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TMI BlogClient Due Diligence.X X X X Extracts X X X X X X X X Extracts X X X X ..... re this is essential not to interrupt the normal conduct of business, the Regulator may permit the reporting entity to complete the verification as soon as reasonably practicable following the establishment of the relationship: Provided further that where a client is subscribing or dealing with depositary receipts or equity shares, issued or listed in jurisdictions notified by the Central Government, of a company incorporated in India, and it is acting on behalf of a beneficial owner who is a resident of such jurisdiction, the determination, identification and verification of such beneficial owner, shall be as per the norms of such jurisdiction and nothing in sub-rule (3) to sub-rule (9) shall be applicable for due-diligence of such beneficial owner. Explanation .- For the purposes of this proviso, the expression equity shares means a share in the equity share capital of a company and equity share capital shall have the same meaning as assigned to it in the Explanation to section 43 of the Companies Act, 2013 (18 of 2013). ] 2 [(1A) Subject to the provisions of sub-rule (1), every reporting entity shall within 13 [ ten days ] after the commencement of an account-based relationship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses other than verifying the identity or address of the client and shall not transfer KYC records or any information contained therein to any third party unless authorised to do so by the client or by the Regulator or by the Director; (1G) The regulator shall issue guidelines to ensure that the Central KYC records are accessible to the reporting entities in real time.] 80 [ (1H) If an update in the KYC record of an existing client is informed by the Central KYC Records Registry to a reporting entity under sub-rule (1D), the reporting entity shall retrieve the updated KYC records from the Central KYC Records Registry and update the KYC record maintained by the reporting entity as per the guidelines issued by the regulator under sub-rule (14) and under clause (g) of sub-rule (2) of rule 9A. ] (2) For the purpose of clause (a) of sub-rule (1), a reporting entity may rely on a third party subject to the conditions that- 73 [ (a) the reporting entity immediately obtains from the third party or from the Central KYC Records Registry, the record or the information of such client due diligence carried out by the third party; ] (b) the reporting entity takes adequate steps to satisfy itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such association or body of individuals; (d) where no natural person is identified under (a) or (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official; (e) where the client is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 62 [ ten ] per cent or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership; and 58 [ (f) where the client or the owner of the controlling interest is an entity listed on a stock exchange in India, or it is an entity resident in jurisdictions notified by the Central Government and listed on stock exchanges in such jurisdictions notified by the Central Government, or it is a subsidiary of such listed entities, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such entities. ] 34 [ (4) Where the client is an individual, he shall for the purpose of sub-rule (1) submit to the reporting entity,- (a) the Aadhaar number where, (i) he is desirous of receiving any benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e small account shall remain operational initially for a period of twelve months, and thereafter for a further period of twelve months if the holder of such an account provides evidence before the banking company of having applied for any of the officially valid documents within twelve months of the opening of the said account, with the entire relaxation provisions to be reviewed in respect of the said account after twenty-four months; 60 [ (iiia) Notwithstanding anything contained in clause (iii), the small account shall remain operational between 1 st April, 2020 and 30th June 2020 and such other periods as may be notified by the Central Government. ] (iv) the small account shall be monitored and when there is suspicion of money laundering or financing of terrorism or other high risk scenarios, the identity of client shall be established 36 [ as per the provisions of sub-rule (4) ] ; 21 [*********] 37 [ (v) the foreign remittance shall not be allowed to be credited into the small account unless the identity of the client is fully established as per provision of sub-rule (4): ] Provided that if the client is not eligible to be enrolled for the Aadhaar number, the identity of clien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice of the trust; and (vi) list of trustees and documents as are required for individuals under sub-rule (4) for those discharging role as trustee and authorised to transact on behalf of the trust. ] 25 [ (9) Where the client is an unincorporated association or a body of individuals, it shall submit to the reporting entity the certified copies of the following documents 45 [ or the equivalent e-documents thereof ] , namely:- (i) resolution of the managing body of such association or body of individuals; (ii) Permanent account number or Form No.60 of the unincorporated association or a body of individuals; (iii) power of attorney