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The Obligations of Banking Companies, Financial Institutions and Intermediaries are prescribed under Chapter IV of the Prevention of Money Laundering Act 2002 (PMLA). Such obligations are prescribed with the aim of avoiding money laundering by keeping track of the transactions of the bank account holders and by maintaining the records of the same. The present articles shall discuss the obligations as enumerated in the said Act.
Table of Contents
The obligations of Banking Companies, Financial Institutions & Intermediaries are provided in Chapter IV of the PMLA under sections 12 to 15. However, it is essential to understand the meaning of Reporting Entity before discussing the obligations of the same.
As per Section 12 under PMLA, a reporting entity can be Banking Companies, Financial Institutions & Intermediaries, and an individual carrying out designated business activities. The Real estate agents/ brokers are considered reporting entities for the purpose of PMLA Rules, 2005. The obligations of such entities are discussed herein under
Section 12 of the Act provides for the obligation of the reporting entities.
All Banking Companies, Financial Institutions and Intermediaries must carry out the following before commencing each specified transaction —
However, where the authentication of the person not being entitled to obtaining an Aadhaar number under the provisions of the said Act is required for the purpose of verification, such verification for the authentication of the client’s identity undertaking the specified transaction shall be conducted by such other process or mode, as prescribed ;
A copy of the order must be forwarded by the Director to every reporting entity or a person who is a party to the proceedings under that sub-section.
The Banking Companies, Financial Institutions, Intermediaries, its directors and employees would not be liable for any criminal or civil proceedings being initiated against them for furnishing information under Section 12(1) (b)
The Central Government may, after consulting with the RBI, prescribe the procedure and the manner for maintaining and furnishing information to such reporting entities, as per section 11A Section 12 (1) and 12AA (1) for the purpose of implementing the provisions of this Act.
It is essential for all Banking Companies, Financial Institutions, and Intermediaries to comply with the obligations as provided in Chapter IV of the Act in order to avoid the complexities consequential to the non-compliance of such obligations.
Also Read:Open Banking: The Future of Financial ServicesNon-Banking Financial Institutions: What They Are and How They Work?
Shubhangi has completed her B. A.LLB (H) with specialization in Business Laws from Amity University. She is particularly interested in legal research and writing and wishes to utilize her knowledge to create informative legal content. She has prior experience in corporate and criminal litigation and has great drafting skills. She has also published various research papers in reputed journals.
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