AML & CFT Guidelines for Real Estate Agents 2022

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Introduction
Purpose of the guidelines
Real Estate Agents
Policies and Procedures to Combat Money Laundering and Terrorist
financing
Obligation to establish policies & procedures under PMLA

Section: B
6.
7.
8.
9.

10.
11.
12.

Detailed Guidelines on Anti Money-Laundering and combating the
financing of terrorism Procedures
Liability for failure to fulfil obligations
Illustrative list of documents required for KYC
Maintenance of records of transactions/ Information to be
recorded/Preservation of records/ Cash and Suspicious transactions
reporting to Financial Intelligence Unit-India (FIU-IND)
Implementation of Section 51A of the Unlawful Activities (Prevention)
Act, 1967 (UAPA)
Recruitment and training of employees
Definitions

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Introduction:

1.1

These guidelines shall be called Guidelines for Reporting Entities (Real
Estate Agents) under the Prevention of Money Laundering Act,
2002 (hereafter called “The Guidelines”).The Guidelines aim to provide a
general background and summary of the provisions of the applicable antimoney laundering and anti-terrorism financing legislations in India, viz. the
Prevention of Money Laundering Act, 2002 (hereinafter referred to as the
“PMLA”) and the Prevention of Money Laundering (Maintenance of Records)
Rules, 2005 (hereinafter referred to as the “PMLR”) and their applicability to
and implications for the real estate agents in applying certain Anti Money
Laundering/ Countering the Financing of Terrorism (AML/CFT) obligations.

1.2

Rule 2(1)(fa)(iv) of the PMLR defines ‘Regulator’ as “the Central Board of
Indirect Taxes and Customs, constituted under Central Boards of Revenue Act,
1963, with respect to the real estate agents” (inserted vide G.S.R. Notification
800(E) dated 28.12.2020 issued under F.No. P-12011/14/2020-ES Cell-DOR.
The Guidelines are being issued by the Directorate General of Audit (DGA),
Central Board of Indirect Taxes and Customs (CBIC) which has been
appointed Regulator on behalf of Central Board of Indirect Taxes & Customs,
Ministry of Finance, Govt. of India for this purpose vide O.M. dated 22.11.2021
of the Commissioner (GST-Inv), CBIC (Annexure-I). The broader context for
the Guidelines is provided by the Recommendations made by Financial Action
Task force (FATF) on anti-money laundering standards and the Guidance on
the Risk-Based Approach adopted in its June 2008 Plenary to Combating
Money Laundering and Terrorist Financing, which includes guidance for
public authorities and designated non-financial businesses and professions
(DNFBPs) including Real Estate Agents (hereinafter also referred to as the
“Reporting Entities”), amongst others.

1.3

The PMLA and the rules made thereunder, viz. the PMLR, on implementing a
risk-based approach for the Reporting Entities, lays down the principles to be
followed by them and highlights risk factors specific to those DNFBPs, along
with suggestions to minimize the risk of Money Laundering/ Terrorist
Financing (ML/TF).
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These guidelines also set out the steps that a Real Estate Agent shall
implement to discourage and to identify any money laundering or terrorist
financing activities. These guidelines prescribe procedures and obligations to
be followed by the reporting entities to ensure compliance with Anti Money
Laundering / Countering the Financing of Terrorism (AML/CFT) guidelines.

1.5

The strategies to manage and mitigate the identified money laundering and
terrorist financing activities are typically aimed at preventing the activity from
occurring through a mixture of deterrence [e.g., appropriate Client Due
Diligence (“CDD”) measures], detection (e.g., monitoring and suspicious
transaction reporting), and record-keeping so as to facilitate investigations by
the appropriate authorities, wherever required, which are discussed at length
here under.

2.

Purpose of the guidelines:

2.1

The purpose of these guidelines is to explain the risk-based approach, outline
the core principles involved in applying the same, and indicate best practices
in the design and implementation of an effective risk-based approach.

2.2

The purpose of these guidelines is also to establish a reporting mechanism
with the real estate agents that will help in combating money laundering and
terrorist financing.

