Reporting Procedure for Reporting Entities under PMLA

For reporting under the PMLA, every reporting entity shall appoint a “Designate Director.” According to Rule 2(1)(ba) of the PML (Maintenance of Record) Rules, 2005 (The Rules), a Designate Director is a person designated to ensure overall compliance under this law. Such Designate Director includes:

• Managing Director or Whole – time director duly authorised by the Board of Directors in case of a company;
• Managing Partner in case of the partnership;
• The proprietor in case of proprietorship concern;
• Managing Trustee in case of Trust;
• The individual who controls or manages the affairs in the case of an unincorporated entity; or
• Other person in case of other reporting entities.

As mentioned earlier, Official Valid Documents as per Rule 2(1)(d) are the passport, Driving Licence, Voter Identity Card, Job Card of NREGA, and Letter issued by the National Population Register. Some other documents are also listed where simplified measures are applied. For Address Verification, documents are utility bills not more than two months old, Property or Municipal tax receipts, Bank Account statements, pension or family pension payment orders or letters of allotment of accommodation issued by certain bodies, or leave or license agreements with these bodies.

One important person in the reporting process is the Regulator. For the person of these two notifications, Rule 2(1)(fa)(i) shall apply. Accordingly, a person or authority or government vested with the power to licence, authorise, register, regulate or supervise the activity of the reporting entity or the director as may be notified by the Government is the Regulator.

In our case, it may be the ICSI, ICAI, ICAI (Cost) or BCI may be the regulator for the respective profession or a person authorised by a notification.

Maintenance of the Record of Transactions

Now, there is another catch. Rule 3 is worded in such a manner as if it is designed for banks, financial institutions and market intermediaries. This required a record of transactions or series of transactions within a month of the value of more than ten lakh Rupees or its equivalent in foreign currency. Cross border transaction with a value of more than five lakh Rupees or its equivalent in foreign currency. Sale and purchase of immovable property valued at fifty lakh Rupees are also covered. All cash transactions with forged or counterfeit currency notes and other suspicious transactions are covered, irrespective of the value.

According to Rule 4, the record shall contain all necessary information specified by the Regulator to permit the reconstruction of individual transactions, including the following information:

• Nature of the transaction;
• Amount of the transaction and the currency in which it was denominated;
• Date on which the transaction was concluded; and
• The parties to the transaction.

The procedure and manner of maintaining the information are given in Rules 5. According to this Rule, the Regulator shall specify the procedure and manner of maintaining the information. Further, every reporting entity shall evolve an internal mechanism for maintaining the record.

Procedure and manner of furnishing information:

1. Every reporting entity shall communicate to the Director (under PMLA) the name, designation, and address of the Designated Director and the Principal Officer.
2. The Principal Officer shall report information under Rule 3 to the Director on the basis of the information available with the reporting entity and the copy of the information shall be retained by the principal officer for official record.

Furnishing information to the Director:

1. The Principal Officer shall furnish the information every month to the director by the 15^th day of the succeeding month.
2. In case of suspicious transactions, the Principal Officer shall furnish the information to the director within seven working days.

Client Due Diligence

Every Reporting entity shall, at the time of commencement of an account-based relationship, shall –

In all other cases, the reporting entity shall verify identity while carrying out transactions equal to or exceeding fifty thousand rupees or any international money transfer operation.

Every Reporting entity shall, within three days, furnish an electronic copy of the KYC record to CKYC Record and shall maintain a physical copy with itself. In these Rules, Aadhar and PAN are the main KYC Documents, with an option of other officially valid documents and photographs.

Where the client is a company, the documents required are a Certificate of Incorporation, MoA, AoA, Board Resolution and power of attorney granted to managers, officers or employees with KYC Documents of these individuals. A similar provision exists for Partnership firms, trusts, and unincorporated entities.