Government amends KYC to add non-profit organisations, ‘politically exposed persons’
New Delhi, March 10, 2023
The decision has been taken ahead of the expected FATF assessment of India later this year
The Finance Ministry has amended the Prevention of Money Laundering (Maintenance of Records) Rules for widening the scope of Know your Customer (KYC) norms to include Politically Exposed Persons (PEPs), non-profit organisations (NPOs) and those dealing in virtual digital assets (VDA) as reporting entities.
The decision has been taken ahead of the expected Financial Action Task Force (FATF) assessment of India later this year.
Through a notification, the Ministry has made the exchanges and intermediaries dealing in VDA, such as cryptocurrency, reporting entities under the Prevention of Money Laundering Act (PMLA), thus making it mandatory for them to adhere to the client/user KYC requirements.
Under the Act, reporting entities are required to keep all the relevant records of their beneficial owners and transactions for at least five years.
The Ministry has issued another notification, which defines PEPs as individuals who have been entrusted with prominent public functions by a foreign country, including the heads of States or governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials.
“In such cases, transactions of ₹10 lakh and above will have to be reported to the Financial Intelligence Unit,” said a government official.
Non-profit organisations formed for religious or charitable purposes, and registered as trust or society, too have been added to the list.
According to the notification, every banking company, financial institution or intermediary will have to register the details of a non-profit organisation client on the Darpan portal of NITI Aayog. They will also have to maintain such registration records for a period of five years after the business relationship between a client and a reporting entity has ended or the account closed, whichever is later.
Another key decision pertains to the lowering of ownership threshold from the previous 25% to 10%, thereby treating any individual or group holding 10% ownership in a reporting entity as a “beneficial owner” for the purpose of PMLA rules.