Prevention of Money Laundering Act, 2002 (PMLA) forms the core of legal
framework put in place by India to combat money laundering and
related crimes. PMLA and the Rules notified there under came into
force from 1st July, 2005. Under PMLA, all the entries registered
with SEBI are required to furnish information of all the suspicious
transactions whether or not made in cash to FIU-IND. Under Section 3
of PMLA, projecting of crime as untainted property is an offence of
money laundering liable to be punishment under section 4 of the PMLA.
Money Laundering involves disguising financial assets so that they can be used
without detection of the illegal activity that produced them.
Through money laundering, the launderer transforms the monetary
proceeds derived from criminal activity into funds with as
apparently legal source.
Financial Intelligence Unit-India (FIU-IND) is the central
national agency of India responsible for receiving, processing,
analyzing and disseminating information of suspect financial
transactions. FIU-IND is also responsible for coordinating and
strengthening efforts of national and international intelligence,
investigation and enforcement agencies in combating money laundering
and related crimes.
Section 2 (1) (g) of PMLA Rules defines suspicious transaction
whether or not made in cash which, to a person acting in good faith:
➢ Gives rise to a reasonable ground of suspicious that it may
involve the proceeds of crime: or
➢ Appears to be made in circumstances of unusual or unjustified
complexity; or
➢ Appears to have no economic rationale or bonafied purpose; or
➢ Gives rise to a reasonable ground of suspicious that it may
involve facing of the activities relating to terrorism
Policy and Procedures for Anti
Money Laundering Measures
The policy and procedures as outlined below provides a general
background on the subjects of money laundering and terrorist
financing summarizes the main provisions of the applicable
anti-money laundering and anti-terrorist financing legislation in
India and provides guidance on the practical implications of the
Act. The same also sets out the steps that a registered intermediary
and any of its representatives, should implement to discourage and
identify any money laundering or terrorist financing activities.
The Prevention of Money Laundering Act, 2002 has come into effect
from 1st July 2005. Necessary Notifications / Rules under the said
Act have been published in the Gazette of India on 1st July 2005 by
the Department of Revenue, Ministry of Finance, Government of India.
As per the provisions of the Act, every banking company,
financial institution (which includes chit fund company, a
co-operative bank, a housing finance institution and a non-banking
financial company) and intermediary (which Includes a stock-broker,
sub- broker, share transfer agent, banker to an issue, trustee to a
trust deed, registrar to anissue, merchant banker, underwriter,
portfolio manager, investment adviser and any other intermediary
associated with securities market and registered under section 12 of
the Securities and Exchange Board of India Act, 1992) shall have to
maintain a record of all the transactions; the nature and value of
which has been prescribed in the Rules under the PMLA. Such
transactions include:
1. All cash transactions of
the value of more than Rs 10 lacs or its equivalent in foreign
currency.
2. All series of cash
transactions integrally connected to each other which have been
valued below Rs 10 lakhs or its equivalent in foreign currency
where such series of transactions take place within one calendar
month.
3. All suspicious transactions whether or not made in cash and including, inter-alia,
credits or debits into from any non-monetary account such as demat
account, security account maintained by the registered
intermediary.
We should adopt written procedures to implement the anti-money
laundering provisions as envisaged under the Anti Money Laundering
Act, 2002. Such procedures should include inter alia, the following
three specific parameters which are related to the overall ‘Client
Due Diligence Process’:
a) Policy for acceptance of clients
b) Procedure for identifying the clients
c) Transaction monitoring and reporting especially Suspicious
Transactions Reporting (STR)
Client Due Diligence Process
The customer due diligence (“CDD”) measures comprise the
following:
a. Obtaining sufficient information
in order to identify persons who beneficially own or control
securities account.
As an organization providing Research Analyst Services, details
of securities account of clients are not shared with us in the
process of delivering services and execution services are not part
of our service package. Accordingly, identifying the beneficial
owner or controlling party of the securities account of the client
is the responsibility of the broker handling the security account of
the client.
b. Verify the customer’s identity
Since Research Analyst regulation does not envisage on the KYC of
the clients, basic KYC detail i.e., PAN card number to establish
identity of the client are to be collected from the clients. KYC
Status of the clients are to be verified using below link: -
https://kra.ndml.in/kra-web/jsps/pos/KYCClientInquiry_NEW.jsp
Or,
https://www.karvykra.com/UPanSearchGlobalWithPanExempt.aspx
c. Identify beneficial ownership and
control, i.e. determine which individual(s) ultimately own(s) or
control(s) the customer and/or the person on whose behalf a
transaction is being conducted
Transaction data is not handled by us as the client doesn't share
the such data with us as part of our research service. We provide
non-discretionary research recommendation service, execution of
which is on the discretion of the client, and execution is handled
by client themselves. Client don't share any executional or
transactional data with us. Accordingly, identifying the beneficial
owner or controlling party of the securities account of the client
is the responsibility of the broker handling the security account of
the client.
As part of client due diligence
process below guidelines are to be adhered to-
a. Policy for acceptance of clients
Following safeguards are to be followed while accepting the
clients:
• No account is opened in a fictitious / benami name or on an
anonymous basis.
• Ensure that an account is not opened where the you are unable
to apply appropriate client’s due diligence measures / collect
basic KYC detail i.e., PAN card number.
• Ensure that the client is KYC registered.
