PMLA Policies

                                  

 

 

                                  

 

 

 

 

 

 

POLICY FOR PREVENTION OF MONEY LAUNDERING ACT (PMLA)

&

ANTI MONEY LAUNDERING (AML)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART – I        OVERVIEW

  1. Introduction
    1. Money Laundering
    2. Financial Intelligence Unit (FIU)-INDIA

 

  1. Background

 

  1. Policy and Procedures to Combat Money Laundering and Terrorist financing

 

PART – II DETAILED OBLIGATIONS

  1. Objectives

Policy Awareness

  1. Client Due Diligence (CDD)
    1. Elements of Client Due Diligence
    2. Policy for acceptance of clients
    3. Policies and procedures for sharing information
    4. Risk Based Approach
    5. Clients of special category (CSC)
    6. Client Identification Procedure
    7. ) Reliance on third party for carrying out Client Due Diligence (CDD)

 

  1. Record Keeping

 

  1. Information to be maintained

 

  1. Retention of Records

 

  1. Monitoring of transactions

 

  1. Suspicious Transaction Monitoring & Reporting

 

  1. List of Designated Individuals/Entities

 

  1. Designation of an officer for reporting of suspicious transaction

 

  1. Employees Hiring/Training and Investor Education

Annexure – I Annexure – II

 

 

 

 

  1. Generation of Alerts
  2. Procedure for freezing of funds, financial assets or economic resources or related services

 

  1. List of Designated Individuals/ Entities

 

  1. Jurisdictions that do not or insufficiently apply the FATF Recommendation

 

  1. Reporting to Financial Intelligence Unit-India

 

  1. Registered Intermediary Adherences
 

1.  INTRODUCTION

Money Laundering

 

Money laundering is the process by which criminals attempt to hide and disguise the true origin and ownership of the proceeds of their criminal/illegal activities. The term “Money Laundering” is also used in relation to the financing of terrorist activity (where the funds may, or may not, originate from crime). It is a process of making dirty money clean. Money is moved around the financial system again and again in such manner that its origin gets hidden.

Money generated from illegitimate source is converted into that derived from legitimate source. The PMLA states that “Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.” Failure to understand and deal with money laundering can lead to significant:

 

  1. a) Regulatory risk b) Reputation risk c) Litigation risk    d) Operational risk

Financial Intelligence Unit (FIU) – INDIA

Financial Intelligence Unit – India (FIU-IND) was set by the Government of India on dated 18th November 2004 as an independent body to report directly to the Economic Intelligence Council (EIC) headed by the Finance Minister. FIU-INDIA is responsible for receiving, processing, analysing and disseminating information relating to suspicious financial transactions information about money laundering, other related offences and financing of terrorism. It also coordinates & strengthen efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and related crimes.

 

  1. BACKGROUND

The PMLA came into effect from 1st July 2005. Necessary Notifications / Rules under the said Act were published in the Gazette of India on 1st July, 2005 by the Department of Revenue, Ministry of Finance and Government of India. The PMLA has been further amended vide notification dated March 6, 2009 and inter alia provides that 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.

 

As per the provisions of the PMLA, every banking company, financial institution (which includes chit fund company, a co-operative bank, a housing finance institution and a non-banking financial company) and intermediary (which includes a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary associated with securities market and registered under Section 12 of the SEBI Act , 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. Such transactions include:

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

 All series of cash transactions integrally connected to each other which have been valued below Rs 10 lakh

or its equivalent in foreign currency where such series of transactions take place within one calendar month.

 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.

Stock Exchanges, Commodity Exchanges and their brokers/members i.e. intermediaries are under the ambit of the Prevention of Money Laundering Act, 2002 (PMLA). FEDERAL CAPITAL MARKETS LTD with memberships at the National stock Exchange and Bombay Stock Exchange in India  memberships at the National stock Exchange, Bombay Stock Exchange and Multi commodity exchange in India, is bound by the guidance and directives relating to the implementation of the provisions of the PML  Act – to prevent money laundering in the securities market and commodity derivatives markets in India and to combat financing terrorism within the country and outside so that objects of the PML Act are achieved.

POLICY AND PROCEDURES TO COMBAT MONEY LAUNDERING AND TERRORIST FINANCING

It is the policy of the firm to prohibit and actively prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities. Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally derived proceeds so that the unlawful proceeds appear to have derived from legitimate origins or constitute legitimate assets. Further, member shall regularly review the policies and procedures on PMLA and Terrorist Financing on an Annual Basis to ensure their effectiveness.

OBJECTIVES

The objective of the AML are as follows:

 To prevent company from being used, intentionally or unintentionally, by criminal elements for money  laundering activities.

