Two days refresher course on NBFC Regulations

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Refer our resources on SBR:

Online Workshop on Regulatory Concerns on Fair Lending Practices and KYC

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Our resources on KYC can be accessed here.

Our resources on SBR:

Amendments to KYC Directions including non- face-to-face KYC

Anita Baid in conversation with Vinod Kothari

Evince your interest here – https://forms.gle/JLaVk6n1mBHdsw4h9

Live on YouTube – https://www.youtube.com/channel/UCgzB-ZviIMcuA_1uv6jATbg/videos

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Practicing professionals as reporting entities under PMLA

Ministry of Finance notification notifies certain client transactions by CA, CS and CMAs for money laundering law

– Team Finserv | finserv@vinodkothari.com

Brief Background

The Ministry of Finance vide notification dated May 03, 2023 (‘Notification’) has widened the ambit of the term “Reporting Entity” as defined in Section 2(1)(wa), read with sec. 2 (1)(sa) of the Prevention of Money Laundering Act, 2002 (‘PMLA’). The Notification, which has already created a lot of flutter, seems to bring practising corporate professionals (CAs, CSs, CMAs), if the said corporate professionals are carrying certain “financial transactions” on behalf of their clients.

At its first reading, one may either take a very aggressive view, to regard all practising corporate  professionals as being “reporting entities”. However, a finer reading suggests that only such professionals, who are carrying specified financial transactions on behalf of their clients, are covered as reporting entities. We discuss this below.

Our YouTube video on the topic discussing the changes brought in by the said notification and its implications is available here – https://www.youtube.com/watch?v=hWdeFfVcnQM
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Amended KYC norms: A move towards faceless KYC

RBI amends KYC norms to permit faceless KYC; beneficial owner of 10% or more to be subjected to KYC

– Anita Baid, Vice President | anita@vinodkothari.com

Recognising the increasing trend towards faceless lending, and the use of technology for customer due diligence, the RBI has made much-needed changes in the KYC process, permitting lenders to avoid any of physical interface with borrowers and rely on documents stored in Digilocker or other e-documents. Amendments, immediately effective, were made to the Master Direction – Know Your Customer (KYC) Direction, 2016 vide a notification dated April 28, 2023.

Watch our YouTube video on the topic here – https://www.youtube.com/live/Ewi4FW8G0xk?feature=share

The amendments in the KYC Directions are applicable to every entity regulated by the RBI, including but not limited to banks, cooperative banks, payment system providers, AIFIs  as well as NBFCs intend to achieve the following:

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Simplifying the KYC process and business identifier

Anita Baid, Vice President | finserv@vinodkothari.com

Backdrop

The regulations for conducting customer identification and due diligence by financial sector entities have been laid down by RBI and SEBI, in accordance with the provisions of Prevention of Money Laundering Act and Rules. Under the current regime, the KYC process extends from physical KYC to digital and video-based KYC as well. The physical process of collecting KYC documents and verifying the same involves a lot of paperwork. On the other hand, the Digital KYC Process is a facility that allows lenders to undertake the KYC of custom​​ers via an authenticated application, specifically developed for this purpose, hence making it a paperless process. The Digital KYC process, however, also requires physical interaction. Video-based KYC is both paperless and without any physical intervention.

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NBFCs licensed for KYC authentication: Guide to the new RBI privilege for Aadhaar e-KYC Authentication

-Kanakprabha Jethani (kanak@vinodkothari.com)

Background

On September 13, 2021, the RBI issued a notification[1] (‘RBI Notification’) permitting all NBFCs, Payment System Providers and Payment System Participants to carry out authentication of client’s Aadhaar number using e-KYC facility provided by the Unique Identification Authority of India (UIDAI), subject, of course, to license being granted by MoF. The process involves an application to the RBI, onward submission after screening of the application by the RBI, then a further screening by UIDAI, and final grant of authentication by the MoF,

We discuss below the underlying requirements of the PMLA, Aadhaar Act and regulations thereunder (defined below) and other important preconditions for this new-found authorisation for NBFCs. Read more