{"id":17433,"date":"2020-10-06T15:28:38","date_gmt":"2020-10-06T09:58:38","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=17433"},"modified":"2024-11-19T12:16:34","modified_gmt":"2024-11-19T06:46:34","slug":"pmla-policy-for-nbfc","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/pmla-policy-for-nbfc\/","title":{"rendered":"A Brief Overview on PMLA Policy for NBFC"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Prevention of Money Laundering Act, 2002 is an Act that was enacted during the NDA governance for the confiscation of property derived via fraudulent activities including money-laundering. PMLA came into the force from 7\/7\/2005. The Act imposes several regulations on the financial institutes, banking companies to check the ID of clients, manage records for the same, and render details to Financial Intelligence Unit* &#8211; India (FIU-IND). In this blog, we will unfold the PMLA policy for <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NFBC<\/strong><\/a>.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/differences-between-nbfcs-and-banks\/\">What are the Key Differences between NBFCs and Banks?<\/a><\/mark><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/pmla-policy-for-nbfc\/#Objectives_of_PMLA_Policy_for_NFBC\" >Objectives of PMLA Policy for NFBC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/pmla-policy-for-nbfc\/#Preventing_Financing_of_Terrorism\" >Preventing Financing of\nTerrorism&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/pmla-policy-for-nbfc\/#Maintenance_of_Transactions_Records\" >Maintenance\nof Transaction\u2019s Records&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/pmla-policy-for-nbfc\/#Information_to_be_Preserved\" >Information to be Preserved<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/pmla-policy-for-nbfc\/#Maintenance_and_Preservation_of_records\" >Maintenance\nand Preservation of records<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/pmla-policy-for-nbfc\/#_Conclusion\" >&nbsp;Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Objectives_of_PMLA_Policy_for_NFBC\"><\/span>Objectives of PMLA Policy for NFBC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The PMLA was enacted to overcome money laundering in the country. It revolves around three objectives:&nbsp;&nbsp;<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li>To control the confiscation of property derived via\nfraudulent activities including money-laundering.<\/li>\n\n\n\n<li>To rein money-laundering<\/li>\n\n\n\n<li>To deal with other attributes associated with money\nlaundering in India.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Financial Intelligence Unit <\/h3>\n\n\n\n<ul>\n<li>India (FIU-IND) was introduced by the government on 18\/11\/2005 as the centralized authority accountable for obtaining, compiling, verifying, and propagating details in the context of fraudulent transactions. <\/li>\n\n\n\n<li>FIU-IND is accountable for cushioning the other intelligence agencies and work in tandem with these agencies to pursue the effort against money laundering. <\/li>\n\n\n\n<li>Being an autonomous body, FIU-IND report directly to the Economic Intelligence Council (EIC) managed by Finance Minister.&nbsp;<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" width=\"678\" height=\"445\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/10\/image-19.png\" alt=\"Financial Intelligence Unit \" class=\"wp-image-17434\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/10\/image-19.png 678w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/10\/image-19-300x197.png 300w\" sizes=\"(max-width: 678px) 100vw, 678px\" \/><\/figure><\/div>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Preventing_Financing_of_Terrorism\"><\/span>Preventing Financing of\nTerrorism&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In terms of PMLA Rules, suspicious transactions are those which offer reasonable doubts that these might involve financing to terrorism. Therefore, NBFC must setup a suitable mechanism via policy framework for in-depth monitoring of accounts suspected of being engaged with terrorist links and making an illustrative report to the<em><strong> Financial Intelligence Unit<\/strong><\/em> on a priority basis.\u00a0<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Security Council Committee<\/h3>\n\n\n\n<p>As soon as the list of entities and\nindividuals sanctioned by the Security Council Committee established following\nseveral United Nations Security Council Resolutions (UNSCRs) are obtained from\nthe Indian Government. RBI circulates these to banks operating across the\ncountry including NBFCs. NBFC, on the contrary, must update the extensive list\nof entities and individuals as circulated by RBI. Further, the same list can be\naccessed on the official website of the United Nations. The NBFCs should make\nsure that the name of the proposed customer should not appear on the list\nbefore opening a new account.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Verify the Existing Accounts<\/h3>\n\n\n\n<p>Moreover, NBFC also needs to verify the\nexisting accounts to make sure that no account is associated with any\nindividual or entities enclosed in the list. The company must communicate with\nRBI and FIU-IND upfront in case of the detection of any suspicious account.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Screening Mechanism<\/h3>\n\n\n\n<p>To make to banking channel safe, NBFCs are\nrequired to set up a cutting-edge screening mechanism to detect the suspicious\ncandidate during the hiring process.