 Create awareness and provide clarity on KYC standards and AML measures.

 To have a proper Customer Due Diligence (CDD) process before registering clients.  To monitor and report suspicious transactions.

 To discourage and identify money laundering or terrorist financing activities.

 To monitor / maintain records of all cash transactions of the value of more than Rs.10 lacs.

POLICY AWARENESS

 

FCML management 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:

  • Simplified steps for preventing money laundering (ML) and terrorist financing (TF), based on the latest laws and regulations. Applied these rules to the whole group when needed
  • Ensure that the content of these Directives are understood by all staff members
  • Regularly check the rules and steps for preventing money laundering (ML) and terrorist financing (TF) to make sure they are working well. To keep the review fair, the person checking the rules should not be the same person who created them
  • Adopt client acceptance policies and procedures which are sensitive to the risk of ML and TF

undertake CDD measures to an extent that is sensitive to the risk of ML and TF depending on the type of client, business relationship or transaction

  • System in place for identifying, monitoring and reporting suspected ML or TF transactions to the law enforcement authorities
  • Help staff stay alert and understand how to spot and prevent money laundering (ML) and terrorist

financing (TF)

CLIENT DUE DILIGENCE

Elements of Client Due Diligence

At the time of opening an account or executing any transaction, the firm will obtain, verify the identity of the person and maintain the record of client’s current address or addresses including permanent address, the

 

nature of business of the client and his financial status. Wherever it is apparent that the securities/commodi- ties acquired or maintained through an account are beneficially owned by a party other than the client, that party will be identified using client identification and verification procedures. The beneficial owner is the natural person or persons on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement.

 

Policy for acceptance of clients

The following Customer Acceptance Policy indicates the criteria for acceptance of customers and shall be followed by NCO:

No account shall be opened in anonymous or fictitious / benami name(s).

Parameters of risk perception shall be clearly defined in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status Politically Exposed Persons (PEPs) etc., to enable categorization of customers into low, medium and high risk.

 FCML shall collect documents and other information from the customer depending on perceived risk and keeping in mind the requirements of AML Act, 2002 and guidelines issued by RBI from time to time.

 

 

Policies and procedures for sharing information

  • Branches and subsidiaries must share customer, account, and transaction information with the group’s compliance, audit, or anti-money laundering (AML) teams when needed to prevent money laundering or terrorism financing
  • Branches and subsidiaries will be able to receive relevant information from the group’s compliance, audit, or AML teams when it helps manage risks. There is a strong rule to keep this information private and to make sure it’s not misused or shared in a way that could alert someone being investigated (tipping-off).

 

Risk Based Approach

The risk to the customer shall be assigned on the following basis:

Low Risk:

Individuals and entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conform to the known profile may be categorized as low risk. The illustrative examples of low risk customers could be salaried employees whose salary structures are well defined, people belonging to lower economic strata of the society whose accounts show small balances and low turnover, Government Departments and Government owned companies, regulators and statutory bodies etc. In such cases, only the basic requirements of verifying the identity and location of the customer shall be met.

Medium Risk (Level II):

Customers that are likely to pose a higher than average risk to the broker may be categorized as medium or high risk depending on Customer’s background, nature and location of activity, country of origin, sources of funds and his client profile etc; such as:

     Persons in business/industry or trading activity where the area of his residence or place of business has a scope or history of unlawful trading/business activity.

 

Where the client profile of the person/s opening the account, according to the perception of the team is uncertain and/or doubtful/dubious.

Clients of special category (CSC): High Risk (Level III)

FCML may apply enhanced due diligence measures based on the risk assessment, thereby requiring intensive “-due diligence‟ for higher risk customers, especially those for whom the sources of funds are not clear. The examples of customers requiring higher due diligence may include:

Non Resident Customers

 High Net Worth Individuals

 Trusts, charities, NGOs and organizations receiving donations

 Companies having close family shareholding or beneficial ownership  Firms with „sleeping partners‟

 Politically Exposed Persons (PEPs)

 Those with dubious reputation as per public information available, etc.  Companies offering foreign exchange offerings

 Clients in high-risk countries

Risk Assessment

The Risk Assessment is required in order to identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk with respect to its clients, countries or geographical areas, nature and volume of transactions, payment methods used by clients, etc. The risk assessment will also consider any country specific information that is circulated by the Government of India and SEBI from time to time, as well as, the updated list of individuals and entities who are subjected to sanction measures as required under the various United Nations’ Security Council Resolutions.

 

 

Risk Assessment is dependent on kind of customers the Company deals with.

