The government has made Aadhaar mandatory for opening new accounts. It has noted that all existing bank accounts will have to be linked with Aadhaar number by December 31, 2017, or else they will be declared invalid.
More significantly, not only Aadhaar has been mandatory for opening new accounts but also for carrying out high-value transactions. The government has said that transactions worth Rs 50,000 or more will require Aadhaar number.
The government move to link all bank accounts with Aadhaar number comes days after the Supreme Court partially struck down the government proposal to make Aadhaar mandatory for the filing of tax returns. While the government wanted all taxpayers to quote Aadhaar number, the court said that only those who have the Aadhaar could be compelled to do so.
Those who do not have Aadhaar number can file the tax without it after July 1 and their PAN card will not be invalidated, noted the court. However, the latest move from the government ensures that all taxpayers, irrespective of the Supreme Court directive, will have to quote Aadhaar number while filing the tax returns.
Interestingly, the bank accounts are not exactly the only thing that is going to be linked to Aadhaar number. Several weeks ago the government had also issued a directive to telecom operators in the country, asking them to re-verify all phone numbers with Aadhaar. If any phone number is not re-verified and linked to Aadhaar by February 2018, it will be deactivated.
The government in Budget 2017 has already mandated seeding of the Aadhaar number with Permanent Account Number to avoid individuals using multiple PANs to evade taxes.
The notification issued amending the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, mandated quoting of Aadhaar along with PAN or Form 60 by individuals, companies and partnership firms for all financial transactions of Rs 50,000 or above.
Tightening the rules for small accounts, which can be opened without having officially valid KYC documents, the amendment said such accounts – which can have a maximum deposit of Rs 50,000, can be opened only at bank branches which have the core banking solution.
It can also be opened at a branch where it is possible to manually monitor and ensure that foreign remittances are not credited to such accounts and stipulated limits on monthly and annual aggregate of transactions and balance are not breached, the amended PMLA rules said.
Such small accounts shall remain operational initially for a period of 12 months and, thereafter, for a similar period if the account holder provides evidence that he or she has applied for officially valid identification documents.
“The small account shall be monitored and when there is a suspicion of money laundering or financing of terrorism or other high-risk scenarios, the identity of claim shall be established through the production of official valid documents,” it said.
The amendment makes it mandatory for individuals, companies and partnership firms to quote Aadhaar along with PAN or Form 60 for all financial transactions of Rs 50,000 or above with effect from June 1.
After June 1 if a person does not have an Aadhaar number at the time of opening an account, then he has to furnish proof of application for enrolment for Aadhaar and submit the Aadhaar number to the bank within six months of opening of the bank account.
“In case the client, eligible to be enrolled for Aadhaar and obtain a PAN… does not submit the Aadhaar number or the PAN at the time of commencement of an account-based relationship with a reporting entity, the client shall submit the same within a period of six months from the date of the commencement of the account-based relationship.
“Provided that the clients… already having an account-based relationship with reporting entities prior to date of this notification, the client shall submit the Aadhaar number and PAN by December 31, 2017,” the notification said.
So far, according to the PMLA Rules, it is mandatory to provide PAN numbers or Form 60 to banks while opening accounts or for high-value transactions.
For companies opening bank accounts, the Aadhaar number of managers, or employees holding an attorney to transact on the company’s behalf will have to be provided.
Commenting on the development, Nangia & Co-Managing Partner Rakesh Nangia said: “With the amendment, obtaining Aadhaar and PAN have gained paramount importance, since the banks are now required to report Aadhaar and PAN in respect of each of its clients at the time of account opening and in case of existing accounts at the time of making transactions worth Rs 50,000 or more”.
The Prevention of Money Laundering Act (PMLA) forms the core of the legal framework put in place by India to combat money laundering and generation of black money.
The PMLA and rules impose an obligation on reporting entities such as banks, financial institutions and intermediaries to verify the identity of clients, maintain records and furnish information to the Financial Intelligence Unit of India (FIU-IND).
According to Rule 9, every reporting entity shall at the time of commencement of an account-based relationship, identify its clients, verify their identity and obtain information on the purpose and intended nature of the business relationship.
In all other cases, identity should be verified while carrying out transactions of an amount equal to or exceeding Rs 50,000, and in any international money transfer operation.
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