3.

Real Estate Agents
For purposes of these guidelines, the term "real estate agents" has the same
meaning as defined in Clause (zm) of Section 2 of The Real Estate (Regulation
and Development) Act, 2016 (‘RERA’). “Real estate agent” means ‘any person,
who negotiates or acts on behalf of one person in a transaction of transfer of
his plot, apartment or building, as the case may be, in a real estate project, by
way of sale, with another person or transfer of plot, apartment or building, as
the case may be, of any other person to him and receives remuneration or fees
or any other charges for his services whether as a commission or otherwise and
includes a person who introduces, through any medium, prospective buyers
and sellers to each other for negotiation for sale or purchase of plot, apartment
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Policies and Procedures to Combat Money Laundering and
Terrorist financing: (AML/ CFT Program):

4.1.

Every real estate agent is required to have an AML/ CFT program in place in
order to discharge its statutory responsibility to detect possible attempts of
money laundering and financing of terrorism.

4.2.

In view of the requirements of the PMLA and the rules made thereunder, as
applicable to the reporting entities in preventing ML and TF, each real estate
agent shall consider carefully the specific nature of its business,
organisational structure, type of client and transaction, etc to satisfy itself
that the measures taken by it are adequate and appropriate and follow the
spirit of the suggested measures as laid down in the PMLA. Each reporting
entity shall also satisfy itself that such measures are effectively implemented.

4.3

Real Estate offers a convenient way to launder large amounts in a single
transaction. Real Estate also offers secondary benefits for the criminals, such
as helping them to secure residence, ensuring social respectability, and
providing an immediately available good of material benefit.

As such,

criminals may not make any tangible use of many financial assets, but such is
not the case with real estate sector as it offers opportunity to individuals to
transfer the value of funds into both commercial and residential property.
Real estate is often an appreciating asset that can generate returns and
become a good source of personal gains. A real estate agent must be able to
form a reasonable belief that they know the true identity of each customer.
Customer Due Diligence (CDD) measures must be conducted to form these
beliefs with the identification and verification of the identity of customers
and their beneficial owners.
5.

Obligation to establish policies and procedures under PMLA:

5.1

In order to combat the menace of money-laundering, terror financing and
other related serious crimes, Rule 7(3) of the PMLR casts an obligation on
every reporting entity to evolve an internal mechanism in respect of these
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To comply with these obligations, every reporting entity shall establish
appropriate policies and procedures for the prevention of ML and TF and
ensure their effectiveness and compliance with all relevant legal and
regulatory requirements. The reporting entities shall:
(i)

issue a statement of policies and procedures for dealing with ML
and

TF

reflecting

the

current

statutory

and

regulatory

requirements;
(ii)

ensure that spirit of these guidelines and internal policies and
procedures are understood by all staff members;

(iii)

regularly review the policies and procedures on the prevention of
ML and TF to ensure their effectiveness. To ensure the
effectiveness of policies and procedures, the person doing such a
review shall, as far as possible, be different from the one who has
framed them;

(iv)

adopt client acceptance policies and procedures and undertake
Client Due Diligence (CDD) measures to the extent that is sensitive
to the risk of ML and TF depending on the type of client, business
relationship or transaction;

(v)

have a system in place for identifying, monitoring and reporting
suspected ML or TF transactions to the law enforcement
authorities; and

(vi)

develop mechanism/s through training/ workshops, etc to make
their staff aware and vigilant to guard against ML and TF.

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Maintenance of records: As per the provisions of Section 12 of the PMLA,
every reporting entity shall have to maintain a record of all the transactions;
information relating to such transactions, whether attempted or executed,
the nature and value of which has been prescribed in Rule 3 of the PMLR and
to maintain record of documents evidencing identity of its clients and
beneficial owners as well as account files and business correspondence
relating to its clients as detailed in the foregoing part of these guidelines.

5.4

Transactions defined for the purpose of reporting: As prescribed
under Rule 3 of the PMLR, such transactions include:
(i)

All cash transactions of the value of more than Rs. 10 lakh or its
equivalent in foreign currency.