granted to him to transact on its behalf; 46 [ and ] 47 [ (iv) such documents as are required for an individual under sub-rule (4) relating to beneficial owner, managers, officers or employees, as the case may be, holding an attorney to transact on its behalf; ] (v) such information as may be required by the reporting entity to collectively establish the existence of such association or body of individuals. ]] 64 [ (9A) Every Banking Company or Financial Institution or intermediary, as the case may be, shall register the details of a client, in case of cli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previously been undertaken and the adequacy of data obtained 75 [ , such that the information or data collected under client due diligence is kept up-to-date and relevant, particularly where there is high risk ] . (13) (i) Every reporting entity shall carry out risk assessment to identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk for clients, countries or geographic areas, and products, services, transactions or delivery channels that is consistent with any national risk assessment conducted by a body or authority duly notified by the Central Government. (ii) The risk assessment mentioned in clause (i) shall- (a) be documented; (b) consider all the relevant risk factors before determining the level of overall risk and the appropriate level and type of mitigation to be applied; (c) be kept up to date; and (d) be available to competent authorities and self-regulating bodies. (14) (i) The regulator shall issue guidelines incorporating the requirements of 10 [sub-rules (1) to (13) 26 [ sub-rule (15) and sub-rule (17) ] ] and may prescribe enhanced or simplified measures to verify the client's identity taking into consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 11A, such banking company or reporting entity shall carry out authentication of the client's Aadhaar number using e-KYC authentication facility provided by the Unique Identification Authority of India; (b) proof of possession of Aadhaar under clause (aa) of sub-rule (4) where offline verification can be carried out, the reporting entity shall carry out offline verification; (c) an equivalent e-document of any officially valid document, the reporting entity shall verify the digital signature as per the provisions of the Information Technology Act, 2000 (21 of 2000) and any rules issues thereunder and take a live photo as specified under Annexure 1. (d) any officially valid document or proof of possession of Aadhaar number under clause (ab) of sub-rule (4) where offline verification cannot be carried out, the reporting entity shall carry out verification through digital KYC as specified under Annexure 1: Provided that for a period not beyond such date as may be notified for a class of reporting entity, instead of carrying out digital KYC, the reporting entity pertaining to such class may obtain a certified copy of the proof of possession of Aadhaar number or the officia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments for the limited purpose of proof of address:- (a) utility bill which is not more than two months old of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill); (b) property or Municipal tax receipt; (c) pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address; (d) letter of allotment of accommodation from employer issued by State Government or Central Government Departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies and leave and licence agreements with such employers allotting official accommodation: Provided that the client shall submit updated officially valid document 56 [ or their equivalent e-documents thereof ] with current address within a period of three months of submitting the above documents. ] 59 [ (19) Where a client has provided his Aadhaar number for identification under clause (a) of sub-rule (4) and wants to provide a current address, different from the address as per the identity information available in the Central Identities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the business relationship, and (b) in all other cases, verify identity while carrying out: (i) transaction of an amount equal to or exceeding rupees fifty thousand, whether conducted as a single transaction or several transactions that appear to be connected, or (ii) any international money transfer operations. (1A) Every banking company, financial institution and intermediary, as the case may be, shall determine whether a client is acting on behalf of a beneficial owner, identify the beneficial owner and take all reasonable steps to verify his identity. Explanation .-For the purposes of this sub-rule beneficial owner shall mean the natural person who ultimately owns or controls a client and/or the person on whose behalf a transaction is being conducted, and includes a person who exercise ultimate effective control over a juridical person. (1B) Every banking company, financial institution and intermediary, as the case may be, shall exercise ongoing due diligence with respect to the business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge of the client, his business and risk profile and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n operational initially for a period of twelve months, and thereafter for a further period of twelve months if the holder of such an account provides evidence before the banking company of having applied for any of the officially valid documents