Policy for Anti-Money Laundering (AML)
The basic objective of this Policy is to ensure that adequate controls and procedures are in place to protect the system from default and prevent the unwanted, scrupulous and dubious clients from entering into the system And Preventing Money Laundering and Combating financing of terrorism activities.
Pursuant to the recommendation made by the Financial Action Task Force Money on Anti Money Laundering standards, SEBI had issued the guidelines on Anti Money Laundering standards vide their notification no. ISD/CIR/RR/AML/1/6 dated 18th January 2006 and vide letter no. ISD/CIR/RR/AML/2/6 dated 20th March 2006 and had issue the obligation of Intermediaries registered under section 12 of the Securities and Exchange Board of India Act, 1992. Further, This policy document is based on the SEBI’s master circular on PMLA bearing reference no. ISD/AML/CIR-1/2010 dated February 12, 2010 and subsequent circulars bearing reference no.CIR/ISD/AML/2/2010 dated June 14, 2010, CIR/ISD/AML/3/2010 dated December 31, 2010 and SEBI/HO/MIRSD/DOP/CIR/P/2019/113 dated October 15, 2019, which consolidates requirements/obligations to be fulfilled by all the registered intermediaries, SEBI Circular No. CIR/MIRSD/1/2014 dated March SEBI/HO/MIRSD/DOS3/CIR/P/2018/104 dated July 4, 2018. As per the SEBI guidelines, all Intermediaries have been advice to ensure that proper policy frameworks are put in place as per the guidelines on Anti Money Laundering standards notify by SEBI as prescribed in Prevention of money laundering Act, 2002 (PMLA) and Rules. SEBI has issued necessary directives from time to time vide its circulars covering issues related to Know Your client (KYC) norms, Anti Money Laundering (AML), Client Due Diligence (CDD) and Combating Financing of Terrorism (CFT). This policy will be subject to changes in order to incorporate further directives that SEBI may give vide its circulars on PMLA, from time to time.
Applicability of PMLA
The Prevention of Money Laundering Act, 2002 (PMLA) has been brought into force with effect from 1st July, 2005. Necessary Notifications / Rules under the said Act have been published in the Gazette of India on 1st July 2005 by the Department of Revenue, Ministry of Finance, and Government of India.
Money Laundering can be defined as engaging in financial transactions that involve income derived from criminal activities, transaction designated to conceal the true origin of criminally derived proceeds and appears to have been received through illegitimate sources/ funds. This is done in below mentioned three phases:
Market Intermediaries are therefore placed with a statutory duty to make a disclosure to the Authorized Officer when knowing or suspecting that any property, in whole or in part, directly or indirectly, representing the proceeds of a predicated offence, or was or is intended to be used in that connection is passing through the Market Intermediaries
The government of India set up Financial Intelligent Unit -India (FIU) on 18th November 2004 as an independent body to report directly to the Economic Intelligence council (EIC) headed by the finance minister. FIU-IND has been established as the central national agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transaction. FIU-IND is also responsible for coordinating and stretching efforts of national and international intelligence and enforcement agencies in pursuing the global efforts against Money laundering and related Crimes.
In order to combat drug trafficking, terrorism and other organized and serious crimes have all emphasized the need for financial institutions, including securities market intermediaries, we have established internal procedures that effectively serve to prevent and impede money laundering and terrorist financing.
“Suspicions Transactions” means a transaction whether or not made in cash which to a person acting in good faith –
(a) Gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or
(b) Appears to be made in circumstances of unusual or unjustified complexity; or
(c) Appears to have no economic rationale or Bonafide purpose.
Reasons for suspicious/Identifying suspicious transaction:
• Identity of Client
• False identification documents
• Identification documents which could not be verified within reasonable time
• Non face to face client
• Client in high-risk jurisdiction
• Doubt over the real beneficiary of the account
• Account opened with named very close to other established business entities
• Receipt back of welcome kit undelivered at the address given by the client
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
Reporting suspicious transaction
In terms of the PML Rules, The Principal Officer shall report information relating to cash and suspicious VSE Stock Services Ltd. 27 transactions to the Director, Financial Intelligence Unit-India (FIU-IND) at the following address: Director, FIU-IND,
Financial Intelligence Unit-India, 6th Floor, Hotel Samrat, Chanakyapuri, New Delhi-110021 Website: http://fiuindia.gov.in
After careful examination of the transactions and coming to a conclusion on the STR or CTR, the reporting will be done as per the guidelines of FIU-IND, all the reporting requirements and formats that are available on the website of FIU-IND under the section obligation of Reporting Entity – Furnishing Information Reporting Format (https://fiuindia.gov.in/files/downloads/Filing_Information.html).