(ii)

All series of cash transactions integrally connected to each other
which have been individually valued below Rs. 10 lakh or its
equivalent in foreign currency where such series of transactions have
taken place within a month and the monthly aggregate exceeds an
amount of Rs. 10 lakh or its equivalent in foreign currency.

(iii)

All cash transactions where forged or counterfeit currency notes or
bank notes have been used as genuine or where any forgery of a
valuable security or a document has taken place facilitating the
transactions.

(iv)

All suspicious transactions whether or not made in cash and by
way of deposits or credits, as provided under sub rule 1(D) of Rule 3
of the said rules.

It is, however, clarified that for the purpose of suspicious transactions
reporting, apart from ‘transactions integrally connected’, ‘transactions
remotely connected or related’ shall also be considered.
5.5

Know Your Client (KYC) and Client Due Diligence (CDD): As
provided under Section 11A of the PMLA read with Rule 9 of the PMLR, it is
incumbent upon every Reporting Entity to follow certain client identification
procedures in respect of the buyers and sellers of real estate and monitoring
transactions of a suspicious nature for the purpose of reporting it to the
appropriate authority. These ‘Know Your Client’ guidelines have been
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Suspicious Transaction Reporting: In line with FATF Recommendation
20, Rule 8(2) read with Rule 3(1)(D) of the PMLR provides for prompt
reporting of a suspicious transaction, which includes an attempted suspicious
transaction, to the FIU-IND, if a reporting entity suspects or has reasonable
grounds to suspect that funds used by a client are the proceeds of a criminal
activity, or are related to terrorist financing. A suspicious transaction shall be
reported within seven working days of its occurrence.

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Detailed Guidelines on Anti Money-Laundering and combating the
financing of terrorism Procedures

6.1

Appointment of a Designated Director and a Principal Officer:
In line with the provisions of Rule 7 of the PMLR, every reporting entity shall
appoint:
(i)

a Principal Officer and,

(ii)

a Designated Director

As far as possible, the Principal Officer and the Designated Director should
be separate individuals. Names, designation, telephone number and
addresses (email addresses) of Principal Officer and the Designated Director
including any changes therein shall be intimated to the Office of the Director,
FIU-IND, Regulator and the Real Estate Regulatory Authority governing the
reporting entity.
6.1.1

The Designated Director and the Principal Officer shall be

responsible for the following to combat money laundering/ countering
the financing of terrorism:
(a) Furnishing of the information under Rule 8 (1) of the PMLR, as
prescribed under sub rule (1) of Rule 3 of the said rules on monthly
basis, by 15th day of the succeeding month, in prescribed
Format to the Director, FIU-IND. However, the information in
respect of a suspicious transaction shall be furnished within seven
working days of its occurrence as per Rule 8(2) of the PMLR, as
mentioned at Para 8.6. Such information shall include any
attempted transactions, whether or not made in cash;
(b) Evolving an internal mechanism with regard to any guidelines
issued by the Regulator or the Director, FIU-IND and for furnishing
information as prescribed under sub rule (1) of Rule 3 of the PMLR;
(c) Communication of group policies relating to prevention of ML and
TF to all management and relevant staff that handle account
information,

money

and

client

records,

etc.

within

their

organisation;
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Maintenance of records;

(ii) Compliance

with

relevant

statutory

and

regulatory

requirements;
(iii) Cooperation with the relevant law enforcement authorities,
including the timely disclosure of information; and
(iv) Role of internal audit or compliance function to ensure
compliance with the policies, procedures and controls relating
to the prevention of ML and TF, including detection of
suspected money laundering transactions.
6.2

Client Due Diligence (CDD) Measures and Know Your Client (KYC)
norms:
6.2.1. In consonance with the basic principles of the KYC norms as
prescribed in the PMLA or the rules made there under, all reporting
entities shall frame their own internal directives based on their
experience in dealing with their clients and legal requirements as per
the established practices.
6.2.2. In accordance with Rule 9 of the PMLR, each reporting entity
shall adopt written procedures to implement the anti-money laundering
provisions as envisaged under the PMLA, related to the ‘Client Due
Diligence Process’. The requirement is stated hereunder:
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:
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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, as mentioned
at Para 8.5 above.
2.

