SEBI, vide master circular dated June 6, 2024, has issued the guidelines on Anti-Money Laundering (“AML”) Standards and Combating the Financing of Terrorism (“CFT”)/Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002 (“PMLA”) (“PMLA Guidelines”). The PMLA Guidelines stipulate the essential principles for combating Money Laundering (“ML”) and Terrorist Financing (“TF”) and provide detailed procedures and obligations to be followed and complied with by all the registered intermediaries. The PMLA Guidelines will also apply to the branches of stock exchanges, registered intermediaries and their subsidiaries situated abroad, especially, in countries which do not apply, or insufficiently apply, the recommendations made by the FATF. The PMLA Guidelines outline the following key points:
- Establishment of policies, procedures and controls: Intermediaries must establish appropriate policies, and procedures to prevent and detect ML and TF. This includes appointing a principal officer responsible for AML/CFT compliance and designating a person as a ‘Designated Director' in terms of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. Further, Intermediaries must adopt written procedures to implement AML provisions envisaged under the PMLA.
- Customer Due Diligence (“CDD”): Intermediaries are required to conduct thorough CDD, including verifying the identity of clients and beneficial owners using reliable and independent client identification and verification procedures, periodic update of all documents and information on clients and beneficial owners.
- Client acceptance policies and client identification procedure: Enhanced due diligence measures / safeguards are required for special category clients, those classified as highrisk. The KYC policy must specify the client identification procedure to be carried out at different stages i.e. while establishing the relationship, while carrying out transactions for the client or when the intermediary has doubts regarding adequacy / veracity of previously obtained client identification data.
- Reporting of suspicious transaction: Intermediaries must report suspicious transactions to the Financial Intelligence UnitIndia as per the specified formats and timelines.
- Record keeping: Adequate records of transactions, CDD documents, and other relevant information must be maintained for a minimum of 5 (five) years.
- Procedure for freezing of funds, financial assets etc.: Stock exchanges and registered intermediaries must ensure no accounts are held in the name of individuals/entities who are suspected of having terrorist links under the list periodically circulated by the United Nations Security Council.
- Employee training: Regular training programs for employees must be conducted to ensure they are aware of AML/CFT procedures.
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