The Prevention of Money-Laundering Act, 2002 has been developed by the Government of India to prevent the money-laundering in India and to provide the regulations for the confiscation of the property derived from, or invovled in, money-laundering and for matters incidental thereto.
The Act have made the requirements for the Reporting Entities viz. Banks, Financial Institution, NBFCs, etc. to comply with certain rules and regulation prescribed under the Act with the Reserve Bank of India (RBI) and Financial Intelligence Unit-India (FIU-India)
'Know you Customer' guidelines were issued in Febraury, 2005 for framing an Anti Money Laundering and combating financing of terrorism policies by the regulatory authorities. Compliance with these standards by the Banks/financial institutions/NBFCs are considered necessary for international financial relationships. As such, they are required to frame the Anti Money Laundering measures and Know you Customer gudileines are adopted by passing a Board Resolutoin which needs to be intimated to RBI within the precribed time.
NBFCs are required to appoint a Principal Officer and put in place a system of internal reporting of suspicious transactions and cash transactions of INR 10 lakh and above. In this connection, Government of India, Ministry of Finance, Department of Revenue, issued a notification dated July 1, 2005 in the Gazette of India, notifying the Rules under the Prevention of Money Laundering Act (PMLA), 2002. In terms of the Rules, the provisions of PMLA, 2002 came into effect from July 1, 2005. Section 12 of the PMLA, 2002 casts certain obligations on the NBFCs in regard to preservation and reporting of customer account information.
NBFCs are also required to follow a system of maintaining proper record of transactions prescribed under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005), for maintaining the following transactions:
NBFCs are required to adhere to the reporting requirements as per the amended rules.
In terms of the PMLA rules, NBFCs are required to report information relating to cash and suspicious transactions to the Director, Financial Intelligence Unit
The reporting formats contain detailed guidelines on the compilation and manner/procedure of submission of the reports to FIU-IND.
NBFCs are required to adopt the format prescribed for banks with modifications as applicable.
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