Every reporting entity shall be responsible for obtaining KYC

records of its clients and file the same with the Central KYC Records
Registry. The third-party KYC records may also be used for this
purpose.
6.2.3. Considering the potential threat of transactions in real estate by
a money launderer / terrorism financier, the reporting entities should
make reasonable efforts to determine the true identity of all clients
engaging in sale and purchase of such real estate, especially the person
who funds/pays for a transaction, either as beneficial owner or
otherwise. Where a client is a juridical person, verification of identity is
required to be carried out on persons purporting to act and are
authorised to act on behalf of a client. Effective procedures should be
put in place to obtain requisite details for proper identification of new
clients. Special care has to be exercised to ensure that the transactions
are not under anonymous or fictitious names.
6.3.

Beneficial owners:

The reporting entities should also make reasonable

efforts to obtain sufficient information in order to identify persons who are
the beneficial owners. Whenever it is apparent that the transactions made
through an account are beneficially owned by a party other than the client,
that party shall be identified using client identification and verification
procedures. The beneficial owner is the natural person or persons who
ultimately own, control or influence a client and/or persons on whose behalf
a transaction is being conducted. It also includes those persons who exercise
ultimate effective control over a legal person or arrangement. The client’s
identity should be verified using reliable, independent source documents,
data or information.
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Enhanced Due Diligence:
6.4.1. In tune with the FATF Recommendation 10, Section 12AA of the
PMLA prescribes for the reporting entities to perform enhanced due
diligence

for

higher-risk

clients,

business

relationships

and

transactions.
6.4.2. Reporting entities should examine, as far as reasonably possible,
the background and purpose of all complex, unusually large
transactions, and all unusual patterns of transactions, which have no
apparent economic or lawful purpose. Where the risks of money
laundering or terrorist financing are higher, reporting entities should be
required to conduct enhanced due diligence measures, consistent with
the risks identified. In particular, they should increase the degree and
nature of monitoring of the business relationship, in order to determine
whether those transactions or activities appear unusual or suspicious.
6.4.3 Conducting enhanced due diligence should not be limited to
merely documenting income proofs. They should be more rigorous and
robust measures than normal KYC. These measures should be
commensurate with the risk. While it is not intended to be exhaustive,
the following are some of the reasonable measures in carrying out
enhanced due diligence:
(i)

More frequent review of the clients' profile/transactions,

(ii)

Application of additional measures like gathering information

from publicly available sources or otherwise,
(iii)

Review of the clients’ information at senior level of the reporting

entity,
(iv)

Reasonable measures to know the client's source of funds

commensurate with the assessed risk of client and product profile
which may include:
(a)

conducting independent enquiries on the details collected on /
provided by the client where required,

(b)

consulting a credible database, public or other, etc.

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Policy for client acceptance and risk assessment (Risk Based
Approach):
6.5.1. Within the provisions of Rule 9 of the PMLR, the KYC policy
shall clearly spell out the client identification procedure to be carried
out at different stages, i.e., while establishing the relationship with
client, while carrying out transactions with a client or when the
reporting entity has doubts regarding the veracity or the adequacy of
previously obtained client identification data.
6.5.2. It is generally recognized that certain clients may be of a higher
or lower risk category depending on the circumstances such as the
client’s background, type of business relationship or transaction, etc. In
order to identify the types of clients that are likely to pose a higher than
average risk of ML or TF, the reporting entities shall develop client
acceptance policies and procedures. It would help in applying client due
diligence on a risk sensitive basis. The risk assessment shall be
documented and shall be made available to the Director, FIU-IND/
Regulator, as and when required. The following safeguards are to be
followed while accepting the clients:
a) No reporting entity shall allow the opening of or keep any

anonymous account or account in fictitious names or accounts
on behalf of other persons whose identity has not been
disclosed or cannot be verified.
b) The clients should be categorised in two categories, viz. high

