Verification of Identity Under Section 11A of the Prevention of Money Laundering Act (PMLA)

The Prevention of Money Laundering Act (PMLA) requires reporting entities to ensure thorough identity verification of their clients and beneficial owners to strengthen the framework against money laundering. Section 11A, introduced through amendments, provides detailed guidelines for verifying identities while balancing compliance, privacy, and convenience.

Key Provisions of Section 11A

1. Modes of Verification

Reporting entities, such as banks, financial institutions, and other specified bodies, are mandated to verify the identity of their clients and beneficial owners using one or more of the following methods:

• Aadhaar-based Authentication: Applicable if the entity is a banking company, under the Aadhaar Act, 2016.
• Offline Aadhaar Verification: A less intrusive method of identity verification.
• Passport Verification: Using a passport issued under the Passports Act, 1967.
• Other Officially Valid Documents (OVDs): Any additional modes of identification as notified by the Central Government.

2. Permission for Non-Banking Entities

• Non-banking entities may also perform Aadhaar-based authentication if permitted by the Central Government.
• Such permission requires:
  • Compliance with Privacy and Security Standards under the Aadhaar Act.
  • Consultation with the Unique Identification Authority of India (UIDAI) and the appropriate regulator.

3. Multiple Modes of Identification

• If Aadhaar-based authentication is used, the entity must also offer other identification modes such as offline Aadhaar verification, passport, or other OVDs.
• This ensures clients and beneficial owners have the freedom to choose their preferred method of identity verification.

4. Voluntary Choice for Clients

• Identity verification using Aadhaar is a voluntary choice for clients and beneficial owners.
• No individual can be denied services for opting out of Aadhaar-based authentication or verification.

5. Restrictions on Storing Aadhaar Data

To safeguard privacy:

• Entities cannot store clients’ core biometric information or Aadhaar numbers if Aadhaar-based authentication or offline verification is used.

6. Additional Safeguards

• The Central Government retains the authority to introduce additional safeguards to enhance security and privacy during the identity verification process.

Explanation of Terms

• Aadhaar Number: A unique identification number issued under the Aadhaar Act.
• Core Biometric Information: Defined under the Aadhaar Act, it includes fingerprint scans, iris scans, or other biometric data.

Compliance and Legal Assistance

Identity verification under Section 11A forms a critical part of compliance for reporting entities under the PMLA. Failure to adhere to these provisions can result in legal consequences, including penalties.

Legal Light Consulting (LLC) offers specialized legal services to help entities ensure compliance with PMLA provisions, including identity verification processes.

Why Choose LLC?

1. Expertise in PMLA Compliance: Our lawyers have extensive experience in navigating PMLA regulations and ensuring seamless compliance.
2. Tailored Solutions: We provide customized advice and solutions for reporting entities to meet their specific needs.
3. Data Privacy Focus: Our team ensures that identity verification processes adhere to data protection and privacy standards.
4. Comprehensive Representation: From advisory services to handling disputes, we represent clients at every stage of compliance and enforcement.

Conclusion

Section 11A of the PMLA aims to balance robust identity verification with privacy and security safeguards. It empowers clients and beneficial owners with the right to choose their preferred verification method while ensuring compliance for reporting entities.

For professional legal guidance on PMLA compliance and identity verification, contact Legal Light Consulting. Our team is committed to providing expert legal representation and safeguarding your interests.