Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT)

SEBI/ HO/ MIRSD/ DOP/ CIR/ P/ 2019/113 · 2019-10-15 · SEBI

Summary

This section introduces the Master Circular on Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidelines for SEBI-registered intermediaries. It establishes that these guidelines supersede previous circulars and apply to all intermediaries registered under Section 12 of the SEBI Act, including their overseas branches where permitted. The text outlines the background of the Prevention of Money Laundering Act, 2002, and defines specific transaction types requiring record maintenance. Section 1.3 mandates registered intermediaries to establish comprehensive policies and procedures to combat money laundering and terrorist financing in compliance with the PMLA. Section 2.1 requires these intermediaries to adopt written anti-money laundering procedures covering client acceptance, identification, and transaction monitoring. Section 2.2 details specific Client Due Diligence measures, including identifying beneficial owners based on ownership thresholds and verifying identities through reliable sources. This section mandates ongoing due diligence and periodic updates to client information for registered intermediaries. It establishes strict policies for client acc

Text

The Prevention of Money Laundering Act, 2002 (“PMLA”) was brought into force with effect from 1st July 2005.

Every banking company, financial institution and intermediary shall have to adhere to client account opening procedures and maintain records of such transactions as prescribed by the PMLA and rules notified there under.

These guidelines shall also apply to registered intermediaries’ branches and subsidiaries located abroad... When local applicable laws and regulations prohibit implementation of these requirements, the same shall be brought to the notice of SEBI.

It is emphasized that the intermediaries may, according to their requirements, specify additional disclosures to be made by clients to address concerns of money laundering and suspicious transactions undertaken by clients.

This Master Circular shall supersede the earlier Master Circular on AML/ CFT dated July 04, 2018.

The Directives provide guidance on the practical implications of the PMLA and set out steps that a registered intermediary or its representatives shall implement to discourage and to identify any money laundering or terrorist financing activities.

Each registered intermediary shall consider the specific nature of its business... when implementing the suggested measures... The overriding principle is that they shall be able to satisfy themselves that the measures taken by them are adequate, appropriate and abide by the spirit of such measures and the requirements as enshrined in the PMLA.

Violating the prohibitions on manipulative and deceptive devices, insider trading and substantial acquisition of securities or control as prescribed in Section 12 A read with Section 24 of the Securities and Exchange Board of India Act, 1992 (SEBI Act) will now be treated as a scheduled offence under schedule B of the PMLA.

Every banking company, financial institution and intermediary... 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.

All cash transactions of the value of more than ` 10 lakh or its equivalent in foreign currency.

All series of cash transactions integrally connected to each other which have been valued below ` 10 lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate exceeds an amount of ten lakh rupees or its equivalent in foreign currency.

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.

Source: SecMarx — Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.