Govt. Notifies Amendment to Prevention of Money-laundering (Maintenance of Records) Rules, 2005 [Read Notification]

The Central Government frequently amends existing legislation or rules in response to the need for such revisions. The Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, were amended and announced by the government on 7th March 2023.

The Central Government therefore promulgates the following regulations to further alter the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 in accordance with the authority granted by section 73 of the Prevention of Money-laundering Act, 2002 (15 of 2003).

As per the notification, Rules 2(1), 3, 9 of Prevention of Money-laundering (Maintenance of Records) Rules, 2005 has been amended.  The amendments will come into force once they have been published. The amendments were as follows:

Rule 2(1)

In sub- rule 1, “(cba) “group” shall have the same meaning assigned to it in Section 286(9)(e) of the Income-tax Act,1961 has inserted after clause (cb).

Also, for clause (cf), it was substituted that “Non-profit organization” means any entity or organisation, constituted for religious or charitable purposes referred to in section 2(15) of the Income-tax Act, 1961, that is registered as a trust or a society under the Societies Registration Act, 1860 or any similar State legislation or a Company registered under the section 8 of the Companies Act, 2013;”

Further, after clause (da), (db) clause shall be inserted. The amendment includes  (db) “Politically Exposed Persons” (PEPs) are 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;”.

Rule 3

After rule 3, a new 3A rule was inserted. As per (3A), Implementation of policies by groups. – Groups are required to implement group-wide policies for the purpose of discharging obligations under the provisions of Chapter IV of the Prevention of Money-laundering Act, 2002.

Rule 9

1. Sub Rule 3- in clause (a), in the Explanation, in clause (1), for the words “twenty-five”, the word “ten” shall be substituted and in clause (e), for the word “fifteen”, the word “ten” shall be substituted.
2. Sub rule 6– in sub-clause (iv), the word “and” was omitted; Further, after sub-clause (v), the following clauses shall be inserted,:-

“(vi) the names of the relevant persons holding senior management position; and

(vii) the registered office and the principal place of its business, if it is different.”

3.  Sub rule (7)– in clause (iii), the word “and” was omitted; Then, in clause (iv), for the words “on its behalf:” the words on its behalf; and” shall be substituted.

Further, after clause (iv), the following clause shall be inserted:  the names of all the partners and address of the registered office, and the principal place of its business, if it is different.”

4. Sub rule 8– in clause (iii), the word “and” shall be omitted;

Then, after clause (iv), the following clauses shall be inserted:

 “(v) the names of the beneficiaries, trustees, settlor and authors of the trust and the address of the registered office of the trust; and

  (vi) list of trustees and documents as are required for individuals under sub-rule (4) for those discharging role as trustee and authorised to transact on behalf of the trust.”

5. Sub rule 9 –  it was inserted :

“(9A) Every Banking Company or Financial Institution or intermediary, as the case may be, shall register the details of a client, in case of client being a non-profit organisation, on the DARPAN Portal of NITI Aayog, if not already registered, and 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 has been closed, whichever is later.

(9B) Where the client has submitted any documents for the purpose of sub-rule (1), it shall submit to the reporting entity any update of such documents, for the purpose of updating the records mentioned under sub-rules (4),(5),(6),(7),(8) or (9), as the case may be, within 30 days of such updation.”

6. Sub rule (10) – for the words “is a juridical person”, the words “purports to act on behalf of juridical person or individual or trust” shall be substituted.

The Prevention of Money-Laundering (Maintenance of Records Rules), 2005, were created in order to carry out the authority granted by the Prevention of Money-Laundering Act, 2002 (15 of 2003). These rules pertain to the maintenance of records of the nature and value of transactions, the procedure and manner of maintaining and the time for furnishing information, as well as the verification of records of the identity of the clients of the reporting entities.

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