The client should not be permitted to act on behalf of another
person / entity for service delivery
Do not accept clients with identity matching with banned person/
entity as per SEBI/ Stock Exchanges in capital market: -check
whether the client ‘s identity matched with persons debarred/
banned by SEBI before opening of account. If you find them in that
list then do no open the account. List may be verified using below
link-
https://www.bseindia.com/investors/debent.aspx?expandable=4
https://www.nseindia.com/regulations/member-sebi-debarred-entities
Conduct Risk assessment which takes into account any country
specific information using the updated list of individuals and
entities who are subjected to sanction measures as required under
the various United Nations' Security Council Resolutions. Do not
on-board a client who is present in the list. These can be accessed
at the URL
http:// www.un.org/sc/committees/1267/aq_sanctions_list.shtml and
http://www.un.org/sc/committees/1988/list.shtml
b. Procedure for identifying the clients
The client identification procedure to be carried out at the time
of establishing the client relationship i.e. onboarding the client.
Since Research Analyst regulation does not envisage on the KYC of
the clients, basic KYC detail i.e., PAN card number of the client
are to be collected from the clients to establish identity of our
clients whom the services are delivered.
Failure by prospective client to provide satisfactory evidence of
identity should be noted and reported to the higher authority and
service should not be started for the said client.
c. Maintenance of record
All the records of the clients are to be maintained for a minimum
period of 10 Years or in case of any regulatory action till the time
the same is resolved.
d. Audit
Audit of RA activities to be done by an independent professional
as allowed by the regulation. Any observations of audit to be taken
on priority basis and corrective actions to be initiated.
e. Transaction monitoring and
reporting especially Suspicious Transactions Reporting (STR)
Only Transaction encountered while delivering the service is
collection of fees as we don’t have access to the execution of
transaction data of the clients. Accordingly, the fee collection
should be through our bank account only. Further, no cash
transaction should be allowed for fee payment by the clients. The
nature and value of transactions, which has been prescribed in the
Rules under the PMLA to maintain and record includes:
o All cash transactions of the value of more than Rs 10 lacs or
its equivalent in foreign currency.
o All series of cash transactions integrally connected to each
other which have been valued below Rs 10 lakhs or its equivalent in
foreign currency where such series of transactions take place within
one calendar month.
o All suspicious transactions whether or not made in cash and
including, inter-alia, credits or debits into from any non-monetary
account such as demat account, security account maintained by the
registered intermediary.
Any suspicious transactions will be immediately notified to the
Compliance Officer. The notifications may be done in the form of a
detailed report with specific references to the clients,
transactions and the nature/reason of suspicion. The compliance
staff members will have timely access to customer identification
data and other CDD information, transaction records and other
relevant information.
Compliance Officer will carefully go through all the reporting
requirements and formats as per the provision of PMLA
a) The Principal Officer will be responsible for timely
submission of CTR and STR to FIU-IND
b) Utmost confidentially will be maintained in filling of CTR and
STR to FIU- IND.
c) The reports will be transmitted by speed/registered post/fax at
the notified address.
d) No nil reporting will be made to FIU-IND in case there are no
cash/suspicious transaction to be reported.
Reporting to FIU – India
In terms of the PMLA rules, BMWA will report information relating
to cash and suspicious transactions to The Director, Financial
Intelligence Unit India (FIU – IND) at the following address:
Director, FIU – IND
Financial Intelligence Unit India 6th floor
Hotel Samrat Chanakyapuri, New Delhi – 110021
Role of staff
Principal Officer
The Principal Officer is responsible for the following:
o Communicating the policy on prevention of Money laundering to
the employees.
o Receiving reports from employees for any suspicious dealing
noticed by them.
o Clarification of any queries from employees on this matter.
o Ensuring that the employees dealing with the
clients/prospective clients are aware of the guidelines and are
advised to follow the same strictly.
o Report any suspicious transactions to appropriate authorities.
o Handle compliance function and to ensure compliance with the
policies, procedures, and controls relating to the prevention of ML
and TF
o Evaluate the process in case any gaps are identified
On-Boarding Staff
For staff members dealing with customers or handling
customer-facing processes, it is essential to be sensitive to the
AML requirements and obligations
o Primary responsibility of compliance is on the on-boarding
staff since they deal face-to-face with customers.
o On-boarding staff to carry out KYC process/ customer due
diligence process / any further checks required as per our process
during new business and renewal
o Default on carrying out obligation under AML law can attract
action as per set company policies
o If you come to know of any suspicious activity, you have to
bring that to our notice
Communication of policy
Copy of above policy is to be provided to all the management and
relevant staff that handle account information, securities
transactions, money and client records etc. whether in branches,
departments or subsidiaries; An internal session on awareness of the
above policy is to b conducted on a yearly basis in 1st week of
April to spread awareness of the same among all the relevant
person(s).
Compliance with relevant statutory
and regulatory requirements;
It is to be ensured that the activities are in compliance with
all the relevant statutory and regulatory requirements.
Co-operation with the relevant law
enforcement authorities, including the timely disclosure of
information;
As and when sought appropriate information’s of the clients as
maintained are to be shared with the relevant law enforcement
authorities and timely disclosures of the information’s to be made as per the requirement.
Review of Policy and Procedures
Management of the research Entity is to review the policies and
procedures on the prevention of ML and TF to ensure their
effectiveness as and when there is change in regulatory guidelines
with respect to prevention of ML and TF.