risk and low risk.
c) Factors

of

risk

perception

for

monitoring

suspicious

transactions of the clients are clearly defined having regard to
clients’ location, nature of business activity, trading turnover
etc. and manner of making payment for transactions
undertaken.
d) Individuals (other than High Net Worth) and entities whose

identities and sources of wealth can be easily identified and
transactions in whose accounts by and large conform to the
known profile may be categorised as low risk. The salaried
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worth individuals, trusts, charities, NGOs and organisations
receiving

donations,

companies

having

close

family

shareholding or beneficial ownership, firms with sleeping
partners etc will determine their Money Laundering/ Terrorist
Financing risk.
f)

Individuals who are or have been entrusted with prominent
public functions in a foreign country, e.g., Heads of States or
of

Governments,

senior

politicians,

senior

government/judicial/military officers, senior executives of
state-owned corporations, important political party officials,
are higher risk clients and reporting entities should conduct
enhanced due diligence of such individuals and their close
relatives. All reporting entities shall put in place appropriate
risk management systems to obtain relevant information
about such clients, such as referring to publicly available
information. Approval at senior management level must be
required for establishing business relationships with such
clients. Reporting entities shall also take reasonable measures
to verify the sources of funds as well as the wealth of such
clients.
g) The clients with dubious reputation as per available public

information are considered as high risk, requiring EDD.
h) In cases where the appropriate CDD measures to identify the

profile of a client cannot be applied or it is not possible to
ascertain the identity of the client, or the information provided
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In cases, where the identity of a client is ascertained as having
a criminal background, a suspicious transaction report shall
be filed.

6.6.

Reliance on Third Party KYC:
The reporting entity is solely responsible for undertaking Client Due Diligence
and Enhanced Due Diligence measures. However, subject to the provisions of
Rule 9(2) of the PML (Maintenance of Records) Rules, 2005, a reporting entity
may rely on a third party for obtaining the KYC information. It shall be
ensured by the reporting entity that the third party is not based in a country or
jurisdiction assessed as high risk.

6.7

Suspicious Transaction Monitoring and Reporting
6.7.1

Reporting entities shall ensure that appropriate steps are

taken to enable suspicious transactions to be recognized and have
appropriate procedures for reporting suspicious transactions.
6.7.2 A list of circumstances which may be in the nature of suspicious
transactions is given below. This list is only illustrative and whether a
particular transaction is suspicious or not will depend upon the
background, details of the transactions and other facts and
circumstances:
(i)

Clients whose identity verification seems difficult or clients that
appear not to cooperate;

(ii) Asset management services for clients where the source of the
funds is not clear or not in keeping with clients’ apparent
standing/business activity;
(iii) Clients based in high-risk jurisdictions;
(iv) Substantial increases in business without apparent cause;
(v) Clients transferring large sums of money to or from overseas
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6.7.3 Any suspicious transaction shall be immediately notified to the
Principal Officer or the Designated Director within the reporting entity.
The notification may be done in the form of a detailed report with
specific reference to the clients, transactions and the nature /reason of
suspicion. However, it shall be ensured that there is continuity in
dealing with the client as normal until told otherwise and the client
shall not be told of the report/ suspicion.
6.7.4 It is likely that in some cases transactions are abandoned or
aborted by clients on being asked to give some details or to provide
documents. It is clarified that reporting entities shall report all such
attempted transactions in STRs, even if not completed by clients,
irrespective of the amount of the transaction.
7.

Liability for failure to fulfil obligations:
As prescribed under Section 13 of the PMLA, any reporting entity may be
required to get its records audited by a Chartered Accountant appointed by the
Central Govt. and also impose a monetary penalty on the reporting entity, its
director or the employees for failure to fulfil the obligations cast upon them by
the PMLA or rules made there under. A delay in not reporting a transaction as
prescribed under these rules shall also constitute violation of the PMLA and
the rules made thereunder.

8.