within twelve months of the opening of the said account, with the entire relaxation provisions to be reviewed in respect of the said account after twenty four months; (iv) a small account shall be monitored and when there is suspicion of money-laundering or financing of terrorism or other high risk scenarios, the identity of client shall be established through the production of officially valid documents, as referred to in sub-rule (2) of rule 9; and (v) foreign remittance shall not be allowed to be credited into a small account unless the identity of the client is fully established through the production of officially valid documents, as referred to in sub-rule (2) of rule 9. (3) Where the client is a company, it shall for the purposes of sub-rule (1) submit to the banking company or financial institution or intermediary, as the case may be, one certified copy of the following documents: (i) Certificate of incorporation; (ii) Memorandum an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amme to determine the true identity of its clients, incorporating requirements of sub-rules (1) to (6A) and guidelines issued under clause (i) above. 2. Inserted Vide Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2015, w.e.f. 7-7-2015. 3. Substituted Vide Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2015, w.e.f. 7-7-2015. Before it was read as: (a) the reporting entity immediately obtains necessary information of such client due diligence carried out by the third party; 4. Substituted vide Not. 2/2017 - Dated 1-6-2017 before it was read as, (4) Where the client is an individual, he shall for the purpose of sub-rule (1), submit to the reporting entity, one certified copy of an 'officially valid document' containing details of his identity and address, one recent photograph and such other documents including in respect of the nature of business and financial status of the client as may be required by the reporting entity: Provided that photograph need not be submitted by a client falling under clause (b) of sub-rule (1). (5) Notwithstanding anything contained in sub-rule (4), an individual who desires to open a small acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-rule (1) submit to the reporting entity one certified copy of the following documents:- (i) registration certificate; (ii) partnership deed; and (iii) an officially valid document in respect of the person holding an attorney to transact on its behalf. (8) Where the client is a trust, it shall, for the purposes of sub-rule (1) submit to the reporting entity one certified copy of the following documents:- (i) registration certificate; (ii) trust deed; and (iii) an officially valid document in respect of the person holding an attorney to transact on its behalf. (9) Where the client is an unincorporated association or a body of individuals, it shall submit to the reporting entity one certified copy of the following documents:- (i) resolution of the managing body of such association or body of individuals; (ii) power of attorney granted to him to transact on its behalf; (iii) an officially valid document in respect of the person holding an attorney to transact on its behalf; and (iv) such information as may be required by the reporting entity to collectively establish the legal existence of such an association or body of individuals. 5. Inserted vide Not. 2/2017 - Dated 1-6-2017 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmit one certified copy of an officially valid document' containing details of his identity and address, one recent photograph and such other documents including in respect of the nature or business and financial status of the client as may be required by the reporting entity. 18. Omitted vide NOTIFICATION No. G.S.R. 108(E) dated 13-02-2019 before it was read as and (4A) 19. Substituted vide NOTIFICATION No. G.S.R. 108(E) dated 13-02-2019 before it was read as thump 20. Substituted vide NOTIFICATION No. G.S.R. 108(E) dated 13-02-2019 before it was read as the Aadhaar number of the client or where an Aadhaar number has not been assigned to the client, through the production of proof of application towards enrolment for Aadhaar along with an officially valid document 21. Omitted vide NOTIFICATION No. G.S.R. 108(E) dated 13-02-2019 before it was read as Provided further that if the client is not eligible to be enrolled for an Aadhaar number, the identity of client shall be established through the production of an officially valid document; 22. Substituted vide NOTIFICATION No. G.S.R. 108(E) dated 13-02-2019 before it was read as (6) Where the client is a company, it shall for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or Form 60 as defined in the Income-tax Rules, 1962 , issued to the person holding an attorney to transact on its behalf or where Aadhaar number has not been assigned, proof of application towards enrolment for Aadhaar and in case Permanent Account Number is not submitted an officially valid document shall be submitted: Provided that for the purpose of this clause if the person holding an attorney to transact on the company's behalf is not eligible to be enrolled for Aadhaar number and does not submit the Permanent Account Number, certified copy of an officially valid document shall be submitted. 