Prevention of Money Laundering Act Amended

  • 11 Mar 2023

The Indian Finance Ministry has made amendments to the Prevention of Money Laundering Act (PMLA) rules on March 10, 2023.

  • More Disclosures for NGOs: The amendments require reporting entities such as banks, financial institutions, and intermediaries to provide more disclosures related to transactions involving NGOs.
  • This increased scrutiny is aimed at preventing money laundering and terrorist financing through NGOs.
  • Greater Clarity on Politically Exposed Persons (PEPs): The amendments define PEPs under the PMLA in line with the recommendations of the Financial Action Task Force (FATF).
  • This will help reporting entities to better identify and monitor PEPs, who are considered higher risk individuals due to their potential involvement in corrupt activities.
  • Enhanced Due Diligence: Reporting entities will be required to undertake enhanced due diligence measures for customers who are PEPs, or for transactions involving high-risk countries or activities.
  • This will help to identify and mitigate the risks of money laundering and terrorist financing.
  • Increased Compliance Costs: The amendments may result in increased compliance costs for reporting entities, as they will need to invest in new systems and processes to comply with the enhanced requirements.
  • This may also impact NGOs, who may face additional reporting requirements and scrutiny from reporting entities.

The new clause in the PMLA compliance rules defines PEPs as individuals who have been “entrusted with prominent public functions by a foreign country, including the heads of States or Governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials”