sebi:ORDER/SBM/KL/2021-22/15298

SEBI · SEBI · 2006-01-18 · Suresh B Menon, Adjudicating Officer

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Facts / Headnote

Adjudication proceedings disposed without penalty - charges dropped with benefit of doubt

Provisions invoked

• s. 15
• s. 19
• s. 12
• s. 15H
• s. 15I

Regulations

• Reg. 20
• Reg. 20A
• Reg. 199
• Reg. 98
• Reg. 201

Parties

• Janata Sahakari Bank Limited

Holding

The adjudication proceedings against Janata Sahakari Bank Limited for alleged failure to have a PMLA policy for 1052 non-banking DP clients were disposed without penalty, with the benefit of doubt given to the Noticee.

Full text

Adjudication order in the matter of Janata Sahakari Bank Limited Page 2 of 13 policy w.r.t the Beneficiary Account Holders (BO Accounts) who were also its bank customers. However, as regards the customers/persons/entities who were not having any bank accounts with the Noticee and who were only enrolled as direct DP clients with the Noticee, it was observed that the Noticee did not have a dedicated PMLA policy in place during the relevant period. In this context, pursuant to the inspection, it was brought out in the inspection report that there were 1052 such DP accounts which did not maintain any bank accounts /banking facility with the Noticee but had only availed the DP facility offered by the Noticee. During the course of inspection, it was brought out that the Noticee did not have a PMLA policy w.r.t the aforesaid 1052 DP accounts maintained with it. In view of the same, it is alleged that Noticee has violated the provisions of SEBI Circular No. ISD/CIR/RR/AML/1/06 dated January 18, 2006 and clause 11 of the code of conduct prescribed for the Depository Participants read with Regulation 20AA of SEBI (Depositories and Participants) Regulations, 1996 (hereinafter referred to as ‘DP Regulations 1996’) read with Regulation 98 of the SEBI (Depositories and Participants) Regulations, 2018 (hereinafter referred to as ‘DP Regulations 2018’). In view of the above observations / findings, adjudication proceedings were initiated against the Noticee under the provisions of section 15

Adjudication order in the matter of Janata Sahakari Bank Limited Page 3 of 13 March 8, 2021 was issued to the Noticee in terms of Rule 4 (1) of the Adjudication Rules read with Section 15-I of the SEBI Act to show cause as to why an inquiry should not be held against the Noticee and why penalty be not imposed on it under the provisions of section 15HB of the SEBI Act for the aforementioned alleged violations committed by the Noticee. The SCN, inter-alia, alleged the following :- a. As on date of inspection, it was observed that the Noticee had a total of 33,162 BO accounts under CDSL and NSDL. Out of these, 32,110 BO accounts are the bank customers of Janata Sahakari Bank. Remaining 1052 BO accounts are not the bank customers of Janata Sahakari Bank. While there is a bank Prevention of Money Laundering Act, 2002 (hereinafter referred to as “PMLA”) policy, there is no separate PMLA policy for DP clients. Hence it is alleged that 1052 clients who are not the bank customers are not getting covered under any PMLA policy. b. In view of the above, it is alleged that the Noticee is in violation of provisions of SEBI Circular No. ISD/CIR/RR/AML/1/06 dated January 18, 2006 read with clause 11 of Code of Conduct prescribed for Depository Participants read with Regulation 20AA of SEBI (Depositories and Participants) Regulations, 1996 read with Regulation 98 of SEBI (Depositories and Participants) Regulations, 2018.

Adjudication order in the matter of Janata Sahakari Bank Limited Page 4 of 13 they are customers of our Bank or not. Copy of the said sanctioned policy was sent to you vide our reply letter dt.04.01.2016. c. Since 19.12.2015 the revised policy is in operation and we have not received any alert /caution from quarterly report of NSDL / CDSL. Further we state that monthly concurrent audit is also conducted by external CA firm and the scope of audit includes adherence of AML &. PMLA directions by the Dermot Clients. We also conduct half yearly "Internal Audit" through C.A. firma, the report of which is exhaustive & having inclusion of PMLA directives. d. Considering all above points we feel that we have observed the directives of PMLA and will continue to do so in future. We request you to consider our sincere efforts in addressing the issue. e. We with respect request you not to consider this as a violation of the Act. We shall be very thankful to you if called for personal hearing in the said matter. f. We are aware of importance of AML & PMLA directives and ensure that they will be effectively implemented by us all the time. We once again humbly request you not to consider this as a violation & oblige us.

Source: SecMarx — sebi:ORDER/SBM/KL/2021-22/15298. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.