Client Identification Procedure

Customer identification means identifying the person and verifying his/her identity by using reliable, independent source documents, data or information. FCML needs to obtain sufficient information necessary to establish to it’s satisfaction, the identity of each new customer, whether regular or occasional, and the purpose of the intended nature of brokering relationship. Being satisfied means that FCML is able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance of the extant guidelines in place. Besides risk perception, the nature of information/documents required would also depend on the type of customer (individual, corporate, etc).

 

For customers that are natural persons, FCML shall obtain sufficient identification data to verify the identity of the customer, his address/location, and also his recent photograph. For customers that are legal persons or entities, FCML shall

  • verify the legal status of the legal person/entity through proper and relevant documents
  • verify that any person purporting to act on behalf of the legal person/entity is so authorized and identify and verify the identity of that person
  • Understand the ownership and control structure of the customer and determine, who are the natural persons who ultimately control the legal person.

Customer Identification requirements in respect of a few typical cases, especially, legal persons requiring an extra element of caution are given in Annexure – I for the guidance of the members of NCO.

 

 

 

 

If FCML decides to accept such accounts in terms of the Customer Acceptance Policy, FCML shall take reasonable measures to identify the beneficial owner(s) and verify his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s) is/are. An indicative list of the nature and type of documents/information that may be relied upon for customer identification is given in Annexure – II

.

Reliance on third party for carrying out Client Due Diligence (CDD)

Company may rely on a third party subject to the conditions that are specified in Rule 9 (2) of the PML Rules and shall be in accordance with the regulations and circulars/ guidelines issued by SEBI from time to time for the purpose of:

 Identification and verification of the identity of a client and

 Determination of whether the client is acting on behalf of a beneficial owner, identification of the beneficial owner and verification of the identity of the beneficial owner.

Such third party shall be regulated, supervised or monitored for, and have measures in place for compliance with CDD and record- keeping requirements in line with the obligations under the PML Act.

RECORD KEEPING

As part of our AML program, FCML will create and maintain STRs and CTRs, relevant documentation on customer identity and verification as well as account files and business correspondences. We will maintain STRs and their accompanying documentation for a period of Eight years.

INFORMATION TO BE MAINTAINED

 All cash transactions of the value of more than rupees ten lakhs or its equivalent in foreign currency;

 All series of cash transactions integrally connected to each other which have been valued below rupees ten lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month;

 All suspicious transactions. Suspicious transaction means a transaction whether or not made in cash which, to a person acting in good faith –

 gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or  appears to be made in circumstances of unusual or unjustified complexity; or

 appears to have no economic rationale or bonafide purpose; or

 gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism

The records shall contain the following information:

 the nature of the transactions;

 the amount of the transaction and the currency in which it was denominated; the date on which the transaction was conducted; and

 the parties to the transaction.

The records will be updated on daily basis, and in any case not later than 5 working days

RETENTION OF RECORDS

There is a proper mechanism for maintenance and preservation of such records and information in a manner that allows easy and quick retrieval of data as and when requested by the competent authorities.

 

 

 

All necessary records on transactions, both domestic and International, record of documents evidencing the

identity of its clients and beneficial owners (e.g., copies or records of official identification documents like passports, identity cards, driving licenses or similar documents) as well as account files and business correspondence for a period of Eight years after the business relationship between a client and intermediary has ended or the account has been closed, whichever is later.

All record of information related to transactions, whether attempted or executed, that are reported to FIU will be maintained for a period of Eight years.

MONITORING OF TRANSACTIONS

  • FCML will monitor through the automated means of Back Office Software for unusual size, volume, pattern or type of For non-automated monitoring, the following kinds of activities are to be mentioned as Red Flags and reported to the Principal Officer.
  • The customer exhibits unusual concern about the firm’s compliance with government reporting requirements and the firm’s AML policies (particularly concerning his or her identity, type of business and assets), or is reluctant or refuses to reveal any information concerning business activities, or furnishes unusual or

suspicious identification or business documents.

  • The customer wishes to engage in transactions that lack business sense or apparent investment strategy, or are inconsistent with the customer’s stated business or investment strategy.

 

  • The information provided by the customer that identifies a legitimate source for funds is false, misleading, or substantially incorrect.

 

 

  • Upon request, the customer refuses to identify or fails to indicate any legitimate source for his or her funds and other assets.
  • The customer (or a person publicly associated with the customer) has a questionable background or is the subject of news reports indicating possible criminal, civil or regulatory violations.

