Chapter IV OBLIGATIONS OF BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES

1[12. Reporting entity to maintain records.--(1) Every reporting entity shall--

1. (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;
2. (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*****
3. (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.

1. (2) Every information maintained, furnished or verified, save as otherwise provided under any law for the time being in force, shall be kept confidential.
2. (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.
3. (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.
4. (5) The Central Government may, by notification, exempt any reporting entity or class of reporting 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.

1. (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.
2. (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.]

1[12AA. Enhanced due diligence.--(1) Every reporting entity shall, prior to the commencement of each specified transaction,--

1. (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;
2. (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;
3. (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.

1. (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.
2. (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.
3. (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.]

1. (1) The Director may, either of his own motion or on an application made by any authority, officer or person, 1[make such inquiry or cause such inquiry to be made, as he thinks fit to be necessary, with regard to the obligations of the reporting entity, under this Chapter.] 2[(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.] 3[(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.]
2. (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. 4[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).]

1[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.]

1[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 2[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.]