Money laundering: Cash limit may be brought down to Rs 200,000 from Rs 1 mn

The Centre is planning to tighten the anti-money laundering rules pertaining to the “reporting and maintenance of record” by mandating reporting entities to furnish information of entities dealing in cash above a certain amount, a move to curb money laundering.

Under the current Prevention of Money Laundering Act (PMLA) rules, such reporting is required for all cash transactions of value exceeding Rs 1 million, all cross-border wire transfers of more than Rs 500,000, and all purchase and sale of immovable property of Rs 5 million or more.

Sources say the cash transaction limit could be reduced to as low as Rs 200,000.

The reporting provisions under PMLA impose obligations on reporting entities like banks, financial institutions, and intermediaries such as stockbrokers to verify the identity of clients, maintain records, and furnish information to the financial intelligence unit (FIU).

FIU then analyses and processes such information and disseminates it to appropriate central and international agencies to support anti-money laundering efforts.

According to sources, the government may also insert the threshold for reporting entities about cash transaction in gold and bullion. After severe criticism, the government had rescinded its circular, which had said that jewellers with turnover of more than Rs 20 million would need to become reporting entity under the PMLA.

At present, jewellers require permanent account number (PAN) for jewellery purchases of over Rs 200,000 under the income tax rules. Making them under reporting entity would have obliged them to report the cash transaction under the said PMLA provisions.

The changes in the law would be a step towards cleaning up black money from the system. “We need to treat domestic black money more seriously than a mere criminal offence or dispute. We need to go deeper to keep a check on any illicit gains or tax evasion. We need a more stringent know-your-customer process in place under the anti-money laundering laws,” said a senior government official.

Further, there are also talks on widening the definition of the reporting entity. Sources say some more entities are likely to be added under the PMLA provisions.

Besides, the government is also considering the biometric identification number Aadhaar as a mandatory identity proof required to be obtained by the reporting entities from anyone dealing in any financial transaction.

The government is of the view that the said information could be extended for evaluating the goods and services tax collection as well.

Most of the sectors, especially services sectors like hotels and airlines, may ask for Aadhaar for bookings, said a person privy to the development.

Last year, the government brought the amendment to the PMLA rule and directed the reporting entity to compare the copy of the officially valid identification document produced by the client with the original and record it on the copy.

At present, the PMLA provisions attract a jail term of seven years and above in case of establishment of ‘proceed of crime”.

PMLA rules on furnishing information

• Reporting entity shall maintain record of all transaction as specified
• Reporting entity such as banks, financial institutions to furnish info to FIU
• Cash transaction of more than Rs 1 million to be maintained and reported
• Cash transaction integrally connected to each other within a month exceeds Rs 1 million
• All suspicious transaction, whether or not made in cash
• To report cross-border wire transfers of value exceeding Rs 500,000
• Purchase and sale of immovable property valued Rs 5 million and above

 Amendment to PMLA rules on cards
 

• To tighten reporting and maintenance of record by reporting entity
• Reduce the reporting limit substantially from the current Rs 1 million
• Bring new threshold for gold, bullion purchase in cash
• Mulls to make Aadhaar as mandatory identity proof to be recorded and submitted by the reporting entities