List of documents required for KYC:
As required under rule 9 of PMLR, the following is an illustrative list of
documents, which may be obtained from the clients for ascertaining their
identity under KYC requirement:

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Officially Valid Documents

Accounts of individuals
-

-

Legal name and any other
names used

Correct permanent address

(i)
(ii)
(iii)
(iv)
(v)
(vi)

Passport
PAN card
Voter’s Identity Card
Driving licence
Identity card issued by the employer
Letter from a recognized public authority or
public servant verifying the identity and
residence of the client

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)

Telephone bill
Bank account statement
Letter from any recognized public authority
Electricity bill
Ration card
Letter from employer
any one document which provides client
information to the satisfaction of the reporting
entity

(i)

Certificate of incorporation and Memorandum

Accounts of companies
-

Name of the company

-

Principal place of business

-

Mailing

address

of

& Articles of Association
(ii)

account and identification of those who have

the company
-

Telephone/Fax Number

Resolution of the Board of Directors to open an
authority to operate the account

(iii)

Power of Attorney granted to its managers,
officers or employees to transact business on
its behalf

(iv)

Copy of PAN allotment letter

(v)

Copy of the telephone bill

Accounts of partnership firms
(i) Registration certificate, if registered

-

Legal name

-

Address

-

Names of all partners and their

(iii) Power of Attorney granted to a partner or an

addresses

employee of the firm to transact business on its behalf

Telephone numbers of the firm

(iv) Any officially valid document identifying the

and partners

partners and the persons holding the Power of Attorney

-

(ii) Partnership deed

and their addresses
(v) Telephone bill in the name of firm/ partners

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Names of trustees, settlers,
beneficiaries and signatories

-

Names and addresses of the

(i)

Certificate of registration, if registered

(ii)

Power of Attorney granted to transact business
on its behalf

(iii)

trustees, settlors, beneficiaries and those

founder, the managers

holding

/directors

-

Telephone/fax numbers

Power

founders/managers/

and
the beneficiaries

Any officially valid document to identify the
of
directors

Attorney,
and

their

addresses
(iv)

Resolution of the managing body of the
foundation/association

(v)

Telephone bill

9.

Maintenance of records of transactions/ Information to be
recorded/Preservation of records/ Cash and Suspicious
transactions reporting to FIU-IND:

9.1.

Section 12 of the PMLA casts the obligation upon every reporting entity to
maintain records of all transactions in such a manner that all individual
transactions are reconstructed and furnishing of information related to
transactions to Director FIU-IND. It also provides for preservation of
information and records for a period of five years. The procedure for
maintenance of records of transactions, information required to be
recorded, procedure and manner of maintaining information and
procedure and manner of furnishing information is prescribed under
Rule 3, 4, 5, 7 and 8 of the PMLR. All reporting entities are required to
ensure compliance of the aforesaid provisions. These provisions are
detailed in succeeding paragraphs.

9.2.

Maintenance of records of transactions (nature and value): All
reporting entities need to put in place a system of maintaining records of
transactions, as prescribed under Rule 3, as below:
(i)

All cash transactions of the value of more than Rs. 10 lakh or its
equivalent in foreign currency.

(ii)

All series of cash transactions integrally connected to each
other which have been individually valued below Rs. 10 lakh or
its equivalent in foreign currency where such series of
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All cash transactions where forged or counterfeit currency
notes or bank notes have been used as genuine or where any
forgery of a valuable security or a document has taken place
facilitating the transactions.

(iv)

All suspicious transactions whether or not made in cash and by
way of deposits or credits, as provided under sub rule 1(D) of
Rule 3 of the said rules.

9.3

Information required to be maintained:
The records as referred to in Rule 3 of PMLR shall contain all necessary
information to permit reconstruction of individual transaction, including
the following information:
(a)

the nature of the transactions;

(b)

the amount of the transaction and the currency in which it was
denominated;

(c)

the date on which the transaction was conducted; and

(d)

the parties to the transaction

The reporting entity shall maintain these records of documents
evidencing identity of its clients and beneficial owners as well as account
files and business correspondence relating to its clients.
9.4.

