Pmla And Its Entry Into The Gaming Sector

Introduction

The Ministry of Finance in its recent notification dated March 7th decided decided to classify the entities that engage in activities related to the aspect of Virtual Digital Assets (VDA(s). A new definition pertaining to “Reporting Entities has been introduced under the Prevention of Money Laundering Act, 2002 and the rules of the same have updated accordingly. Reporting Entities include any persons that carry out any designated or stipulated profession or business that comes under the arena of Virtual Digital Assests.

VDAs can be defined as a token or code that is generated through the means of cryptography. These VDAs are not considered to be currency. VDAs further offer many more benefits such as digital representation of value exchanged and can also serve as stores of value or any unit of account that can be transferred and these include NFTs, (Non-fungible Tokens), several digital assets or also involved.

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Gaming Platform

Any tokens that meet the criteria for a VDA are included in the definition of NFTs, with the exception of those that permit the change of ownership in the underpinning tactile  assets in a way that is legally enforceable. The expansive nature of this term is evidenced by the fact that additional explanations have to be made in order to exclude things like subscriptions, gift cards, and reward points.

The notification brought out by the Ministry of Finance has categorised the activities that can result in an entity being considered as a Reporting Entity, these include when there is any exchange between  fiat currencies and any form of VDAs, interchange between the different forms of VDAs or any transfer between the same, or any provision related to the sale of VDAs.

If the following conditions are met, then these reporting entities have to comply by the various requirements that are mentioned under the PMLA,2002, this includes an extensive process of verification of both user and client identity, details of the client such ownership, purpose of ownership, purpose behind the transactions being done, and even records of maintenance must be produced.

The main and purpose of bringing out this notification is to expand the already existing regime to online money gaming platforms. In some Online Money Gaming Platforms , there exists an option of trading, accumulating the value that has been won through the game, the same must be kept at check. Till now, there has not been any legal check or barrier imposed on such value attachments, and the same has come under scrutiny in co-relation to the implication of  PMLA. The option that these VDAs provide that is in-game purchasing of tokens is something that is necessary to be brought under the radar of PMLA.

CONCLUSION

The very intent of bringing the PMLA, 2002 was to mitigate money laundering and to accordingly control the same. With the Skill Gaming Sector now gaining popularity it has turned out to become a new possible avenue of housing laundered money and the same must be controlled and the notification by the Ministry of finance is a move towards the same hopefully on the positive side.

Author: Ankitha Varnika, A student at  National Law University, Visakhapatnam, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

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