What changed
RBI circular dated February 22, 2013, specifies the procedure for determining beneficial ownership under Rule 9(1A) of PML Rules 2005 for money changing activities. It replaces earlier guidance from November 2009 and provides clear thresholds: >25% for companies, >15% for partnerships and unincorporated bodies. Trusts now require identification of settlor, trustee, protector, and beneficiaries with ≥15% interest.
What it means for you
Banks and authorised persons must update their KYC policies to include beneficial ownership checks for all money changing transactions. This tightens AML/CFT compliance and shifts due diligence burden to identify natural persons behind legal entities. Failure to comply could invite regulatory action under FEMA and PMLA.
What you must do
- Review and update your KYC policy to incorporate beneficial ownership determination as per the specified thresholds.
- Train staff on identifying beneficial owners for companies (>25%), partnerships (>15%), trusts (settlor, trustee, protector, beneficiaries ≥15%), and unincorporated bodies (>15%).
- Ensure agents and franchisees also adhere to these guidelines, with franchisers taking full responsibility.
- Document all beneficial ownership verification steps and maintain records for regulatory inspection.
Who it affects
All authorised persons (banks, money changers, forex dealers), Agents and franchisees of authorised persons, Compliance and KYC teams, Customers using money changing services, especially legal entities and trusts
What is the threshold for identifying beneficial owners in a company?
For a company, controlling ownership interest is ownership of or entitlement to more than 25% of shares, capital, or profits. If doubt exists, identify natural persons exercising control through other means like voting rights or agreements.
Are listed companies 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, it is not necessary to identify and verify the identity of any shareholder or beneficial owner.
What are the obligations for trusts under this circular?
For trusts, authorised persons must identify the settlor, trustee, protector, beneficiaries with 15% or more interest, and any other natural person exercising ultimate effective control through a chain of control or ownership.