Under the reporting framework, a “reporting entity” has the following duties:
- Verification of Identity by Reporting Entity;
- maintain a record of all transactions;
- Furnish information to the director; and
- Due Diligence.
Verification of Identity by the Reporting Entity [Section 11]
Every Reporting Entity shall verify the identity of its clients and the beneficial owner by—
- if the reporting entity is a banking company;
It may be noted that under the PML (Maintenance of Record) Rules 2005, a Passport, Driving Licence, Voter card, Job Card under NREGA, and Letter under the National Population Register are valid documents.
This may be noted that using modes of identification shall be a voluntary choice of every client or beneficial owner sought to be identified. No client or beneficial owner shall be denied services for not having an Aadhaar number.
Reporting entity to maintain records [Section 12]
Every reporting entity shall—
(a) maintain a record of all transactions, including information relating to transactions covered in such manner as to enable it to reconstruct individual transactions;
(b) furnish to the Director within such time as may be prescribed, information relating to such transactions, whether attempted or executed, the nature and value of which may be prescribed;
(c) maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients.
Every information maintained, furnished or verified shall be kept confidential.
Such record of transactions shall be maintained for five years from the date of transaction between the client and the reporting entity. The record evidencing identity shall be maintained for five years after the business relationship between a client and the reporting entity has ended.
Every reporting entity shall furnish to the Director such information as may be required by him. (Section 13)
Enhanced due diligence prior to specified transactions [Section 12AA]
Every reporting entity shall, prior to the commencement of each specified transaction:
- verify the identity of the clients undertaking such specified transaction using Aadhar;
- take additional steps to examine the ownership and financial position, including sources of funds of the client, and
- 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.
Where the client fails to fulfil these conditions, the reporting entity shall not allow the specified transaction to be carried out.
For the purpose of the section “specified transaction” means prescribed transactions involving —
(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; and
(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.
Procedure and manner of furnishing information by reporting entities [Section 15]
The Central Government may, in consultation with the Reserve Bank of India, prescribe the procedure and the manner of maintaining and furnishing information by a reporting entity.