Vijay Pal Dalmia, Advocate
Supreme Court of India & Delhi High Court
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The Government of India vide its notification dated 28th December 2020, made it obligatory for real estate agents whose turnover is more than 20 lakhs in a year to keep records of the transactions and comply with the provisions of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 ("PMLA Rules, 2005") framed under the Prevention of Money Laundering Act, 2002 ("PMLA Act"). That vide the earlier notification dated 15.11.2017, the 'real estate agents' as defined under clause (zm) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (No. 16 of 2016) were notified as the "person carrying on designated business or profession" under sub-clause (iii) of clause (sa) of sub-section 1 of section 2 of the Prevention of Money-laundering Act, 2002. The earlier notification has been superseded by the notification dated 28.12.2020.
That as per Section 2 (wa) of the PMLA Act, "reporting entity" means a banking company, financial institution, intermediary or a person carrying on a designated business or profession. That under the Section 12 of the PMLA Act, it is obligatory on the reporting entity to maintain the records of the business as per the provisions of the PMLA Act and PMLA Rules, 2005.
The Section 12 of the PMLA Act states as under:
Section 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;
(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 entities from any obligation under this Chapter.
Further, the Government of India has also notified Central Board of Indirect Taxes and Custom ("CBIT") as the Regulator for the real estate agents/ brokers for the purpose of PMLA Rules, 2005. However, till date, no procedure or guideline has been issued by the CBIT for the real estate agents/ brokers for maintaining information in respect of transactions, internal mechanism for maintaining information, However, the real estate agents/ brokers should start adhering with the norms of Know Your Client ("KYC") and do proper KYC verification of the customers as per the PMLA Rules, 2005 and develop a proper mechanism for detecting the suspicious transactions and maintaining the records of the transactions, as stipulated under the PMLA Rules, 2005. The real estate agents/ brokers are also under an obligation to report about the transactions which fall under the criteria given under the PMLA Rules, 2005 to the PMLA Authorities, within the stipulated time period provided under the Rules.
In case of non-compliance of the PMLA Rules, 2005, the real estate agents/ brokers can be subjected to monetary penalties which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure. The monetary penalty are in addition to any other action that may be taken under any other provisions of this PMLA Act. Therefore, it is imperative on the Real Estate Agents/ Brokers to comply with the provisions of PMLA Act and PMLA Rules, 2005.
The copy of the notification dated 28.12.2020 can be accessed at the below link:
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