TaxTMI 
TaxTMI 
Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002
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.... Particulars Existing Instructions After amendment to PML Rules Change in Instructions of the RBI 1 Definition of Designated Director - Rule 2 (ba) New definition added in the PML Rules. Designated Director" means a person designated by the reporting entity to ensure overall compliance with the obligations imposed under chapter IV of the Act and the Rules and includes -- (i) the Managing Director or a whole-time Director duly authorized by the Board of Directors if the reporting entity is a company, (ii) the managing partner if the reporting entity is a partnership firm, (iii) the proprietor if the reporting entity is a proprietorship concern, (iv) the managing trustee if the reporting entity is a trust, (v) a person or individual, as the case may be, who controls and manages the affairs of the reporting entity if the reporting entity is an unincorporated association or a body of individuals, and (vi) such other person or class of persons as may be notified by the Government if the reporting entity does not fall in any of the categories above. Explanation. - For the purpose of this clause, the terms "Managing Director" and "Whole-time Director"....
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....yment made or received in whole or in part of any contractual or other legal obligation; (vi) any payment made in respect of playing games of chance for cash or kind including such activities associated with casino; and (vii) establishing or creating a legal person or legal arrangement.' Banks are required to take note of these changes. 4 Rule 14(i) and Proviso to Rule 2(d) New instructions Rule 14(i) provides that the 'Regulator' may prescribe enhanced or simplified measures to verify the identity of the customers taking into consideration the type of customer, business relationship, nature and value of transactions based on the overall money laundering and terrorist financing risks involved A proviso has been added to the definition of 'officially valid document' at Rule 2(d), which states that where 'simplified measures' are applied for verifying the identity of customers the following documents shall be deemed to be 'officially valid documents: i. identity card with applicant's Photograph issued by Central/State Government Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Publi....
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....t format. 8 Rule 10(2) (2) The records of the identity of clients shall be maintained in hard and soft copies in a manner as may be specified by its regulators from time to time. (2) The records of the identity of clients shall be maintained in a manner as may be specified by its regulators from time to time. Regulator has to specify the procedure and manner of maintaining the records of the identity of clients. 9 Rule 7(1) New addition The name, designation and address of the Designated Director is to be communicated to the Director, FIU-IND. In addition, it shall be the duty of every reporting entity, its Designated Director, officers and employees to observe the procedure and manner of furnishing and reporting information on transactions referred to in Rule 3. Reserve Bank vide circular DBOD.AML.BC. No.80/14.01.001/2013-14 dated December 31, 2013, has advised banks to nominate a Designated Director. The banks are, therefore, advised to adhere to the reporting requirements as per this new rule. 10 Rule 8 (1) All Cash transactions (in terms of Rule 3 (c)) where forged or counterfeit currency notes or bank notes has been used as genuine or where any forgery of valuable ....
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.... be made available from the third party upon request without delay; (c) the reporting entity is satisfied that such third party is regulated, supervised or monitored for, and has measures in place for compliance with client due diligence and record-keeping requirements in line with the requirements and obligations under the Act; (d) the third party is not based in a country or jurisdiction assessed as high risk; and (e) the reporting entity is ultimately responsible for client due diligence and undertaking enhanced due diligence measures, as applicable. Banks may rely on third party verification subject to conditions at (a) to (e) of Rule 9(2) 14 Rule 9(3) Procedure for determining beneficial owner A. Where the client is a person other than an individual or trust, the banking company and financial institution, as the case may be, shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the following information: (i) The identity of the natural person, who, whether acting alone or together, or through one or more juridical person, exercises control through ownership or who ultimately has a controlling own....
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....majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements; (b) where the client is a partnership firm, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of/entitlement to more than fifteen percent of capital or profits of the partnership; (c) where the client is an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of or entitlement to more than fifteen percent of the property or capital or profits of such association or body of individuals; (d) where no natural person is identified under (a) or (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official; (e) where the client is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with fifteen percent or more interest in the trust....
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....ve authority to operate the account (iii) Power of Attorney granted to its managers, officers or employees to transact business on its behalf (iv) Copy of PAN allotment letter (v) Copy of the telephone bill (a) Certificate of incorporation; (b) Memorandum and Articles of Association; (c) A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf; and (d) An officially valid document in respect of managers, officers or employees holding an attorney to transact on its behalf. Banks to take note of the list of documents to be accepted as specified in the Rules. 17 Rule 9(7) Accounts of partnership firms (i) Registration certificate, if registered (ii) Partnership deed (iii) Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf (iv) Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses (v) Telephone bill in the name of firm/partners (a) Registration certificate; (b) Partnership deed; and (c) An officially valid document in respect of the person holding an attorney to transact on ....