The finance ministry has tightened anti-money laundering rules by classifying anyone holding more than a 10 per cent equity stake in a company as a beneficial owner, lowering the threshold from 15 per cent earlier.

The ministry has amended the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, which also provides for management-level functionary as ‘’Principal Officer’’ responsible for providing information to the financial intelligence unit.

The amendment also said that in the case of a trust, the reporting entity shall ensure that trustees disclose their status at the time of commencement of an account-based relationship or when carrying out specified transactions.

The government has in recent months tightened various anti-money laundering provisions ahead of assessment by the global watchdog on terror financing and money laundering Financial Action Task Force (FATF).

The agency is scheduled to conduct an assessment of the implementation of anti-money laundering and counter-terror financing standards in India later this year.

In May, the finance ministry had notified changes in PMLA provisions which made chartered and cost accountants and company secretaries liable under the anti-money laundering law for carrying out certain specified financial transactions on behalf of their clients.

These transactions include buying and selling of any properties and management of bank accounts.

In March, the PMLA rules were amended making it mandatory for banks and financial institutions to record financial transactions of politically exposed persons (PEP).

Also, financial institutions or reporting agencies were mandated to collect information about the financial transactions of the non-profit organisations or NGOs under the PMLA.

The government also made it mandatory for crypto exchanges and intermediaries dealing with virtual digital assets to do KYC (Know Your Customer) for their clients and users of the platform.

FATF alert

While India is compliant with FATF regulations, any gaps found in its preparedness to combat money laundering could lead to adverse comments or, at worst, impact its rating and make it costlier for global firms to do business in the country, according to Reuters.

“Any drop in ratings can affect India and its institutions’ ability to do business with global financial institutions,” said an industry official.

The FATF rates India “compliant”, the highest of its three-tier rating scale that includes “grey” and “black”. That review was in 2010 and a fresh one has been delayed due to Covid-19.

To ensure that it maintains the top-tier rating, India’s market regulator Sebi has also tweaked a number of rules.