 

  • The customer exhibits a lack of concern regarding risks, commissions, or other transaction

 

  • The customer appears to be acting as an agent for an undisclosed principal, but declines or is reluctant, without legitimate commercial reasons, to provide information or is otherwise evasive regarding that person or entity.

 

  • The customer has difficulty describing the nature of his or her business or lacks general knowledge of his or her industry.

 

  • The customer engages in transactions involving cash or cash equivalents or other monetary instruments that appear to be structured to avoid the 10,00,000 government reporting requirements, especially if the cash or monetary instruments are in an amount just below reporting or recording thresholds.

 

  • For no apparent reason, the customer insists for multiple accounts under a single name or multiple names, with a large number of inter- account or third-party transfers.

 

  • The customer engages in excessive journal entries between unrelated accounts without any apparent business purpose.

 

 

  • The customer requests that a transaction be processed to avoid the firm’s normal documentation

requirements.

  • The customer, for no apparent reason or in conjunction with other red flags, engages in transactions

 

 

 

  • involving certain types of securities, such as Z group and T group stocks, which although legitimate, have been used in connection with fraudulent schemes and money laundering (Such transactions may warrant further due diligence to ensure the legitimacy or the customer’s activity.)
  • The customer’s account shows an unexplained high level of account
  • The customer maintains multiple accounts, or maintains accounts in the names of family members or corporate entities, for no apparent purpose.

 

  • The customer’s account has inflows of funds or other assets well beyond the known income or resources of the

 

  • The customer attempts to make frequent or large deposits of currency, insists on dealing only in cash, or asks for exemptions from the firm’s policies relating to the deposit of cash.

 

When a member of the firm detects any red flag he or she will escalate the same to the Principal Officer for further investigation. Broad categories of reason for suspicion and examples of suspicious transactions for an intermediary are indicated as under:

 

 Identity of Client

  • False identification documents
  • Identification documents which could not be verified within reasonable time
  • Non-face to face client
  • Doubt over the real beneficiary of the
  • Accounts opened with names very close to other established business entities

 Suspicious Background

  • Suspicious background or links with known criminals

 Multiple Accounts

  • Large number of accounts having a common account holder, introducer or authorized signatory with no rationale.
  • Unexplained transfers between multiple accounts with no rationale

 Activity in Accounts

  • Unusual activity compared to past transactions
  • Use of different accounts by client alternatively
  • Sudden activity in dormant accounts
  • Activity inconsistent with what would be expected from declared business
  • Account used for circular trading

 

 Nature of Transactions

  • Unusual or unjustified complexity
  • No economic rationale or bonafide purpose
  • Source of funds are doubtful
  • Appears to be case of insider trading
  • Investment proceeds transferred to a third party
  • Transactions reflect likely market manipulations
  • Suspicious off market transactions

 Value of Transactions

  • Value just under the reporting threshold amount in an apparent attempt to avoid reporting
  • Large sums being transferred from overseas for making payments
  • Inconsistent with the clients apparent financial standing
  • Inconsistency in the payment pattern by client
  • Block deal which is not at market price or prices appear to be artificially inflated/deflated

SUSPICIOUS TRANSACTION MONITORING & REPORTING

For Cash Transaction Reporting (CTR)

 All dealing in Cash that requiring reporting to the FIU IND will be done in the CTR format and in the matter and at intervals as prescribed by the FIU IND

 

For Suspicious Transactions Reporting (STR)

FCML will make a note of Suspicious Transaction that have not been explained to the satisfaction of the Principal Officer and thereafter report the same to the FIU IND within the required deadlines. This will typically, be in cases where we know, suspect, or have reason to suspect:

 

 the transaction involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity as part of a plan to violate or evade any the transaction reporting requirement,

 the transaction is designed, whether through structuring or otherwise, to evade the any requirements of PMLA Act and Rules framed thereof

 the transaction has no business or apparent lawful purpose or is not the sort in which the customer would normally be expected to engage, and we know, after examining the background, possible purpose of the transaction and other facts, of no reasonable explanation for the transaction, or

 the transaction involves the use of the firm to facilitate criminal activity.

 

FCML will not base it’s decision on whether to file a STR solely on whether the transaction falls above a threshold. FCML will file a STR and notify law enforcement of all transactions that raise an identifiable suspicion of criminal, terrorist, or corrupt activities.

 

All STRs will be reported quarterly to the Board of Directors, with a clear reminder of the need to maintain the confidentiality of the STRs We will not notify any person involved in the transaction that the transaction has been reported, except as permitted by the PMLA Act and Rules therefore

 

LIST OF DESIGNATED INDIVIDUALS / ENTITIES

At the time of account opening of the entities or individuals, name will be verified with UNSCRs list. Accounts will not be opened in the name of anyone whose name appears in said list.

