The Finance Ministry has tightened the definition of beneficial owners under the anti-money laundering law, mandating reporting companies like banks and crypto platforms to collect information from their clients.
As per the amendments to the PMLA -Prevention of Money Laundering Rules, any individual or group holding 10 % ownership in the client of a 'reporting entity' will now be considered a beneficial owner as against the ownership threshold of 25 % applicable earlier. The amended rules were notified on March 7 by the Finance Ministry. Under the anti-money laundering law, 'reporting entities' are banks and financial institutions, firms engaged in real estate and jewellery sectors.
They also include intermediaries in casinos and crypto or virtual digital assets. So far, these entities were required to maintain Know Your Customer (KYC) details or records of documents evidencing the identity of their clients as well as account files and business correspondence relating to clients. They are required to maintain a record of all transactions, including the record of all cash transactions of more than Rs 10 lakh.
They will now have to also collect the details of the registered office address and principal place of business of their clients. Nangia Andersen LLP M&A Tax Partner Sandeep Jhunjhunwala said the due diligence documentation requirements by reporting entities, which were till now limited to obtaining the basic KYCs of clients such as registration certificates, PAN card copies and documents of officers holding an attorney to transact on behalf of the client, have now been extended.
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