Insertion of new section 12AA.
189. After section 12A of the principal Act, the following section shall be inserted, namely:––
Enhanced due diligence.
‘12AA. (1) Every reporting entity shall, prior to the commencement of each specified transaction,-
(a) authenticate the identity of the clients undertaking such specified transaction in such manner and subject to such conditions as may be prescribed;
(b) take additional steps to examine the ownership and financial position, including sources of funds of the client, in such manner as may be prescribed;
(c) take additional steps as may be prescribed to record the purpose behind conducting the specified transaction and the intended nature of the relationship between the transaction parties.
(2) Where the client fails to fulfil the conditions laid down under sub-section (1), the reporting entity shall not allow the specified transaction to be carried out.
(3) Where any specified transaction or series of specified transactions undertaken by a client is considered suspicious or likely to involve proceeds of crime, the reporting entity shall increase the future monitoring of the business relationship with the client, including greater scrutiny or transactions in such manner as may be prescribed.
Explanation.––For the purpose of this section, “authentication” means the process as defined under sub-section (c) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016. (18 of 2016.)
(4) The information obtained while applying the enhanced due diligence measures under sub-section (1) shall be maintained for a period of five years from the date of transaction between a client and the reporting entity.’.
Note:
While Passing the bill in the Loksabha as on 18-7-2019, the following amendments were made:
Clause 189
Amendments made:
Page 53, for lines 25 and 26, substitute –
“(a) verify the identity of the clients undertaking such specified transaction by authentication under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 in such manner and subject to such conditions, as may be prescribed:
Provided that where verification requires authentication of a person who is not entitled to obtain an Aadhaar number under the provisions of the said Act, verification to authenticate the identity of the client undertaking such specified transaction shall be carried out by such other process or mode, as may be prescribed;”. (26)
Page 53, for lines 37 to 42, substitute –
“(4) The information obtained while applying the enhanced due diligence measures under sub-section (1) shall be maintained for a period of five years from the date of transaction between a client and the reporting entity.
Explanation.- For the purposes of this section, “specified transaction” means-
(a) any withdrawal or deposit in cash, exceeding such amount;
(b) any transaction in foreign exchange, exceeding such amount;
(c) any transaction in any high value imports or remittances;
(d) such other transaction or class of transactions, in the interest or where there is a high risk of money-laundering or terrorist financing, as may be prescribed.’. (27)
Thus, the amended provision will be:
189. After section 12A of the principal Act, the following section shall be inserted, namely:––
Enhanced due diligence.
‘12AA. (1) Every reporting entity shall, prior to the commencement of each specified transaction,-
(a) verify the identity of the clients undertaking such specified transaction by authentication under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 in such manner and subject to such conditions, as may be prescribed:
Provided that where verification requires authentication of a person who is not entitled to obtain an Aadhaar number under the provisions of the said Act, verification to authenticate the identity of the client undertaking such specified transaction shall be carried out by such other process or mode, as may be prescribed;
(b) take additional steps to examine the ownership and financial position, including sources of funds of the client, in such manner as may be prescribed;
(c) take additional steps as may be prescribed to record the purpose behind conducting the specified transaction and the intended nature of the relationship between the transaction parties.
(2) Where the client fails to fulfil the conditions laid down under sub-section (1), the reporting entity shall not allow the specified transaction to be carried out.
(3) Where any specified transaction or series of specified transactions undertaken by a client is considered suspicious or likely to involve proceeds of crime, the reporting entity shall increase the future monitoring of the business relationship with the client, including greater scrutiny or transactions in such manner as may be prescribed.
(4) The information obtained while applying the enhanced due diligence measures under sub-section (1) shall be maintained for a period of five years from the date of transaction between a client and the reporting entity.
Explanation.- For the purposes of this section, “specified transaction” means-
(a) any withdrawal or deposit in cash, exceeding such amount;
(b) any transaction in foreign exchange, exceeding such amount;
(c) any transaction in any high value imports or remittances;
(d) such other transaction or class of transactions, in the interest or where there is a high risk of money-laundering or terrorist financing, as may be prescribed.'.
Notes on Clauses:
Clauses 187 to 192 of the Bill seek to amend certain provisions of the Prevention of Money-Laundering Act, 2002.
It is proposed to amend sub-clause (i) of clause (n) of sub-section (I) of section 2, to meet out the difficulties being faced out by the Securities and Exchange Board of India.
It is further proposed to amend sub-clause (ii) of clause (sa) of sub-section (I) of section 2, to meet out the difficulties being faced out by the Financial Intelligence Unit, India.
It is also proposed to amend section 12A so as to provide the reference of newly inserted section 12AA therein.
It is also proposed to insert a section 12AA of the said Act so as to provide for the provisions for enhance due diligence.
It is also proposed to amend section 15 of the said Act so as to provide the reference of newly inserted section 12AA therein.
It is also proposed to insert Section 72A to allow power to Central Government to constitute Inter Ministerial Co-ordination Committee that is responsible for coordination and cooperation across all relevant/competent authorities on implementation of Financial Action Task Force standards. This is required for effective implementation of Financial Action Task Force standards Recommendations and to draw, coordinate, monitor and review the Anti Money Laundering or Countering Financing of Terrorism policies or activities and their implementation to strengthen Anti Money Laundering or Countering Financing of Terrorism framework in line with Financial Action Task Force standards.
It is also proposed to amend section 73 of the Act so as to provide certain rule making provisions.
