Know Your Client (KYC) norms for ODI subscribers, transferability of ODIs, reporting of suspicious transactions, periodic review of systems and modified ODI reporting format.
Summary
This circular mandates Foreign Portfolio Investors issuing Offshore Derivative Instruments to comply with Indian KYC and AML norms for client due diligence. It establishes specific requirements for identifying beneficial owners, conducting periodic KYC reviews, and reporting suspicious transactions. Additionally, it introduces new reporting formats for ODI transfers, position reconfirmation, and annual operational evaluations.
Text
ODI Issuers shall identify and verify beneficial owners holding in excess of the threshold defined under Rule 9 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 i.e. 25 % in case of a company and 15 % in case of partnership firms/ trusts/ unincorporated bodies.
The definition of the term “Beneficial Owner” shall be as per sub-rule (3) of Rule 9 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.
The KYC documentation to be obtained by ODI Issuers from each of such ODI subscribers in respect of beneficial owner who holds above the threshold limits in such ODI subscriber, should be as per Annexure (I) enclosed with this circular.
The materiality threshold to identify the beneficial owner should be first applied at the ODI subscriber level and look through principle shall be applied to identify the beneficial owner of the material shareholder/ owner entity.
Where no material shareholder/owner entity is identified in the ODI subscriber using the materiality threshold, the identity and address proof of the relevant natural person who holds the position of senior managing official of the material shareholder/owner entity should be obtained.
ODI Issuer shall ensure that any transfer of offshore derivative instruments issued by or on its behalf is carried out subject to conditions: transferred only to persons in accordance with Regulation 22 (1) of SEBI (Foreign Portfolio Investors) Regulations, 2014; and prior consent of the foreign portfolio investor is obtained unless pre-approved.
The ODI issuers shall be required to maintain with them the KYC documents as prescribed above at all times and should be made available to SEBI on demand.
The KYC review shall be done at the time of on-boarding and once every three years for low risk clients.
The KYC review shall be done at the time of on-boarding and every year for all other clients.
ODI Issuers shall be required to file suspicious transaction reports, if any, with the Indian Financial Intelligence Unit, in relation to the ODIs issued by it.
In the monthly reports on ODIs all the intermediate transfers during the month would also be required to be reported.
ODI Issuers shall be required to carry out reconfirmation of the ODI positions on a semi-annual basis. In case of any divergence from reported monthly data, the same should be informed to SEBI in format provided.
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Source: SecMarx — Know Your Client (KYC) norms for ODI subscribers, transferability of ODIs, reporting of suspicious transactions, periodic review of systems and modified ODI reporting format.. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.