DESIGNATION OF AN OFFICER FOR REPORTING OF SUSPICIOUS TRANSACTION

Appointment of Principal Officer

To ensure compliance, monitoring and report compliance of Anti Money Laundering policy, Senior Executive heading the Compliance Department of the broker at Corporate Office shall act as Principal Officer. He/She shall be responsible to monitor and report transactions and share information on Anti Money Laundering as required under the law. The Principal Officer shall maintain close liaison with enforcement agencies, brokers and any other institutions that are involved in the fight against money laundering and combating financing of terrorism. The Principal Officer shall furnish a compliance certificate to the Board on quarterly basis certifying that Revised Anti

Money laundering Policy is being strictly followed by NCO.

Appointment of a Designated Director

As per the PML rules, in addition to the requirement of a Principal Officer, the company has appointed Designated

Director to ensure overall compliance.

EMPLOYEES’ HIRING/TRAINING AND INVESTOR EDUCATION

Employees’ Hiring

FCML adopts a professional and ethical hiring policy based on meritocracy. The step-by-step hiring process involves the following procedure

 Reference through known sources

 CV of the candidate is obtained with relevant information  Screening of the candidate profile

 Call-for multi-stage interview is done

 Qualitative factor check (Basic qualitative factors such as Qualification, work experience, personal and work details are checked)

First round of interview with dept head Second round with senior management HR verification

Appointment letter issuance Confirmation of date of joining

 Doc verification (Submission of proof of evidence such as id & address proof, Bank details, Pan card and educational background credentials are obtained)

Employee code generation and thumb impression for electronic access and attendance

Employees’ Training

FCML will develop ongoing employee training under the leadership of the Principal Officer. Our training will occur on at least an annual basis. It will be based on our firm’s size, its customer base, and its resources. Our training will include, at a minimum: how to identify red flags and signs of money laundering that arise duringthe course of the employee’s duties; what to do once the risk is identified; what employees roles are in the firm’s compliance efforts and how to perform them; the firm’s record retention policy; and the disciplinary consequences (including civil and criminal penalties) for noncompliance with the PMLA Act.

 

We will develop training in our firm, or contract for it. Delivery of the training may include educational pam- phlets, videos, intranet systems, in-person lectures, and explanatory memos. We will review our operations to see if certain employees, such as those in compliance, margin, and corporate security, require specialized additional training. Our written procedures will be updated to reflect any such changes.

 

Investor Education

Implementation of KYC procedures requires FCML to demand certain information from the customers that maybe of personal in nature or which have hitherto never been called for. This can sometimes lead to a lot of questioning by the customer as to the motive and purpose of collecting such information. Therefore, the front desk staff needs to handle such situations tactfully while dealing with customers and educate the customer of the objectives of the KYC program.

ANNEXURE – I

Customer Identification Requirements – Indicative Guidelines Particulars Guidelines

Trust/Nominee or Fiduciary Accounts

There exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the customer identification procedures. FCML should determine whether the customer is acting on behalf of another personas trustee/nominee or any other intermediary. If so, FCML shall insist on receipt of satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting, as also obtain details of the nature of the trust or other arrangements in place. While opening an account for a trust, FCML should take reasonable precautions to verify the identity of the trustees and the settlers of trust (including any person settling assets into the trust), grantors, protectors, beneficiaries and signatories.

Beneficiaries should be identified when they are defined. In the case of a „foundation’, steps should be taken to verify the founder managers/ directors and the beneficiaries, if defined.

 

Accounts of companies and firms

FCML need to be vigilant against business entities being used by individuals as a „front‟ for maintaining accounts with brokers. FCML should examine the control structure of the entity, determine the source of funds and identify the natural persons who have a controlling interest and who comprise the management. These requirements may be moderated according to the risk perception e.g. in the case of a public company it will not be necessary to identify all the shareholders. But at least promoters, directors and its executives need to be identified adequately.

Accounts of Politically Exposed Persons (PEPs)

Politically exposed persons are individuals who are or have been entrusted with prominent public functions e.g., Heads of States or of Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc. FCML should gather sufficient information on any person/customer of this category intending to establish a relationship and check all the information available on the person in the public domain. FCML should verify the identity of the person and seek information about the sources of funds before accepting the PEP as a customer.

FCML should seek prior approval of their concerned Heads for opening an account in the name of PEP.