The following Schedule shall be followed for Reporting:
a) The Cash Transaction Report (CTR) (wherever applicable) for each month shall be submitted to FIU IND by 15th of the succeeding month.
b) 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 record his reasons for treating any transaction or a series of transactions as suspicious. It shall be ensured that there is no undue delay in arriving at such a conclusion.
c) The Non-Profit Organization Transaction Reports (NTRs) for each month shall be submitted to FIU IND by 15th of the succeeding month. The Principal Officer will be responsible for timely submission of CTR, STR and NTR to FIU-IND d) Utmost confidentiality shall be maintained in filing of CTR, STR and NTR to FIU- IND
e) No nil reporting needs to be made to FIU-IND in case there are no cash/suspicious/non-profit organization transactions to be reported
For the purpose of the Act Mrs. PB Shruti will be competent Principal officer and Alternate Officer. Details of the appointment of the Principal Officer will be intimated to FIU-IND immediately.
Principal Officer will ensure:
The main aspect of this policy is the Customer Due Diligence Process which means:
• Obtaining sufficient information about to the client in order to identify who is the actual beneficial owner of the securities or on whose behalf transaction is conducted.
• Verify the customer’s identity using reliable, independent source document, data or information the
• Conduct ongoing due diligence and scrutiny of the account /client to ensure that transactionconducted are consistent client’s background/financial status, its activities and risk profile.
The Customer Due Diligence process includes three specific parameters:
a) The client account should not be opened in a fictitious / benami name or on an anonymous basis.
b) Risk perception of the client need to defined having regarded to:
c) Documentation like KYC and Risk Disclosure Document and other information from different category of client prescribed by SEBI and any other regulatory authority to be collected depending on perceived risk and having regard to the requirement to the Prevention of Money Laundering Act, 2002, guidelines issued by RBI and SEBI from time to time.
(d) Ensure that a client account is not opened where the organization is unable to apply appropriate client’s due diligence measures / KYC policies. This may be applicable in cases where it is not possible to ascertain the identity of the client, information provided to the organization is suspected to be non- genuine, perceived non-co-operation of the client in providing full and complete information. Discontinue to do business with such a person and file a suspicious activity report. We can also evaluate whether there is suspicious trading in determining whether to freeze or close the account. Should be cautious to ensure that it does not return securities or money that may be from suspicious trades. However, we can consult the relevant authorities in determining what action should be taken when it suspects suspicious trading.
(e) We need to comply with adequate formalities when client is permitted to act on behalf of another person/entity. It should be clearly specified the manner in which the account should be operated, transaction limits for the operation, additional authority required for transactions exceeding a specified quantity/value and other appropriate details. The rights and responsibilities of both the persons (i.e. the agent-client registered with Broker, as well as the person on whose behalf the agent is acting) should be clearly laid down. Adequate verification of a person’s authority to act on behalf the customer should be carried out.
(f) Necessary checks and balance to be put in place before opening an account so as to ensure that the identity of the client does not match with any person having known criminal background or is not banned in any other manner, whether in terms of criminal or civil proceedings by any enforcement agency worldwide.
For New clients:
Client information & Identity
We should accept the client base on the risk they are likely to pose. The aim is to identify clients who are likely to pose a higher-than-average risk of money laundering or terrorist financing. For this purpose, we need to classify the clients as low risk, medium risk and high-risk clients. By classifying the clients, we will be in a better position to apply higher appropriate customer due diligence process. That is, for high-risk client we have to apply higher degree of due diligence. The Factors of risk perception depend on client’s location, nature of business activity, turnover, nature of transaction, manner of payment etc.
In order to achieve to achieve this objective, all clients of branch should be classified in the following category:
Mrs. PB Shruti shall take measures to educate the Investor about the requirements, importance and necessity of the PMLA including any amendments, circulars and notifications through new letters, personal meetings etc,. Once the AML/ CFT measures are implemented investor is required to provide the sensitive information like documents evidencing his source of funds, his income tax returns, bank statements etc.
Regular monitoring of transactions is vital for ensuring effectiveness of the AML procedures. This is possible only if the intermediary has an understanding of the normal activity of the client so that it can identify deviations in transactions /activities.
PB Shruti shall pay special attention to all complex, unusually large transactions / patterns which appear to have no economic purpose. The intermediary may specify internal threshold limits for each class of client accounts and pay special attention to transactions which exceeds these limits. The background including all documents/office records memorandums/clarifications sought pertaining to such transactions and purpose thereof shall also be examined carefully and findings shall be recorded in writing. Further such findings, records and related documents shall be made available to auditors and also to SEBI/stock exchanges/FIUIND/ other relevant Authorities, during audit, inspection or as and when required. These records are required to be preserved for ten (10) years as is required under the PMLA.
The beneficial owner of the account;
The volume of the funds flowing through the account; and
For selected transactions.
The origin of the funds;
The form in which the funds were offered or withdrawn, e.g. cash, cheques, etc
The identity of the person undertaking the transaction;
The destination of the funds;
The form of instruction and authority.
Organization should ensure that all client and transaction records and information are made available on a timely basis to the competent investigating authorities.
All necessary records on transactions, both domestic and international, should be maintained at least for the minimum period of five years (5) from the date of cessation of the transaction [both in soft and hard copy].
The aforesaid AML policy shall be reviewed periodically by PB Shruti with regard to testing its adequacy to meet the compliance requirements of PMLA 2002 and relevant circulars issued by Regulatory/ Statutory bodies.