Guneet Mayall
December 13, 2023
The Prevention of Money Laundering
Act, 2002 (“PMLA”) and the rules made thereunder, viz., the Prevention
of Money Laundering Rules, 2005 (“PMLR”), form the core of India’s legal
framework to counter money laundering, terrorist financing, serious crime, and
other threats to the economic integrity, financial stability, and internal
security of the nation.
Under Chapter IV of the
PMLA, the ‘Reporting Entities’, are required to implement robust mechanisms and
safeguards to mitigate the risk of misuse of the financial system in relation
to the above threats. This includes requirements relating to Customer Due Diligence
(“CDD”) (initial and ongoing), which includes Enhanced Due Diligence (“EDD”)
in respect of high-risk customers, reporting of specified transactions, and
maintenance of records relating to transactions and CDD/ Know Your Client (“KYC”).
The Government of India, Ministry of Finance, Department of Revenue, vide Notification G.S.R. 855(E), dated 29 November 2022, issued under F.No.P 12011/7/2022-ES Cell- DOR (“the Notification”) has notified the ‘real estate agents’ as defined under clause (zm) of Section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016) and as a person engaged in providing services in relation to sale or purchase of real estate and having annual turnover of Rupees twenty lakhs and above as a “person carrying out designated business or profession” under Section 2(1)(sa)(iii) of the PMLA, whereas further by virtue of 2(1)(wa) of the PMLA, a person carrying on designated business or profession is a ‘reporting entity’ for the purposes of the PMLA and the PMLR.
Regulators with an intent
to bring complete clarity to the real estate agents in their role as a
reporting entity issued the Anti-Money Laundering, Countering the Financing of Terrorism
and Combating Proliferation Financing Guidelines for Real Estate Agents, 2023
under PMLA, 2002, UAPA, 1967, and WMDA, 2005 dated 04.05.2023 (“the
Guidelines”).
Following are the compliances required to be undertaken by the real estate agents as a reporting entity to aid government combat money laundering:
Whereas
strict and meaningful compliance with the obligations under the PMLA and the
PMLR, including those extracted above, is critical to safeguard the Indian
financial system from illicit financial flows, to detect and deter criminal and
terrorist use of financial channels, to prosecute criminal and terrorist
activities, to prevent the laundering of ‘proceeds of crime’, and to protect
the integrity of system constituents as a whole.
Compliance with the
obligations contained in the PMLA and PMLR by ‘Reporting Entities’, with reference
to CDD and the timely reporting of prescribed transactions, serves as a robust
safeguard against the misuse or abuse of the nation’s financial ecosystem.
Conversely, the failure to implement safeguards by even a single entity can
create a weak link leading to systemic risk and exposure, in addition to making
the non- compliant entities subjected to vigorous fines and punishments.
Insolvency and Bankruptcy Code, 2016 (“Code”) was introduced with the aim to revamp the erstwhile insolvency and bankruptcy laws in India to facilitate and foster the resolution process by lenders against the insolvent debtors, in a systematic, effective and timely manner.
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