4
[11A. Verification of Identity by Reporting Entity.—(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 (18 of 2016) if the reporting entity is a banking company; or
1. Subs. by Act 2 of 2013, s. 7, for “Adjudicating Authority” (w.e.f. 15-2-2013).
2. Ins. by s.7, ibid. (w.e.f. 15-2-2013).
3. Subs. by s. 8, ibid., for “sub-section (6) of section 8” (w.e.f. 15-2-2013).
4. Ins. by Act 14 of 2019, s. 27 (w.e.f. 25-07-2019).
14
(b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other Subsidies,
Benefits and Services) Act, 2016 (18 of 2016); or
(c) use of passport issued under section 4 of the PassportsAct, 1967 (15 of 1967); or
(d) use of any other officially valid document or modes of identification as may be notified by the
Central Government in thisbehalf:
Provided that the Central Government may, if satisfied that a reporting entity other than banking
company, complies with such the standards of privacy and security under the Aadhaar (Targeted Delivery of
Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 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 (18 of 2016) and the
appropriate regulator.
(2) If any reporting entity performs authentication under clause (a) ofsub-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 Aadhaarnumber.
(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 (18 of 2016).]
1
[12. Reporting entity to maintain records.—(1) Every reporting entity shall—
(a) maintain a record of all transactions, including information relating to transactions covered
under clause (b), in such manner as to enable it to reconstruct individual transactions;
(b) furnish to the Director within such time as may be prescribed, information relating to such
transactions, whether attempted or executed, the nature and value of which may be prescribed;
2* * * * *
(e) maintain record of documents evidencing identity of its clients and beneficial owners as well
as account files and business correspondence relating to its clients.
(2) Every information maintained, furnished or verified, save as otherwise provided under any law
for the time being in force, shall be kept confidential.
(3) The records referred to in clause (a) of sub-section (1) shall be maintained for a period of five
years from the date of transaction between a client and the reporting entity.
(4) The records referred to in clause (e) of sub-section (1) shall be maintained for a period of five
years after the business relationship between a client and the reporting entity has ended or the account has
been closed, whichever is later.
(5) The Central Government may, by notification, exempt any reporting entity or class of reporting
1. Subs. by Act 2 of 2013, s. 9, for section 12 (w.e.f. 15-2-2013).
2. Clauses (c) and (d) omitted by Act 14 of 2019, s. 28 (w.e.f. 25-07-2019).
15
entities from any obligation under this Chapter.]
1
[12A. Access to information.—(1) The Director may call for from any reporting entity any of the
records referred to in 2
[section 11A, sub-section (1) of section 12, sub-section (1) of section 12AA] and
any additional information as he considers necessary for the purposes of this Act.
(2) Every reporting entity shall furnish to the Director such information as may be required by him
under sub-section (1) within such time and in such manner as he may specify.
(3) Save as otherwise provided under any law for the time being in force, every information sought
by the Director under sub-section (1), shall be kept confidential.]
3
[12AA. Enhanced due diligence.—(1) Every reporting entity shall, prior to the commencement of
each specified transaction,—
(a) verify the identity of the clients undertaking such specified transaction by authentication
under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services)
Act, 2016 (18 of 2016) in such manner and subject to such conditions, as may be prescribed:
Provided that where verification requires authentication of a person who is not entitled to obtain
an Aadhaar number under the provisions of the said Act, verification to authenticate the identity of
the client undertaking such specified transaction shall be carried out by such other process or mode,
as may be prescribed;
(b) take additional steps to examine the ownership and financial position, including sources of
funds of the client, in such manner as may be prescribed;
(c) take additional steps as may be prescribed to record the purpose behind conducting the
specified transaction and the intended nature of the relationship between the transaction parties.
(2) Where the client fails to fulfill the conditions laid down under sub-section (1), the reporting entity
shall not allow the specified transaction to be carried out.
(3) Where any specified transaction or series of specified transactions undertaken by a client is
considered suspicious or likely to involve proceeds of crime, the reporting entity shall increase the future
monitoring of the business relationship with the client, including greater scrutiny or transactions in such
manner as may be prescribed.
(4) The information obtained while applying the enhanced due diligence measures under
sub-section (1) shall be maintained for a period of five years from the date of transaction between a client
and the reporting entity.
Explanation.—For the purposes of this section, “specified transaction” means—
(a) any withdrawal or deposit in cash, exceeding such amount;
(b) any transaction in foreign exchange, exceeding such amount;
(c) any transaction in any high value imports or remittances;
(d) such other transaction or class of transactions, in the interest of revenue or where there is a
high risk or money-laundering or terrorist financing,
as may be prescribed.]
13. Powers of Director to impose fine.—(1) The Director may, either of his own motion or on an
application made by any authority, officer or person, 4
[make such inquiry or cause such inquiry to be
1. Ins. by Act 2 of 2013, s. 10 (w.e.f. 15-2-2013).
2. Subs. by Act 23 of 2019, s. 194, for “sub-section (1) of section 12” (w.e.f. 1-8-2019).
3. Ins. s. 195, ibid. (w.e.f. 1-8-2019).
4. Subs. by Act 2 of 2013, s. 11, for certain words, brackets and figures (w.e.f. 15-2-2013).
16
made, as he thinks fit to be necessary, with regard to the obligations of the reporting entity, under this
Chapter].
1
[(1A) If at any stage of inquiry or any other proceedings before him, the Director having regard to the
nature and complexity of the case, is of the opinion that it is necessary to do so, he may direct the
concerned reporting entity to get its records, as may be specified, audited by an accountant from amongst
a panel of accountants, maintained by the Central Government for this purpose.
(1B)The expenses of, and incidental to, any audit under sub-section (1A) shall be borne by the Central
Government.]
2
[(2) If the Director, in the course of any inquiry, finds that a reporting entity or its designated director
on the Board or any of its employees has failed to comply with the obligations under this Chapter, then,
without prejudice to any other action that may be taken under any other provisions of this Act, he may—
(a) issue a warning in writing; or
(b) direct such reporting entity or its designated director on the Board or any of its employees, to
comply with specific instructions; or
(c) direct such reporting entity or its designated director on the Board or any of its employees, to
send reports at such interval as may be prescribed on the measures it is taking; or
(d) by an order, impose a monetary penalty on such reporting entity or its designated director on
the Board or any of its employees, which shall not be less than ten thousand rupees but may extend to
one lakh rupees for each failure.]
(3) The Director shall forward a copy of the order passed under sub-section (2) to every banking
company, financial institution or intermediary or person who is a party to the proceedings under that
sub-section.
3
[Explanation.—For the purpose of this section, “accountant” shall mean a chartered accountant
within the meaning of the Chartered Accountants Act, 1949 (38 of 1949).]
4
[14. No civil or criminal proceedings against reporting entity, its directors and employees in
certain cases.—Save as otherwise provided in section 13, the reporting entity, its directors and
employees shall not be liable to any civil or criminal proceedings against them for furnishing information
under clause (b) of sub-section (1) of section 12.]
5
[15. Procedure and manner of furnishing information by reporting entities.— The Central
Government may, in consultation with the Reserve Bank of India, prescribe the procedure and the manner
of maintaining and furnishing information by a reporting entity under 6
[section 11A, sub-section (1) of
section 12 and sub-section (1) of section 12AA] for the purpose of implementing the provisions of this
Act.]