Beneficial Owner

Dear friends,
Lets understand who are benefecial owners in an account .

The menace of Money laundering is showing dangerous proportion and its magnitude in India was to the tune of 95 billion dollars in the year 2012-13. In recent past, incidents of laundering huge amount of money by remitting foreign currency  for purported Import of goods under Liberalized Remittance Schemes of the RBI through newly opened accounts have come to the notice at several Banks.

Deficiencies in observance of FEMA Guidelines, proper follow up of remittance and desired due diligence in respect of the accounts used for remittance has resulted to this undesirable situation. As most of the accounts used in these cases of Money laundering are accounts opened in the name of Proprietorship, Partnership or Private Ltd. Companies,  the enhanced due diligence (EDD) on beneficial owners of account was a requisite . As these accounts are perceived as “High Risk” accounts, FATF, FIU-IND and RBI have desired that the beneficial ownership should be clearly established for such accounts.

It will be appropriate to clarify for the benefits of the readers that who are beneficial owners in an account:

a) Where the customer is a company, the beneficial owner is the natural person(s), who acting through judicial persons, have a controlling ownership interest or otherwise exercise control over the affairs of Company . Controlling ownership interest” means ownership of more than 25 % of the shares/capital/profits of the company and “Control” includes the right to appoint majority of the directors or to control the management or policy decisions.

b) Where the customer is a partnership firm / unincorporated association or body of individuals (societies)  , the beneficial owner is the natural person(s), who  acting through one or more juridical person has ownership of more than 15% of capital or profits of the firm/ association.

c) In case of  customer being a trust, beneficial owner (s) include the author of the trust, the trustee, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust.

The bankers are under obligation  to carry out meaningful EDD on beneficial owners as any delinquency in this regard may not only expose the Bank to compliance, operational, legal and reputational risks but  can also cause problems for the erring employees.

Keeping in view the aforesaid, the Banks should incorporate the concise information in their record on the beneficial owners while opening of Current Account in the name of Trust, Public/Private Companies, Partnership Firms, Societies etc.

The employees should be made responsible not only to obtain the relevant information in respect of beneficial owners in such accounts but also for its’ verification and proper incorporation in Core Banking. The employees should refrain themselves from leaving the data  columns unfilled so as to ensure proper identification of beneficial owners.

Sneh Deep Agnihotri