The government has changed the rules of the anti-money laundering law to make it mandatory for banks and other financial institutions to record the financial transactions of people who are politically exposed (PEP).
The government has changed the rules of the anti-money laundering law to make it mandatory for banks and other financial institutions to record the financial transactions of people who are politically exposed (PEP).
Under the provisions of the Prevention of Money Laundering Act, financial institutions or reporting agencies will be required to collect information about the financial transactions of non-profit organisations or NGOs (PMLA).
Under the changed PML Rules, the Finance Ministry defined PEPs as “people who have been given important public roles by a foreign country.” This includes the heads of States or Governments, senior politicians, senior government, judicial, or military officers, senior executives of state-owned corporations, and important political party officials.
The amendment also said that financial institutions will have to register information about their NGO clients on the Darpan portal of the Niti Aayog and keep the information for five years after the business relationship between a client and a reporting entity ends or the account is closed, whichever comes first.
After this change, banks and other financial institutions will have to keep track of the money that PEPs and NGOs spend and share that information with the Enforcement Directorate when asked.
As part of the changes to PMLA rules, the anti-money laundering law’s definition of “beneficial owners” has been made stricter, and reporting entities like banks and crypto platforms are now required to collect information from their clients.
According to the changes, any person or group with 10% ownership in a “reporting entity’s” client will now be considered a “beneficial owner.” Before, the ownership threshold was set at 25%.
Under the law against money laundering, “reporting entities” include banks, financial institutions, and companies in the real estate and jewellery industries. They also include people who act as middlemen in casinos and with crypto, or digital assets.
So far, these entities had to keep KYC details or records of documents that proved who their clients were, as well as client account files and business correspondence. They have to keep track of all transactions, including cash transactions worth more than 10 lakh.
They will also have to find out where their clients’ registered office is and where they do most of their business.