25. Substituted vide NOTIFICATION No. G.S.R. 108(E) dated 13-02-2019 before it was read as (9) Where the client is an unincorporated association or a body of individuals, it shall submit to the reporting entity the certified copies of the following documents:- (i) resolution of the managing body of such association or body of individuals; (ii) power of attorney granted to him to transact on its behalf; (iii) (a) the Aadhaar number; and (b) Permanent Account Number or Form 60 as defined in the Income-tax Rules, 1962 , issued to the person holding, an attorney to transact on its behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the client, eligible to be enrolled for Aadhaar and obtain a Permanent Account Number, referred to in sub-rules (4) to (9) of rule 9 does not submit the Aadhaar number or the Permanent Account Number at the time of commencement of an account based relationship with a reporting entity, the client shall submit the same within a period of six months from the date of the commencement of the account based relationship: Provided that the clients, eligible to be enrolled for Aadhaar and obtain the Permanent Account Number, already having an account based relationship with reporting entities prior to date of this notification, the client shall 8 [submit the Aadhaar number, and Permanent Account Number or Form No. 60, by such date as may be notified by the Central Government] (b) As per regulation 12 of the Aadhaar (Enrolment and Update) Regulations, 2016, the local authorities in the State Governments or Union-territory Administrations have become or are in the process of becoming UIDAI Registrars for Aadhaar enrolment and are organising special Aadhaar enrolment camps at convenient locations for providing enrolment facilities in consultation with UIDAI and any individual desirous of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with current address within a period of three months of submitting the above documents.] 33. Inserted vide NOTIFICATION No. G.S.R. 381(E) dated 28-05-2019 34. Substituted vide NOTIFICATION No. [F. No. P.12011/24/2017-ES Cell-DoR] dated 19-08-2019 before it was read as 4 [(4) Where the client is an individual, 14 [*********] he shall for the purpose of sub-rule (1) submit to the reporting entity,- 15 [ (a) the Aadhaar number where he is desirous of receiving any benefit or subsidy under any scheme notified under section 7 of the Aadhaar (Targeted Delivery of Financial and Other subsidies, Benefits and Services) Act, 2016 (18 of 2016), or a copy of any other officially valid document in other cases containing details of his identity and address, and one recent photograph; and ] (b) the Permanent Account Number or Form No.60 as defined in Income-tax Rules, 1962 , and such other documents including in respect of the nature of business and financial status of the client as may be required by the reporting entity: 16 [*********] Provided further that photograph need not be submitted by a client falling under clause (b) of sub-rule (1). 6 [Explanation.- Obtaining a certified copy by rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining details of identity and address, one recent photograph and Permanent Account Number or Form No.60 of the person holding an attorney to transact on its behalf.; 45. Inserted vide NOTIFICATION No. [F. No. P.12011/24/2017-ES Cell-DoR] dated 19-08-2019 46. Inserted vide NOTIFICATION No. [F. No. P.12011/24/2017-ES Cell-DoR] dated 19-08-2019 47. Substituted vide NOTIFICATION No. [F. No. P.12011/24/2017-ES Cell-DoR] dated 19-08-2019 before it was read as (iv) one copy of an officially valid document containing details of his identity and address, one recent photograph and Permanent Account Number or Form No.60 of the person holding an attorney to transact on its behalf; and 48. Omitted vide NOTIFICATION No. [F. No. P.12011/24/2017-ES Cell-DoR] dated 19-08-2019 before it was read as and 49. Inserted vide NOTIFICATION No. [F. No. P.12011/24/2017-ES Cell-DoR] dated 19-08-2019 50. Inserted vide NOTIFICATION No. [F. No. P.12011/24/2017-ES Cell-DoR] dated 19-08-2019 51. Substituted vide NOTIFICATION No. [F. No. P.12011/24/2017-ES Cell-DoR] dated 19-08-2019 before it was read as 29 [ (15) Any reporting entity, which has been issued banking license by the Reserve Bank of India, at receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67. Substituted vide Notification No. S.O. 1074(E)., dated 07-03-2023. , before it was read as, is a juridicial person . 68. Substituted vide Notification No. G.S.R. 652(E) dated 04-09-2023 before it was read as, fifteen 69. Inserted vide Notification No. G.S.R. 652(E) dated 04-09-2023 70. Inserted vide Notification No. G.S.R. 652(E) dated 04-09-2023 71. Inserted vide Notification No. G.S.R. 652(E) dated 04-09-2023 72. Substituted vide Notification No. G.S.R. 745(E) dated 17-10-2023 before it was read as, (1) Every reporting entity shall- (a) at the time of commencement of an account-based relationship- (i) identify its clients, verify their identity, obtain information on the purpose and intended nature of the business relationship; and (ii) determine whether a client is acting on behalf of a beneficial owner, and identify the beneficial owner and take all steps to verify the identity of the beneficial owner: Provided that where the Regulator is of the view that money laundering and terrorist financing risks are effectively managed and where this is essential not to interrupt the normal conduct of business, the Regulator may permit the reporting entity to complete the verificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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