Overview of Headline  

On 7th March 2023, the Ministry of Finance, Department of Revenue, Government of India notified the 2023 Amendment to the Prevention of Money-Laundering Rules 2005. The rules have been made in the exercise of the power vested in the Central Government Under Section 73 of the Prevention of Money Laundering act, 2002. By inserting Clause (cba), Group has been defined to have the same meaning as in section 286(9)e of the Income Tax Act, 1961. 

The definition of “non-profit organization” has been amended to mean any entity or organization constituted for religious or charitable purposes as referred to in Section 2(15) of the Income Tax Act,1961, and is registered as a trust or a society under the society registration act 1860, or any similar  State legislation or company registered under section 8 of the Companies Act,2013. Prior to the amendment the ‘non-profit organization’ was defined as an entity or organization registered as a trust or a society under the Societies Registration Act, 1860, or any similar State legislation or a company registered under section 8 of the Companies Act, 2013.

The 2023 Amendment defines Politically Exposed Persons (PEP) 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, and important political party members

Unamended Rules

1. Rule no 9(3A) states that “Controlling ownership interest” means ownership of or entitlement to more than 25% of shares or capital or profits of the company.
2. The beneficial owner for the purpose sub-rule(1) shall be determined as under, where the client is a trust.
3. Where the client is a company, it shall be for the purpose of sub-rule (I).
4. A certificate of incorporation is needed.
5. Rules no 9(7)(III) states, where the client is a partnership firm it shall fall for the purpose of sub-rule (I).
6. One should submit a registration certificate, partnership deed, adhaar number, and PAN number.

Amended Rules

1. Rule no 9(3A) states that “Controlling ownership interest” means ownership of or entitlement to more than 10 percent. 
2. The beneficial owner for the purpose sub-rule(1) shall be determined as under, where the client is a trust.
3. One should submit an adhaar number, PAN card details, etc.
4. The names of the relevant senior person should be mentioned.
5. When the client is in a partnership firm, one should submit a registration certificate, partnership deed, adhaar number, and PAN number.
6. The names of all the partners and addresses of the registered office should be submitted.