 

 

 

ANNEXURE-II

Customer Identification Procedure

Features to be verified and documents that may be obtained from Customers Features Documents

Accounts of Individuals

Legal name and any other names used

  • UID (Aadhaar Card)
  • Passport
  • Voter ID
  • Driving License
  • PAN Card with Photograph
  • Identity Card / Document with Applicants Photo issued by various Central and state Undertaking and other institutions as per KYC form Instructions / Checklist

Where the client is an individual, who is not eligible to be enrolled for an Aadhaar number, he shall for the purpose of sub-rule (1), submit to the reporting entity, the Permanent Account Number or Form No. 60.

If client does not submit the PAN, he/she shall submit one certified copy of an ‘officially valid document’ containing details of his identity and address, one recent photograph and such other documents including in respect of the nature or business and financial status of the client as may be required by the reporting entity.

 

 Correct permanent address

  • Passport
  • UID (Aadhaar Card)
  • Voter’s Identity Card
  • Ration Card
  • Registered Lease or Sale Agreement of Residence
  • Driving license
  • Flat Maintenance Bill
  • Insurance copy
  • Utility Bills (Telephone, Electricity or Gas)
  • Bank account Statement/ Passbook
  • Proof of address in the name of spouse
  • Other Identity cards/ documents with Address issued by various State and Central Undertaking and other institutions as per KYC Instructions/Checklist

Accounts of companies

 Name of the company

 Principal place of business

 Mailing address of the company  Telephone/Fax Number

  • Certificate of incorporation and Memorandum & Articles of Association
  • Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account
  • Power of Attorney granted to its managers, officers or employees to transact business on its behalf
  • (a) Aadhaar Numbers and
 

 

(b) Permanent Account Numbers or Form 60 as defined in the Income-tax Rules, 1962

issued to managers, officers or employees holding an attorney to transact on the company’s behalf or where an Aadhaar number has not been assigned, proof of application towards enrolment for Aadhaar and in case Permanent Account Number is not submitted an officially valid document shall be submitted

  • Copy of the telephone bill

If the managers, officers or employees holding an attorney to transact on the company’s behalf are not eligible to be enrolled for Aadhaar number and do not submit the Permanent Account Number, certified copy of an officially valid document shall be submitted.

Accounts of trusts & foundations

 Names of trustees, settlers, beneficiaries and signatories

 Names and addresses of the founder, the managers/directors and the beneficiaries  Telephone/fax numbers

  • Certificate of registration, if registered
  • Power of Attorney granted to transact business on its behalf
  • (a) Aadhaar Numbers and

(b) Permanent Account Numbers or Form 60 as defined in the Income-tax Rules, 1962 issued to managers, officers or employees holding an attorney to transact on the company’s

Behalf or where an Aadhaar number has not been assigned, proof of application towards enrolment for Aadhaar and in case Permanent Account Number is not submitted an officially valid document shall be submitted.

  • founders/managers/ directors and their addresses
  • Resolution of the managing body of the foundation/association
  • Telephone bill
  • Trust Deed

If the managers, officers or employees holding an attorney to transact on the company’s behalf are not eligible to be enrolled for Aadhaar number and do not submit the Permanent Account Number, certified copy of an officially valid document shall be submitted.

 

Provided that where an Aadhaar number has not been assigned to a client, the client shall furnish proof of application of enrolment for Aadhaar and in case the Permanent Account Number is not submitted, one certified copy of an ‘officially valid document’ shall be submitted.

 

“Provided that in case of officially valid document furnished by the client does not contain updated address, the following documents shall be deemed to be officially valid documents for the limited purpose of proof of address:-

  • utility bill which is not more than two months old of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill);
  • property or Municipal tax receipt;
  • pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address;
  • letter of allotment of accommodation from employer issued by State Government or Central Government Departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies and leave and license agreements with such employers allotting official accommodation; Provided further that the client shall submit updated officially valid document with current address within a period of three months of submitting the above documents”

 

“Provided also that in case the officially valid document presented by a foreign national does not contain the details of address, in such case the documents issued by the Government departments of foreign jurisdictions and letter issued by the Foreign Embassy or Mission in India shall be accepted as proof of address”.

 

Any reporting entity, at the time of receipt of the Aadhaar number under provisions of this rule, shall carry out authentication using either e-KYC authentication facility or Yes/No authentication facility provided by Unique Identification Authority of India. In case the client referred to in sub-rules (4) to (9) of rule 9 is not a resident or is a resident in the States of Jammu and Kashmir, Assam or Meghalaya and does not submit the Permanent Account Number, the client shall submit to the reporting entity one certified copy of officially valid document containing details of his identity and address, one recent photograph and such other document including in respect of the nature of business and financial status of the client as may be required by the reporting entity.

