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Section 11A Prevention of Money-laundering Act: Verification of identity by reporting entity

Section 11A (Verification of identity by reporting entity) under Chapter IV (Obligations of Banking Companies, Financial Institutions and Intermediaries) of the Prevention of Money-laundering Act, 2002 (PMLA) —

❝(1) Every reporting entity shall verify the identity of its clients and the beneficial owner, by—

 (a) authentication under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 if the reporting entity is a banking company; or

 (b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016; or

 (c) use of passport issued under section 4 of the Passports Act, 1967; or

 (d) use of any other officially valid document or modes of identification as may be notified by the Central Government in this behalf:

 Provided that the Central Government may, if satisfied that a reporting entity other than banking company, complies with such standards of privacy and security under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, and it is necessary and expedient to do so, by notification, permit such entity to perform authentication under clause (a):

 Provided further that no notification under the first proviso shall be issued without consultation with the Unique Identification Authority of India established under sub-section (1) of section 11 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 and the appropriate regulator.

(2) If any reporting entity performs authentication under clause (a) of sub-section (1), to verify the identity of its client or the beneficial owner it shall make the other modes of identification under clauses (b), (c) and (d) of sub-section (1) also available to such client or the beneficial owner.

(3) The use of modes of identification under sub-section (1) shall be a voluntary choice of every client or beneficial owner who is sought to be identified and no client or beneficial owner shall be denied services for not having an Aadhaar number.

(4) If, for identification of a client or beneficial owner, authentication or offline verification under clause (a) or clause (b) of sub-section (1) is used, neither his core biometric information nor his Aadhaar number shall be stored.

(5) Nothing in this section shall prevent the Central Government from notifying additional safeguards on any reporting entity in respect of verification of the identity of its client or beneficial owner.

 Explanation.—The expressions “Aadhaar number” and “core biometric information” shall have the same meanings as are respectively assigned to them in clauses (a) and ( j) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.’.




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Extra Notes for Readers:

A. Section 11A of PMLA, 2002 was newly inserted by the Aadhaar and Other Laws (Amendment) Act, 2019 (Act 14 of 2019), s. 27 (w.e.f. 25-07-2019).

B. The Prevention of Money-laundering Act, 2002 (Act No. 15 of 2003) was amended by:
1. Prevention of Money-Laundering (Amendment) Act, 2005 (No. 20 of 2005) (w.e.f. 01-7-2005);
2. Prevention of Money-Laundering (Amendment) Act, 2009 (No. 21 of 2009) (w.e.f. 01-6-2009);
3. Prevention of Money-Laundering (Amendment) Act, 2012 (No. 2 of 2013) (w.e.f. 15-2-2013);
4. Finance Act, 2015 (No. 20 of 2015) (w.e.f. 14-5-2015);
5. Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (No. 22 of 2015) (w.e.f. 1-4-2016);
6. Finance Act, 2016 (No. 28 of 2016) (w.e.f. 01-6-2016);
7. Finance Act, 2018 (No. 13 of 2018) (w.e.f. 19-4-2018);
8. Prevention of Corruption (Amendment) Act, 2018 (No. 16 of 2018) (w.e.f. 26-7-2018).
9.  Finance Act, 2019 (No. 7 of 2019) (w.e.f. 20-03-2019).
10. Aadhaar and Other Laws (Amendment) Act, 2019 (No. 14 of 2019) (w.e.f. 25-07-2019).

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