There are substantial enhancements for trusts, arcs, and partnership firms:
FinTech BizNews Service
Mumbai, 20 October 2023: The RBI has recently made significant revisions to its master direction on Know Your Customer (KYC) for regulated entities. These changes incorporate amendments to the Prevention of Money Laundering rules and, importantly, deal with the requirement of beneficial owner (BO) identification for partnership firms.
In line with this, Ankit Ratan, CEO & Co-founder, Signzy, talks about the implications of the new norms. Signzy provides advanced online identity verification service to help businesses meet KYC, KYB and AML regulations. Ankit Ratan explains: “We truly applaud the recent regulatory amendments introduced by the RBI, which signify a pivotal step towards reinforcing the financial sector's integrity. While the regulations impact most entities, there are substantial enhancements for trusts, ARCs, and partnership firms. For instance, the reduction of the ownership threshold from 15% to 10%, along with the introduction of the 'control' parameter, marks a significant stride in the regulator’s pursuit of robust due diligence and risk assessment. These changes will help identify beneficial ownership more effectively in partnership firms, thereby fostering transparency and accountability within the financial sector.”
Furthermore, the amendments pertaining to CDD and Ongoing Due Diligence stand as commendable measures. Ankit adds: “Extending CDD requirements to transactions exceeding Rs50,000, including international money transfers, heightens vigilance against potential financial irregularities. The articulated CDD steps, involving identity verification, understanding the customer's business nature, and meticulous beneficial owner checks, significantly enhance the integrity of our financial system.”
Next, the inclusion of 'source of wealth' in ongoing due diligence underscores the comprehensive nature of these amendments. Ankit explains: “This proactively recognizes the importance of tracing wealth sources, just as critical as scrutinizing fund sources, significantly enhancing our financial sector's resilience against potentially fraudulent activities. The introduction of group-wide AML policies is another commendable initiative. It ensures uniformity across entities within a group, reducing the chances of regulatory arbitrage. This underlines the importance of information sharing and maintaining confidentiality, ultimately bolstering the overall effectiveness of AML measures.”
In addition, it is crucial to acknowledge extension of regulated entities to encompass ARCs. Ankit points out: “This expansion acknowledges the evolving nature of financial services, emphasizing the significance of subjecting all relevant entities to stringent KYC and AML measures. As we move forward and the regulatory landscape becomes more stringent, I believe APIs will emerge as a critical piece that will not only simplify KYC and AML compliance but also help businesses across industries to save time and money.”