Generation of Alerts:-

Alert generation involves application of scenarios and risk factor to detect potentially suspicious activity. Effective alert generation is very critical to the quantity and quality of the STRs generated by Brokers. Indicators are circumstances that indicate suspicious nature of transactions. Suspicious transaction may be detected from one indicator or a set of indicators. FCML has adequate processes and systems for detection of transactions and reporting of suspicious transactions, identified by the employee and are using back office software recommended parameters in the act

Procedure for freezing of funds, financial assets or economic resources or related services

FCML as registered intermediaries shall ensure that in terms of Section 51A of the Unlawful Activities (Prevention) Act, 1967 (UAPA) and amendments thereto, they do not have any accounts in the name of individuals/entities appearing in the lists of individuals and entities, suspected of having terrorist links, which are approved by and periodically circulated by the United Nations Security Council (UNSC).

 

Procedure for implementation of Section 12A of the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 Directions to stock exchanges and registered intermediaries

 

The Government of India, Ministry of Finance has issued an order dated January 30, 2023 vide F. No. P- 12011/14/2022-ES Cell-DOR (“the Order”) detailing the procedure for implementation of Section 12A of the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (“WMD Act”).

 

a)      FCML as a intermediaries shall:

  • Maintain the list of individuals/entities (“Designated List”) and update it, without delay
  • Verify if the particulars of the entities/individual, party to the financial transactions, match with the particulars of the Designated List and in case of match, stock exchanges and registered intermediaries shall not carry out such transaction and shall immediately inform the transaction details with full particulars of the funds, financial assets or economic resources involved to the Central Nodal Officer (“CNO”), without delay. The details of the CNO are as under:

The Director FIU-INDIA

Tel.No.:011-23314458, 011-23314459 (FAX)

Email: dir@fiuindia.gov.in

  • When starting a relationship with a client—and from time to time after that—check if the person or organization is on the Designated Look for any money, assets, or services they may have, like bank accounts, stocks, or insurance. If there is a match, we FCML as intermediaries will quickly report all

                  details to the Chief Nodal Officer (CNO) without delay         

 
  • To send a copy of the report mentioned in paragraphs 59(ii) and 59(iii) to SEBI’s Nodal Officer without It should be sent both by post and by email to sebi_uapa@sebi.gov.in. The postal address is:

Deputy General Manager, Division of FATF,

Market Intermediaries Regulation and Supervision Department, Securities and Exchange Board of India (SEBI),

SEBI Bhavan II, Plot No. C7, ‘G’ Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400051.”

  • If it is clear that a client’s money or assets are covered under Section 12A(2)(a) or 12A(2)(b) of the WMD Act, stop them from making any financial transactions and inform the Chief Nodal Officer (CNO) immediately
  • file a Suspicious Transaction Report (STR) with the FIU-IND covering all transactions in the accounts, covered under paragraphs 59(ii) and (iii) above, carried through or attempted through

 

 

 

List of Designated Individuals/ Entities

FCML follows An updated list of individuals and entities which are subject to various sanction measures such as freezing of assets/accounts, denial of financial services etc., as approved by the Security Council Committee established pursuant to various United Nations’ Security Council Resolutions (UNSCRs) can be accessed at its website at https://press.un.org/en/content/press-release.

  • FCML as Registered intermediaries, we ensure that accounts are not opened in the name of anyone whose name appears in said Registered intermediaries shall continuously scan all existing accounts to ensure that no account is held by or linked to any of the entities or individuals included in the list.
  • We shall maintain updated designated lists in electronic form and run a check on the given parameters on a regular basis to verify whether the designated individuals/entities are holding any funds, financial assets or economic resources or related services held in the form of securities with them
  • We shall leverage latest technological innovations and tools for effective implementation of name screening to meet the sanctions requirements
  • The Stock exchanges and the registered intermediaries shall also file a Suspicious Transaction Report (STR) with FIU-IND covering all transactions carried through or attempted in the accounts covered under the list of designated individuals/entities under Section 35 (1) and 51A of UAPA.
  • Full details of accounts bearing resemblance with any of the individuals/entities in the list shall immediately be intimated to the Central [designated] Nodal Officer for the UAPA, at Fax No.011-23092551 and also conveyed over telephone 011-23092548. The particulars apart from being sent by post shall necessarily be conveyed on email id: jsctcr-mha@gov.in
  • We as a registered intermediaries shall also send a copy of the communication mentioned above to the

UAPA Nodal Officer of the State/UT where the account is held and to SEBI and FIU-IND, without delay. The communication shall be sent to SEBI through post and through email (sebi_uapa@sebi.gov.in) to the UAPA nodal officer of SEBI, Deputy General Manager, Division of FATF, Market Intermediaries Regulation and Supervision Department, Securities and Exchange Board of India, SEBI Bhavan II, Plot No. C7, “G” Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051. The consolidated list of UAPA Nodal Officers is available at the website of Government of India, Ministry of Home Affairs.

