Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT)
Summary
This section of the Master Circular establishes the regulatory framework for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) obligations for SEBI-registered intermediaries under the Prevention of Money Laundering Act, 2002. It defines the scope of covered entities, including various financial institutions and securities market intermediaries, and mandates adherence to client account opening procedures and transaction record-keeping. The document serves as an updated guideline superseding previous circulars, incorporating FATF recommendations and outlining the background principles for combating money laundering. This section clarifies that suspicious transaction reporting includes remotely connected transactions and mandates adopting the more stringent standards between SEBI and host country regulators. It requires registered intermediaries to establish comprehensive policies and procedures to combat money laundering and terrorist financing, overseen by senior management commitment. The directives further specify written anti-money laundering procedures and detailed Client Due Diligence measures, including beneficial ownership identification. This section
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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 their 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 December 31, 2010.
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 and procedures... 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.
transactions remotely connected or related shall also be considered. In case there is a variance in CDD/AML standards prescribed by SEBI and the regulators of the host country, branches/overseas subsidiaries of intermediaries are required to adopt the more stringent requirements of the two.
Each intermediary shall consider carefully the specific nature of its business, organizational structure, type of client and transaction, etc. to satisfy itself that the measures taken by it are adequate and appropriate and follow the spirit of the suggested measures in Section II and the requirements as laid down in the PMLA.
The senior management of a registered intermediary shall be fully committed to establishing appropriate policies and procedures for the prevention of ML and TF and ensuring their effectiveness and compliance with all relevant legal and regulatory requirements.
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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.