Ministry tightens reporting under Money Laundering Act

India Money laundering act

Widening the ambit of the Prevention of Money Laundering Act, the Finance Ministry has tightened the reporting norms for non-profit organisations and beneficial ownership rules.

The changes, brought about by an amendment to the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, require reporting entities such as banks, financial institutions and intermediaries to maintain records of all transactions of their clients, verify their clients and furnish information.

The notification defines non-profit organisations as entities or organisations that are registered as a trust or a society under the Societies Registration Act, 1860, or any similar state legislation, or a company registered under section 8 of the Companies Act, 2013.

Reporting entities must now also register clients that are non-profit organisations on the Darpan portal of Niti Aayog, and maintain the registration records for five years from closure of the business relationship or account closure, whichever is later.

To obtain a system-generated unique ID, voluntary and non-governmental organisations must sign up on the Darpan portal. The unique ID is mandatory to apply for grants under various schemes of ministries, departments and governments bodies.

The new amendment also defines politically exposed persons as “individuals who have been entrusted with prominent public functions by a foreign country, including the heads of state or government, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials”.