In exercise of the powers conferred by sub section 1 of section 11A of the Prevention of Money laundering Act

## Policy Analysis Report: Notification Regarding Aadhaar Authentication Service under the Prevention of Money-laundering Act, 2002 **1. Executive Summary:** This report analyzes a notification issued by the Ministry of Finance, Department of Revenue, Government of India, dated January 28, 2021. This notification, G.S.R. 59(E), grants the National Payments Corporation of India (NPCI) the authority to undertake Aadhaar authentication services under Section 11A of the Prevention of Money-laundering Act (PMLA), 2002. The core purpose of this notification is to enable NPCI to utilize Aadhaar authentication for verifying customer identity, likely to enhance security and efficiency in financial transactions and compliance with PMLA regulations. **2. Introduction:** The purpose of this report is to provide an informative analysis of the Government of India's notification regarding the authorization of the National Payments Corporation of India (NPCI) to perform Aadhaar authentication services under the Prevention of Money-laundering Act (PMLA), 2002, based solely on the provided text. **3. Policy Overview:** This is a new policy notification enabling Aadhaar authentication. The core objective, as inferred from the text, is to strengthen the mechanisms for preventing money laundering by leveraging Aadhaar authentication through the National Payments Corporation of India (NPCI). This likely aims to improve customer verification processes, align with Aadhaar-based service delivery regulations, and enhance the overall security of financial transactions. **4. Background and Rationale:** This new policy likely addresses the need for more robust and efficient customer verification processes within the financial sector to combat money laundering. Given the widespread adoption of Aadhaar, integrating it into the PMLA framework through authorized entities like NPCI enables streamlined identification and validation. The text indicates that this move is predicated on NPCI meeting specified privacy and security standards under the Aadhaar Act. **5. Key Provisions / Changes:** * The core provision is the notification that the National Payments Corporation of India (NPCI) is authorized to undertake Aadhaar authentication services of the Unique Identification Authority of India under Section 11A of the Prevention of Money-laundering Act, 2002. * This authorization is contingent upon NPCI complying with standards of privacy and security under the Aadhaar Targeted Delivery of Financial and Other Subsidies, Benefits and Services Act, 2016. * The Central Government made this decision after consultation with the Unique Identification Authority of India (UIDAI) and the Reserve Bank of India (RBI). **6. Target Audience and Stakeholders:** The primary target audience and stakeholders are: * **National Payments Corporation of India (NPCI):** They are directly affected as they are granted the authority and responsibility to implement Aadhaar authentication services. * **Reserve Bank of India (RBI):** As the regulatory authority consulted in the decision-making process. * **Financial Institutions:** Those interacting with NPCI's payment infrastructure will be indirectly affected through changes in authentication processes. * **Customers of Financial Institutions:** Those whose identities will be verified using Aadhaar through the NPCI platform. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** * The Central Government (Ministry of Finance, Department of Revenue) is the issuing authority. * The National Payments Corporation of India (NPCI) is responsible for implementing the Aadhaar authentication service. * The Unique Identification Authority of India (UIDAI) and the Reserve Bank of India (RBI) are involved in consultation and oversight. * **Timelines/Procedures:** The notification is effective from the date of publication. Specific implementation timelines and procedures are not detailed in the text but are likely to be governed by guidelines issued by NPCI, UIDAI, and RBI. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes and impact of this policy are: * **Enhanced Customer Verification:** Improved and more secure customer verification processes within the financial sector. * **Reduced Money Laundering Activities:** Strengthening the prevention of money laundering through enhanced identity verification. * **Increased Efficiency:** Streamlined authentication processes through the use of Aadhaar, potentially leading to faster and more efficient transactions. * **Compliance with Regulations:** Facilitating compliance with PMLA regulations by financial institutions. **9. Conclusion:** The notification authorizing the National Payments Corporation of India (NPCI) to undertake Aadhaar authentication services under the Prevention of Money-laundering Act (PMLA), 2002 represents a significant step towards strengthening the financial system's ability to combat money laundering. By leveraging the Aadhaar framework and ensuring compliance with privacy and security standards, this policy aims to create a more secure and efficient environment for financial transactions. Its significance lies in its potential to enhance customer verification processes, reduce fraudulent activities, and promote greater transparency in the financial sector.

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