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Maintenance of Records
What are the obligations for maintenance of records under PMLA?
IIn terms of section 12 of the Prevention of Money Laundering Act, 2002, every reporting entity shall maintain a record of all transactions, including the information furnished to FIU-IND, in such a manner as to enable it to reconstruct individual transactions. The record has to be maintained of the prescribed transactions and information for a minimum period of five years.

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Which notification lays down the procedure and the manner of maintenance of records?
Rules 3, 4 and 5 of the Rules notified by Notification No. 9/2005 dated 1st July 2005 as amended by Notification No.15/2005 dated 13th Dec 2005 and Notification No.12/2013 dated 17th Aug 2013 specify the procedure and manner for maintenance and retention of records.

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Which records need to be maintained as per PMLA?
As per Rule 3 of the Rules every reporting entity shall maintain a record of -
  • all cash transactions of the value of more than rupees ten lakhs or its equivalent in foreign currency;
  • all series of cash transactions integrally connected to each other which have been individually valued below rupees ten lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate exceeds Rs.10 lakh;
  • all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine   or where any forgery of a valuable security or a document has taken place facilitating the transactions;
  • all suspicious transactions whether or not made in cash;
  • all cross border wire transfers of the value exceeding Rs.5 lakh or its equivalent in foreign currency where either the origin or destination of fund is in India;
  • all purchase and sale of immovable property valued at Rs.50 lakh or more that is registered by the reporting entity.
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What constitutes a suspicious transaction under PMLA?
Suspicions transaction means a transaction whether or not made in cash which, to a person acting in good faith -
  • gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or
  • appears to be made in circumstances of unusual or unjustified complexity; or
  • appears to have no economic rationale or bonafide purpose; or
  • gives  rise  to  a  reasonable  ground  of  suspicion  that  it may involve financing of the activities relating to terrorism.
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Whether a transaction can be reported both under CTR and STR
Yes, in case it is a cash transaction falling within the prescribed rules and has also an element of suspicious transaction.
How does PMLA, 2002 define records?
Records include the records maintained in the form of books or stored in a computer or such other form as may be prescribed.

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In what form is the information on transaction required to be maintained?
Rule 5 contained in Notification No. 9/2005 read with Notification No.15/2005 and Notification No.12/2013 dated 17th Aug 2013specifies that reporting entities shall maintain transactions with their clients both in hard and soft copies in accordance with the procedure and manner as may be specified by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority, as the case may be.

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For how long should the record of transactions be retained?
The records of all transactions referred to in Rule 3 contained in Notification No.9/2005 dated 1/7/2005 are required to be maintained by reporting entity for a period of five years from the date of cessation of the transactions with their clients.

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Can a reporting entity be penalized for not complying with the obligations of maintenance of records under PMLA, 2002?
Yes, under section 13 of the Prevention of Money Laundering Act, 2002. If the Director, FIU-IND finds that any banking company, financial institution or intermediary has failed to comply with the obligations of maintenance of records, then, he may levy a fine from ten thousand rupees upto one lakh rupees for each failure, apart from other administrative sanctions.

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FIU-India does not seek any information from individuals. If any person receives any such letter/query, it is a fraud and it should be immediately reported to the Police and also brought to the notice of FIU-IND...more