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Enclosed Suspicious Activities <\/h3>\n\n\n\n<p>In regards to generating awareness in the\ncontext of KYC\/AML among the workforce, NBFCs might take reference to the list\nof suspicious activities enclosed in Annex-V of the CC no.126.&nbsp;These\ninstructions are available under Section 45K and 45L of the RBI Act, 1934 and\nany infringement with the same might lures severe penalties mentioned under the\nAct.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Internal Reporting Of Superficial Transactions<\/h3>\n\n\n\n<p>NBFCs should appoint a principal office and\nestablish a system regarding the internal reporting of superficial transactions\nand cash transactions of rupees ten lakh and above. In this context, the\nDepartment of Revenue, Ministry of Finance, issued a circular dated July 1, 2005,\nnotifying the rules under the PML Act, 2002. Section 12 of PLMA, 2002 imposed\ncertain accountability on the NBFCs in the context of preservation &amp;\nreporting of the information related to the customers.&nbsp;Therefore, NBFCs\nare directed to take reference to the provisions of PMLA, 2002, and take\nrelevant actions to ensure compliance with the provision of section 12 of the\nAct ibid.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Maintenance_of_Transactions_Records\"><\/span><strong>Maintenance\nof Transaction\u2019s Records&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>NBFCs must incorporate the system that effectively managed the record of transaction mentioned under Rule 3, as given below:-&nbsp;<\/strong><\/em><\/p>\n\n\n\n<ul>\n<li>The consolidated value of all the cash transaction exceeds the minimum threshold value i.e. 10 lakh&nbsp;<\/li>\n\n\n\n<li>The entire series of transactions (in cash) connected having an aggregate value of ten lakh rupees or its equivalent in foreign currency where such nature of transactions have been executed within a month and the consolidated worth of such transactions surpasses Rs 10 lakh.&nbsp;<\/li>\n\n\n\n<li>All cash transactions revolve around counterfeit currency and where the criminal activities have taken place against the valuable security.&nbsp;<\/li>\n\n\n\n<li>All suspicious transactions irrespective of their nature are not made as per the rules enacted by the Indian government under PML Act, 2002.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Information_to_be_Preserved\"><\/span><strong>Information to be Preserved<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>NBFCs should mandatorily enclose the given details w.r.t transactions mentioned under Rule 3:-<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li>The nature of the transactions as well as their amount<\/li>\n\n\n\n<li>The type of currency&nbsp;<\/li>\n\n\n\n<li>Transaction date&nbsp;<\/li>\n\n\n\n<li>The parties engaged with the transaction.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Maintenance_and_Preservation_of_records\"><\/span><strong>Maintenance\nand Preservation of records<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NBFCs should take relevant measures to\ndevelop a system for better management of account details. The system should be\ncapable of retrieving the account information whenever the need arises.\nMoreover, NBFCs must maintain all the relevant data of the transaction for at\nleast 10 years from the date of termination of the transaction between the\nclient and the NBFC. This would allow the reconstruction of the individual transaction\nto render the proof for the prosecution of a person engaged with criminal\nactivities.&nbsp;<\/p>\n\n\n\n<p>NBFC should preserve the record of the\ncustomers along with their address for at least ten years after the cessation\nof the business relationship. The ID proofs and data related to the transaction\nshould be made available at the disposal of relevant authorities upon\nrequest.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"_Conclusion\"><\/span>&nbsp;Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>PMLA policy for NFBC was introduced to confiscate the transfer of an illegal asset at any cost. The financial institution needs to implant these policies within their framework and also accountable for reporting to Financial Intelligent Unit, India for sharing client records upon request. PMLA ensures transparency within the system and controls the movement of fraudulent money.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/ombudsman-scheme-for-nbfcs\/\">Ombudsman Scheme for NBFCs \u2013 A Complete Overview<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Prevention of Money Laundering Act, 2002 is an Act that was enacted during the NDA governance for the confiscation of property derived via fraudulent activities including money-laundering. PMLA came into the force from 7\/7\/2005. The Act imposes several regulations on the financial institutes, banking companies to check the ID of clients, manage records for the [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":17442,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[91],"tags":[1072],"acf":{"service_id":"8"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":6635,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/17433"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=17433"}],"version-history":[{"count":7,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/17433\/revisions"}],"predecessor-version":[{"id":67254,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/17433\/revisions\/67254"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/17442"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=17433"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=17433"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=17433"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}