The government has made it mandatory for banks and financial institutions to check the original identification documents of individuals dealing in cash above the Rs 50,000 threshold as part of the stepped up war against black money.
The Department of Revenue under the administrative control of the Finance Ministry has issued a notification making an amendment to the Prevention of Money-laundering (Maintenance of Records) Rules.
The new rule now requires the reporting entity to compare the copy of the officially valid identification document produced by the client with the original and record it on the copy. The Prevention of Money Laundering Act (PMLA) forms part of the legal framework put in place by the government to combat money laundering and generation of black money.
The PMLA and its rules impose obligation on reporting entities like banks, financial institutions and intermediaries such as stock brokers to verify the identity of clients, maintain records and furnish information to the Financial Intelligence Unit of India (FIU-IND).
According to Rule 9, every reporting entity shall at the time of commencement of an accountbased relationship, identify its clients, verify their identity and obtain information on the purpose and intended nature of the business relationship.
Intermediaries like stock brokers, chit fund companies, cooperative banks, housing finance institutions and non-banking finance companies are also classified as reporting entities. The biometric identification number Aadhaar and other official documents are required to be obtained by the reporting entities from anyone opening a bank account as well as for any financial transaction of Rs 50,000 and above.
This is also required for all cash dealings of more than Rs 10 lakh or its equivalent in foreign currency, cash transactions where forged or counterfeit currency notes have been used and all suspicious transactions.
All cross- border wire transfers of more than Rs 5 lakh in foreign currency and purchase and sale of immovable property valued at Rs 50 lakh or more also fall under this category, according to the reporting rules.
The notification states in case the officially valid document furnished does not contain updated address, a utility bill like electricity, telephone, post-paid mobile phone, piped gas or water bill which is not more than two months old can be considered as a proof of address.
Also, property or municipal tax receipt, pension or family pension payment orders issued to retired employees by Government departments, or letter of allotment of accommodation from employer can be considered for the same purpose.