 

Jurisdictions that do not or insufficiently apply the FATF Recommendations

 

FCML follows, Financial Action Task Force (FATF) – Secretariat after conclusion of each of it’s plenary, releases public statements and places jurisdictions under increased monitoring to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing risks. In this regard, FATF Statements circulated by SEBI from time to time, and publicly available information, for identifying countries, which do not or insufficiently apply the FATF Recommendations.

Reporting to Financial Intelligence Unit-India

 

In terms of the PML Rules, registered intermediaries are required to report information relating to cash and suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND.2) at the following address:

 

Director, FIU-IND, Financial Intelligence Unit – India 6th Floor, Tower-2, Jeevan Bharati Building, Connaught Place, New Delhi-1 1 0001 ,

INDIA Telephone : 91 -1 1 -23314429, 23314459 91 -1 1 -2331 9793(Helpdesk)

 

Email:helpdesk@fiuindia.gov.in (For FINnet and general queries)

ctrcell@fiuindia.gov.in (For Reporting Entity / Principal Officer registration related queries) complaints@fiuindia.gov.in

Website: http://fiuindia.gov.in

We as a registered intermediaries shall carefully go through all the reporting requirements

 

(https://www.sebi.gov.in/sebi_data/commondocs/jun2024/Brochures on FIU_p.pdf) and formats that are available on the website of FIU – IND under the Section Home – FINNET 2.0 – User Manuals and Guides -Reporting Format (https://www.sebi.gov.in/sebi_data/commondocs/jun2024/Reporting_Format_p.pdf). These documents contain detailed directives on the compilation and manner/procedure of submission of the reports to FIUIND

As a Registered intermediaries we shall adhere to the following:

 

  1. The Cash Transaction Report (CTR) (wherever applicable) for each month shall be submitted to FIU-IND by 15th of the succeeding month
  2. The Suspicious Transaction Report (STR) shall be submitted within 7 days of arriving at a conclusion that any transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature. The Principal Officer shall on being satisfied that the transaction is suspicious, furnish the information promptly in writing by fax or by electronic mail to the Director in respect of transactions referred to in clause (D) of sub-rule (1) of rule 3 of the PML Rules. The Principal Officer shall record his reasons for treating any transaction or a series of transactions as It shall be ensured that there is no undue delay in arriving at such a conclusion
  • The Non-Profit Organization Transaction Reports (NTRs) for each shall be submitted to FIU-IND by 15th of the succeeding month
  1. The Principal Officer will be responsible for timely submission of CTR, STR and NTR to FIU-IND; Utmost confidentiality shall be maintained in filing of CTR, STR and NTR to FIU-IND;
  2. No NIL reporting needs to be made to FIU-IND in case there are no cash/ suspicious/non-profit organization transactions to be reported
  3. “Non-profit organization” means any entity or organisation, constituted for religious or charitable purposes referred to in clause (15) of section 2 of the Income-tax Act, 1961 (43 of 1961), that is registered as a trust or a society under the Societies Registration Act, 1860 (21 of 1860) or any similar State legislation or a Company registered under the section 8 of the Companies Act, 2013 (18 of 2013);
 

 

  • Every registered intermediary, its Directors, officers and all employees shall ensure that the fact of maintenance referred to in Rule 3 of PML Rules and furnishing of information to the Director is kept confidential. Provided that nothing in this rule shall inhibit sharing of information under Rule 3A of PML Rules of any analysis of transactions and activities which appear unusual, if any such analysis has been done
  • As a registered Intermediaries shall not put any restrictions on operations in the accounts where an STR has been made. Registered intermediaries and their directors, officers and employees (permanent and temporary) shall be prohibited from disclosing (“tipping off”) the fact that a STR or related information is being reported or provided to the FIU-IND. This prohibition on tipping off extends not only to the filing of the STR and/ or related information but even before, during and after the submission of an STR. Thus, it shall be ensured that there is no tipping off to the client at any level

 

  1. It is clarified that the registered intermediaries, irrespective of the amount of transaction and/or the threshold limit envisaged for predicate offences specified in part B of Schedule of PMLA, 2002, shall file STR if they have reasonable grounds to believe that the transactions involve proceeds of crime.
  2. It is further clarified that “proceeds of crime” include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence

 

 

 

 

End of Report



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