Foreign investment in Alternative Investment Funds (AIFs)
Summary
This circular modifies the beneficial ownership and sanctions screening provisions for Alternative Investment Funds (AIFs) in light of recent amendments to the Prevention of Money Laundering Rules. It mandates that AIF managers must ensure investors are not listed on UN Security Council sanctions lists or from jurisdictions identified by the Financial Action Task Force as having strategic deficiencies. Furthermore, it prohibits further capital drawdowns from existing investors who fail to meet these revised compliance conditions.
Text
The Government of India through gazette notification dated March 07, 2023 and September 04, 2023 has amended the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, inter-alia, to revise the thresholds for determining the beneficial ownership.
The investor, or its beneficial owner... is not the person(s) mentioned in the Sanctions List notified from time to time by the United Nations Security Council and is not a resident in the country identified in the public statement of Financial Action Task Force as – (i) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or (ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.
In case an investor who has been already on-boarded to scheme of an AIF, does not meet the revised condition as specified at para 2 above, the manager of the AIF shall not drawdown any further capital contribution from such investor for making investment, until the investor meets the said condition.
The provisions of this circular shall come into force with immediate effect.
This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Foreign investment in Alternative Investment Funds (AIFs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.