Retention of information and records:
The information and records maintained for the purpose of these
guidelines, as envisaged under Section 12 of the PMLA, shall be
maintained by the reporting entity for a period of five years from the date
of transaction between a client and the reporting entity. These records
may be called for by the investigation authorities or the Director FIU-IND
along with any other information as they may deem necessary as evidence
for investigation, prosecution or judicial proceedings under the PMLA
and the rules made thereunder. In cases where the records relate to ongoing investigations or transactions which have been the subject of
suspicious transaction reporting, they shall be retained until it is
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Reporting to Financial Intelligence Unit-India:
In terms of the PMLR, reporting entities are required to report
information relating to cash and suspicious transactions to the Director,
Financial Intelligence Unit-India (FIU-IND) at the following address:
Director, FIU-IND,
Financial Intelligence Unit-India, 6th Floor, Hotel Samrat, Chanakyapuri,
New Delhi-110021.
Website: http://fiuindia.gov.in

9.6

Format for reporting Transactions:
The format for reporting transactions, including suspicious transactions
made or attempted, as required under Rule 7(2) of PMLR, would be as
prescribed by the FIU.

9.7

Prohibition on tipping off:
Reporting entities and their directors, officers and employees (permanent
and temporary) shall be prohibited from disclosing (“tipping off”) that a
STR or related information is being reported or provided to the FIU-IND.
This prohibition on tipping off extends not only to the filing of the STR
and/ or related information but even before, during and after the
submission of an STR. Thus, it shall be ensured that there is no tipping
off to the client at any level. It is clarified that the reporting entities,
irrespective of the amount of transaction and/or the threshold limit
envisaged for reporting under PMLA, 2002, shall file STR if they have
reasonable grounds to believe that the transactions involve proceeds of
crime.

10.

Implementation

of

Section

51A

of

the

Unlawful

Activities

(Prevention) Act, 1967 (UAPA):
10.1.

The Ministry of Home Affairs (MHA) Order dated 2nd February, 2021
issued under F. No. 14014/01/2019/CFT under Section 51A of the UAPA
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An updated list of individuals and entities which are subject to various
sanction measures as approved by the Security Council Committee
established pursuant to UNSC 1267 can be accessed from the United
Nations website at:
http://www.un.org/sc/committees/1267/consolist.shtml.

10.3.

By virtue of Section 51A of the UAPA, the Central Government is
empowered to freeze, seize or attach funds of and/or prevent entry into
or transit through India any individual or entities that are suspected to be
engaged in terrorism.

10.4.

Reporting entities shall ensure that no transactions are ever made with
any of the entities or individuals included in the list and if it has
happened, details of all such clients shall immediately be intimated to the
Regulator and FIU-IND

11.

Recruitment and training of employees:

11.1

Recruitment of Employees:
The reporting entities shall have adequate screening procedures in place
to ensure high standards when hiring employees. They shall identify the
key positions within their own organization structures having regard to
the risk of money laundering and terrorist financing and the size of their
business and ensure the employees taking up such key positions are
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Employees’ Training:
Reporting entities must have an ongoing employee training programme
so that their staff is adequately trained in AML and CFT procedures.
Training requirements shall have specific focuses for frontline staff, backoffice staff, compliance staff, risk management staff and staff dealing with
new clients. It is crucial that all those concerned fully understand the
rationale behind these guidelines, obligations and requirements,
implement them consistently and are sensitive to the risks of their
systems being misused by unscrupulous elements.
These guidelines have been issued under the provisions of the

Prevention of Money-Laundering Act, 2002 and the rule made
thereunder, more specifically, the Prevention of Money-Laundering
(Maintenance of Records) Rules, 2005. For any clarifications on these
guidelines or removal of doubts, the provisions of the said act and rules
may be referred.

