Section 12AA - Enhanced due diligence - Prevention of Money-Laundering Act, 2002

1 [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 of revenue or where there is a high risk or money-laundering or terrorist financing, as may be prescribed. ] ********* Notes 1. Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-08-2019