify details of settlor, trustee, protector, and beneficiaries with 15% or more interest.
- Ensure your system flags clients where no natural person is identified via ownership or control, then capture senior managing official details.
- Acknowledge receipt of this circular to your concerned RBI Regional Office.
Who it affects
Regional Rural Banks (RRBs), State and Central Co-operative Banks, Compliance Officers and Principal Officers of these banks
What is the ownership threshold for a company to identify a beneficial owner?
For a company, controlling ownership interest is ownership or entitlement to more than 25% of shares, capital, or profits. For partnerships and unincorporated associations, the threshold is more than 15%.
Are listed companies and their subsidiaries exempt from beneficial ownership identification?
Yes, if the client or the owner of the controlling interest is a company listed on a stock exchange, or a majority-owned subsidiary of such a company, you do not need to identify or verify the identity of any shareholder or beneficial owner.
What should we do if no natural person is identified through ownership or control?
In such cases, you must identify and verify the identity of the natural person who holds the position of senior managing official of the client entity.