Executive Summary:
This document is a notification containing the Fourth Amendment Rules of 2019 to the Prevention of Moneylaundering Maintenance of Records Rules, 2005. It defines "Depository Receipt" and specifies due diligence norms for beneficial owners dealing with depository receipts or equity shares in certain jurisdictions. The rules came into force on the date of their publication in the Official Gazette: September 18, 2019.
Key Points / Main Content:
* **Amendment Title:** The rules are called the Prevention of Moneylaundering Maintenance of Records Fourth Amendment Rules, 2019.
* **Effective Date:** The rules came into force on September 18, 2019.
* **Definition of Depository Receipt:**
* Defines "Depository Receipt" as a foreign currency-denominated instrument issued by a foreign depository in a permissible jurisdiction, backed by eligible securities deposited with a domestic custodian.
* Includes "global depository receipt" as defined in the Companies Act, 2013.
* **Due Diligence for Depository Receipts and Equity Shares:**
* Specifies that for clients subscribing to or dealing with depository receipts or equity shares issued or listed in notified jurisdictions of companies incorporated in India, acting on behalf of beneficial owners resident in those jurisdictions, the due diligence of such beneficial owners shall be as per the norms of that jurisdiction.
* Subrules 3 to 9 of these rules are not applicable for due diligence of such beneficial owners.
* Equity share defined with the same meaning as in Section 43 of the Companies Act, 2013.
* **Exemption from Identifying Beneficial Owners:**
* It is not necessary to identify and verify the identity of any shareholder or beneficial owner of entities listed on a stock exchange in India or entities resident in jurisdictions notified by the Central Government and listed on stock exchanges in such jurisdictions notified by the Central Government, or subsidiaries of such listed entities.
Impact Analysis:
* **Financial Institutions/Intermediaries:**
* *Impact:* Must comply with the new rules regarding the definition of "Depository Receipt" and the revised due diligence procedures for clients dealing with depository receipts and equity shares. They also benefit from the exemption related to the identification of beneficial owners in certain cases.
* *Action Required:* Update internal policies and procedures to reflect the new definition of "Depository Receipt." Implement revised due diligence processes for clients dealing with depository receipts and equity shares in specified jurisdictions. Review and adjust beneficial ownership identification processes based on the exemption criteria.
* **Beneficial Owners (Residents of Specified Jurisdictions):**
* *Impact:* The determination, identification, and verification of beneficial owners who are residents of specified jurisdictions dealing with depository receipts or equity shares will be governed by the norms of their jurisdiction.
* *Action Required:* Be aware of the due diligence requirements of their jurisdiction when dealing with depository receipts or equity shares of companies incorporated in India.
* **Companies Incorporated in India:**
* *Impact:* Those issuing depository receipts or equity shares listed in jurisdictions notified by the Central Government may see changes in the due diligence requirements applied to beneficial owners.
* *Action Required:* Monitor and understand the implications of the new rules on their investors and ensure compliance with any related reporting requirements.
* **Central Government:**
* *Impact:* Responsible for notifying the jurisdictions for which the special due diligence norms apply and for overseeing the implementation of the amended rules.
* *Action Required:* Issue notifications specifying the jurisdictions to which the special due diligence norms apply. Monitor the implementation of the amended rules and address any issues or ambiguities that may arise.
Key Entities Referenced
Prevention of Moneylaundering Act, 2002: An act of the parliament of India to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering
Prevention of Moneylaundering Maintenance of Records Rules, 2005: Rules framed under the Prevention of Money Laundering Act, 2002, related to the maintenance of records.
Central Government: The executive authority of India.
Ministry of Finance: A ministry in the Government of India responsible for the country's finances.
Department of Revenue: A department under the Ministry of Finance, Government of India.
Companies Act, 2013: An Act of the Parliament of India on Indian company law which governs corporate affairs in India.
New Delhi: The capital of India.
A. K. GHARAI: Under Secretary, ES CellDOR
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[फा. सं. एम.11014/1/2017-ईएस सले -डीओआर]
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2019 !ारा (cid:1)कया गया था ।
MINISTRY OF FINANCE
(Department of Revenue)
NOTIFICATION
New Delhi, the 18th September, 2019
G.S.R. 669(E).—In exercise of the powers conferred by section 73 read with section 11A and section
12AA of the Prevention of Money-laundering Act, 2002 (15 of 2003), the Central Government hereby makes
the following rules further to amend the Prevention of Money-laundering (Maintenance of Records) Rules,
2005, namely:—
1. (1) These rules may be called the Prevention of Money-laundering (Maintenance of Records) Fourth
Amendment Rules, 2019.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (hereinafter referred to as
the principal rules), in rule 2 in sub-rule (1), after clause (aaf), the following clause shall be inserted, namely:-
‘(aag) “Depository Receipt” means a foreign currency denominated instrument, whether listed on an
international exchange or not, issued by a foreign depository in a permissible jurisdiction on the back of
eligible securities issued or transferred to that foreign depository and deposited with a domestic
custodian and includes 'global depository receipt' as defined in the Companies Act, 2013 (18 of 2013);’.
3. In the principal rules, in rule 9:--
(i) after sub-rule (1), the following shall be inserted, namely:--
“Provided that where a client is subscribing or dealing with depository receipts or equity shares, issued
or listed in jurisdictions notified by the Central Government, of a company incorporated in India, and it
is acting on behalf of a beneficial owner who is a resident of such jurisdiction, the determination,
identification and verification of such beneficial owner, shall be as per the norms of such jurisdiction and
nothing in the sub-rules (3) to (9) of these rules shall be applicable for due-diligence of such beneficial
owner.”.
Explanation–For the purposes of this proviso, the expression “equity share” means a share in the equity
share capital of a company and equity share capital shall have the same meaning as assigned to it in the
Explanation to section 43 of the Companies Act, 2013.”;¹Hkkx IIµ[k.M 3(i)º Hkkjr dk jkti=k % vlk/kj.k 3
(ii) in sub-rule (3), for clause (f), the following clause shall be substituted, namely;-
“(f) where the client or the owner of the controlling interest is an entity listed on a stock exchange in
India, or it is an entity resident in jurisdictions notified by the Central Government and listed on stock
exchanges in such jurisdictions notified by the Central Government, or it is a subsidiary of such listed
entities, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of
such entities.”
[F. No. M.11014/1/2017-ES Cell-DOR]
A. K. GHARAI, Under Secy.
Note : The principal rules were published in Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)
vide numbers G.S.R. 444(E), dated the 1st July, 2005 and were last amended vide G.S.R. 582(E) dated
19th August, 2019.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.