What changed
RBI clarified the procedure for determining beneficial ownership under PMLA Rules, 2005, as specified by the Government of India. Urban co-operative banks must now follow a tiered approach: first check controlling ownership interest (>25% for companies, >15% for partnerships/unincorporated bodies), then control through other means, and finally senior managing officials. For trusts, identify settler, trustee, protector, and beneficiaries with ≥15% interest.
What it means for you
Urban co-operative banks must update their KYC policies to systematically identify and verify beneficial owners for non-individual clients. This reduces opacity in ownership structures, helping prevent money laundering and terrorist financing. Banks face compliance risk if they fail to document the beneficial ownership chain for entities like companies, partnerships, and trusts.
What you must do
- Review and update your bank's KYC policy to incorporate the tiered beneficial ownership identification procedure.
- Train staff on the new thresholds: >25% for companies, >15% for partnerships and unincorporated bodies, and for trusts.
- Implement systems to capture beneficial owner details for all non-individual clients, including trusts and partnerships.
- Ensure exemption for listed companies and their majority-owned subsidiaries is applied correctly.
- Document the beneficial ownership verification process for audit and regulatory review.
Who it affects
All Primary (Urban) Co-operative Banks, Compliance and KYC teams, Branch managers handling corporate and trust accounts
What is the threshold for beneficial ownership in a company?
For a company, controlling ownership interest means ownership of or entitlement to more than 25% of shares or capital or profits.
Do we need to identify beneficial owners for listed companies?
No, if the client or the owner of the controlling interest is a company listed on a stock exchange, or its majority-owned subsidiary, you are not required to identify or verify shareholders or beneficial owners.
What if no natural person is identified through ownership or control?
If no natural person is identified through controlling ownership interest or other means of control, you must identify the natural person who holds the position of senior managing official.