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DEFINITIONS:
For the purposes of these guidelines,
a) Beneficial Owner means an individual who ultimately owns or controls a
client of a reporting entity or the person on whose behalf a transaction is being
conducted and includes a person who exercises ultimate effective control over
a juridical person.
As specified in Rule 9(3) of PMLR, the beneficial owner shall be
determined as under:
I.

where the client is a company, the beneficial owner is the natural
person(s), who, whether acting alone or together, or through one or
more juridical persons, has a controlling ownership interest or who
exercises control through other means.
Explanation- 1. "Controlling ownership interest" means ownership
of or entitlement to more than 25% of shares or capital or profits of
the company;
2. "Control" shall include the right to appoint majority of the
directors or to control the management or policy decisions including
by virtue of their shareholding or management rights or
shareholders agreements or voting agreements;

II.

where the client is a partnership firm, the beneficial owner is the
natural person(s) who, whether acting alone or together, or through
one or more juridical person, has ownership of/ entitlement to more
than 15% of capital or profits of the partnership;

III.

where the client is an unincorporated association or body of
individuals, the beneficial owner is the natural person(s), who,
whether acting alone or together, or through one or more juridical
person, has ownership of or entitlement to more than 15% of the
property or capital or profits of such association or body of
individuals;
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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;

V.

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 15% 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

VI.

where the client or the owner of the controlling interest is a
company listed on a stock exchange, or is a subsidiary of such a
company, it is not necessary to identify and verify the identity of any
shareholder or beneficial owner of such companies.

b) Central KYC Records Registry means a reporting entity, substantially
owned and controlled by the Central Government, and authorised by that
Government through a notification in the Official Gazette to receive, store,
safeguard and retrieve the KYC records in digital form of a client as referred to
in clause (ha) of Section 2 of the PMLA in such manner and to perform such
other functions as may be required under PMLR.
c) Client means a person who is engaged in a financial transaction or activity
with a reporting entity and includes a person on whose behalf the person who
engaged in the transaction or activity, is acting.
For the purpose of these Guidelines, a client includes a customer engaged or
attempting to engage into a transaction with the Reporting Entity.
d) Designated Director means a person designated by the reporting entity to
ensure overall compliance with the obligations imposed under chapter IV of
the PMLA and the PMLR and includes –
a) The Managing Director or a Whole-Time Director duly authorised by the

Board of Directors if the reporting entity is a company;
b) The managing partner, if the reporting entity is a partnership firm;
c) The proprietor, if the reporting entity is a proprietorship firm;
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affairs of the reporting entity if the reporting entity is an unincorporated
association or a body of individuals; and
f)

such other person or class of persons as may be notified by the
Government if the reporting entity does not fall in any of the categories
above.”

e) Person includes an individual; a Hindu undivided family; a company; a firm;
an association of persons or a body of individuals, whether incorporated or
not; every artificial juridical person not falling within any of the preceding subclauses; and any agency, office or branch owned or controlled by any of the
persons mentioned above.
f) Principal Officer is defined as an officer so designated by a reporting entity.
The Principal Officer would act as a central reference point in facilitating
onward reporting of suspicious transactions and for playing an active role in
the identification and assessment of potentially suspicious transactions and
shall have access to and be able to report to senior management at the next
reporting level or the Board of Directors. It is desirable that the ‘Principal
Officer’ is of a sufficiently senior position and is able to discharge the functions
with independence and authority.
g) Real Estate Agent means a real estate agent as defined under clause (zm) of
section 2 of the Real Estate (Regulation and Development) Act, 2016, who
negotiates or acts on behalf of one person in a transaction of transfer of his
plot, apartment or building, as the case may be, in a real estate project, by way
of sale, with another person or transfer of plot, apartment or building, as the
case may be, of any other person to him and receives remuneration or fees or
any other charges for his services whether as a commission or otherwise and
includes a person who introduces, through any medium, prospective buyers
and sellers to each other for negotiation for sale or purchase of plot, apartment
or building, as the case may be, and includes property dealers, brokers,
middlemen by whatever name called and having annual turnover of
Rupees twenty lakhs and above.
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Explanation- Transaction involving financing of the activities relating to
terrorism includes transaction involving funds suspected to be linked or
related to, or to be used for terrorism, terrorist acts or by a terrorist, terrorist
organisation or those who finance or are attempting to finance terrorism.

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