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Fresh amendments in PMLA to pave way for streamlined KYC process


Finance Ministry has made some crucial amendments under the Prevention of Money Laundering Act, 2002 (PMLA) to improve the act’s clarity for stakeholders. This is an essential development for payments and financial services platforms which require to perform Know Your Customer (KYC) process.

PMLA regulates the KYC process through which banks, telcos, money lenders, and investment platforms identify their customers by storing their ID details before executing any transaction. The recent amendments add clarifications regarding the different means by which these service providers undertake the KYC process of their prospective customers.

The amendments pave the way for regulators such as Reserve Bank of India (RBI) to introduce new guidelines regarding the digital verification processes, including Aadhaar eKYC and video KYC, digitally signed documents.

Additionally, the government’s amendments allow the use of secured digital folders or lockers where the customers can store their documents in electronic form with the provision of remote access, making the entire process paperless.

The allowance to employ the use of digitally signed electronic documents by regulated entities will render the need for physical documents and photographs to store customer details obsolete. Adoption of eKYC processes will streamline the onboarding process for these service providers, removing bottlenecks in the introductory process.

The amendments will also allow companies to collect details from customers who are submitting their information voluntarily, which was stopped after a Supreme Court Judgement last year. The bill to allow the voluntary use of Adhaar for eKYC was passed by Rajya Sabha in July this year.

Further, the changes will enable the use of offline checking of documents for eKYC purposes. Regulated entities can now provide their customers with the service of at home KYC by employing a travelling agent who will visit customers and verify their documents offline by OTP verification.

Apart from the KYC process, the amendments also expand the scope of the act with regards to definitions of criminal activity and the use of proceeds obtained from illegal activity. For instance, an explanation was added to Section 2(1)(u) of PMLA stating

“For the removal of doubts, it is hereby clarified that “proceeds of crime” including property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence.

The Union government has been working for introducing reforms to push growth in the finance sector, which is slowing down due to the falling demand in the market. While the investors are speaking of the economic slowdown, the government and its agencies remain mum on the subject.

The development was reported by ET.

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