Online Gaming Firms May be Denoted ‘Reporting Entities’ Under PMLA

An inter-ministerial consultation being circulated could result in online gaming firms being categorised as ‘reporting entities’ under the Prevention of Money Laundering Act (PMLA), 2002. The move follows the apprehension that gaming apps carry unaccounted money that is being utilised for spurious activities that need to be curtailed through the timely reporting of suspicious transactions. Among reports of money laundering operations being carried out by illegal gaming and betting apps via small retail outlets, regulatory measures were anticipated.

Section 2(wa) of the PMLA Act defines a reporting entity as a banking company, financial institution, intermediary or person carrying on a designated business or profession. Under Section 12, reporting entities are required to maintain records of transactions, clients, beneficial owners, etc., for five years and furnish them to the Financial Intelligence Unit – India (FIU-IND) set up by the Central Government as and when required. Reporting entities are also subjected to enhanced due diligence requirements, such as confirming the identity of clients, examining the ownership and financial position, sources of funds, etc.

The government recently included entities dealing in digital currencies within the ambit of the act through the AML & CFT Guidelines for Reporting Entities Providing Services Related to Virtual Digital Assets. The guidelines were intended to set out the steps that these entities were required to implement to discourage and identify any money laundering, terrorist financing, or proliferation financing activities. A similar set of guidelines may be imposed on online gaming firms such as Dream11, Games 24×7, Winzo, etc.