On September 4, 2023, the Ministry of Finance notified the Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2023 bringing about major changes pertaining to beneficial ownership in partnership firms, trustee disclosures, etc. thereby widening its ambit.
The changes under the amendment rules are as follows: –
- Only officers at the management level can be designated by reporting entities as Principal Officers.
- If the client is a partnership firm, the natural person who owns more than 10% of capital or profits in the partnership, or exercises control through other means would be the beneficial owner for the purposes of due diligence by reporting entities. Here, “control” would include the right to control the management or policy decision. Earlier, the threshold for determining beneficial ownership in a partnership firm was set at 15% of capital or profits in the partnership.
- When it comes to trusts, the reporting entities would be required to make sure that the trustees disclose their status at the time of commencement of an account-based relationship or when carrying out transactions of an amount equal to or exceeding INR 50,000, or any international money transfer operations.
- The records of the identity of clients must be maintained by the reporting entities, including the “result of any analysis undertaken” as per client due diligence (under Rule 9) or maintenance of transaction records (under Rule 3).