Dear Hon’ble Members of Working Committee This communication is to inform you about the latest change in the Prevention of Money laundering Act (PMLA) 2002 by an amendment notified in the official gazette on November 12, 2009. Under this change now all Non Profit Organizations (NPOs) registered as Charities trusts, Non-Government Organizations, educational institutions or societies will be under the preview of PMLA. This means the source of funds has to be disclosed and also be scrutinized for large monetary transactions. Earlier the entities covered under the Act only included chit fund companies, banking companies, financial institutions, and housing finance companies. The rule asks for maintenance of records of the nature and value of transactions, procedure and manner of maintaining and time for furnishing of information and verification of records of the identity of the donor/client by the banking companies, financial institutions (now NPOs) and intermediaries. The “suspicious transaction” means“ a transaction whether or not made in cash which, to person acting in good faith; (a) gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or (b) appears to be made in circumstances of unusual or unjustified complexity; or (c) appears to have no economic rationale or bonafide purpose. The “transaction” includes deposit, withdrawal, exchange or transfer of funds in whatever currency, whether in cash or by cheque, payment order or other instruments or by electronic or other non-physical means. Every NPO, as the case may be, 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 valued below rupees ten lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month; all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security has taken place; and all suspicious transactions whether or not made in cash. The records referred to in rule shall contain the information about the nature of the transactions; the amount of the transaction and the currency in which it was denominated; the date on which the transaction was conducted; and the parties to the transaction. These records shall be maintained for a period of ten years from the date of cessation of the transactions. The Principal Officer of a NPO shall furnish the information in respect of transactions every month to the Director by the 15th day of the succeeding month. Kindly also see the attached detailed Act and the Rules to know more about this provision. We have also circulated this among the financial experts to know about their opinion. We will communicate with you their opinion also. Best Wishes
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