Govt tightens PMLA rules, brings partners with 10% stake under its purview

livemint.com:

NEW DELHI : The Revenue Department has tightened the rules under the anti-money laundering law to make reporting obligations more stringent for entities like banks, stock brokers and insurers, showed an official order. The Money-laundering (Maintenance of Records) Second Amendment Rules, brought out by the Revenue Department seeks to ensure more effective compliance of the reporting requirements. The order redfines the ‘principal officer of a reporting entity’, the ‘beneficial owner’ of partnership firms and the list of records to be maintained physically by the reporting entities.

The principal officer is responsible for furnishing information to the Financial Intelligence Unit. Experts said that prior to the amendment, a reporting entity had the discretion to appoint any officer as ‘Principal Officer’. After the amendment, only an officer at the management level can be appointed as a principal officer.

"It seems that the amendment is intended to ensure proper and effective compliance by reporting entities by placing the responsibility on an officer who is part of the management," said S Vasudevan, Executive Partner at Lakshmikumaran & Sridharan Attorneys. The amendments also seek to improve transparency of clients of reporting entities such as banks and financial institutions. A reporting entity has to determine whether a client is acting on behalf of a beneficial owner and check the identity of the beneficial owner at the time of starting an account-based relationship.