The Directives as outlined below provide a general background and summary of the main provisions of the applicable anti-money laundering and anti-terrorist financing legislations in India. They also provide guidance on the practical implications of the Prevention of Money Laundering Act, 2002 (PMLA). The Directives also set out the steps that a registered intermediary or its representatives shall implement to discourage and to identify anti money laundering or terrorist financing activities. The relevance and usefulness of these Directives will be kept under review and it may be necessary to issue amendments from time to time.
These Directives are intended for use primarily by intermediaries registered under Section 12 of the Securities and Exchange Board of India Act, 1992 (SEBI Act). While it is recognized that a “one- size-fits-all” approach may not be appropriate for the securities industry in India, each registered intermediary shall consider the specific nature of its business, organizational structure, type of clients and transactions, etc. when implementing the suggested measures and procedures to ensure that they are effectively applied. 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.
This Policy has been framed by Prudent Corporate Advisory Services Ltd.. (“PCAS/Company”)in order to comply with the applicable Anti Money Laundering (AML) Standards/ Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002 and Pursuant to the recommendations made by the Financial Action Task Force on anti-money laundering standards, SEBI had issued the Guidelines on Anti Money Laundering Standards vide their notification No.ISD/CIR/RR/AML/1/06 dated 18th January 2006, vide Circular No.ISD/CIR/RR/AML/2/06 dated 20th March 2006 vide letter No. ISD/AML/CIR-1/2008 dated December 19, 2008,vide Circular No. ISD/AML/CIR-1/2009 dated September 01, 2009, Vide Circular No. ISD/AML/CIR-2/2009 date October 23,2009, vide Circular CIR/ISD/AML/3/2010 dated December 31, 2010, vide Circular No. ISD/AML/CIR-1/2010 dated February 2010 and vide Circular number CIR/MIRSD/11/2014 dated March 12th, 2014, vide Circular SEBI/HO/MIRSD/DOS3/CIR/P/2018/104 dated July 04th, 2018 and vide Circular number SEBI/HO/MIRSD/DOP/CIR/P/2019/113 dated October 15th, 2019 had issued the obligations of the intermediaries registered under Section 12 of SEBI Act, 1992. As per these SEBI guidelines, PCAS have ensured that proper policy frameworks are put in place as per the Guidelines on Anti Money Laundering Standards notified by SEBI.
Further 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;
It may, however, be clarified that for the purpose of suspicious transactions reporting, apart from ‘transactions integrally connected’, ‘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.
The purpose of this document is to guide all the employees of PCAS and employees of its associates on the steps that they are required to take and implement to prevent and identify anti money laundering or terrorist financing activities. It shall be the responsibility of each of the concerned employees that they should be able to satisfy themselves that the measures taken by them are adequate, appropriate and follow the spirit of these measures and the requirements as enshrined in the “Prevention of Money Laundering Act, 2002”.
Some of these suggested measures may not be applicable to every circumstance or to each department, Branch / Sub-broker. However, each entity should consider carefully the specific nature of its business, type of customer and transaction to satisfy itself that the measures taken by the employees are adequate and appropriate to follow the spirit of these guidelines.
The main aspect of this policy is the Customer Due Diligence Process which means:
Explanation: Controlling ownership interest means ownership of/entitlement to:
Explanation: Control through other means would include exercised through voting rights, agreement, arrangements or in any other manner.
Client acceptance policies and procedures aim to identify the types of clients that are likely to pose a higher than average risk of ML or TF. To apply client due diligence on a risk sensitive basis depends on the type of client business relationship or transaction. The following safeguards shall be followed by the company while accepting the clients
- http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml and
- http://www.un.org/sc/committees/1988/list.shtml
Utmost care shall be taken while dealing with a client of Special Category. Such clients shall include:
NRIs, HNIs, Trust, Charities, NGOs, Organization receiving donation, Politically Exposed Persons (PEP), persons of foreign origin, companies having closed share holding/ownership, companies dealing in foreign currency, shell companies, overseas entities, clients in high risk countries, non face to face clients, and clients with dubious background. Current/Former Head of State, Current/Former senior high profile politician, Companies offering foreign exchange, etc.) or clients from high-risk countries where existence / effectiveness of money laundering controls is suspected, where there is unusual banking secrecy, countries active in narcotics production, countries where corruption (as per Transparency International Corruption Perception Index) is highly prevalent, countries against which government sanctions are applied, countries reputed to be any of the following – Havens/ sponsors of international terrorism, offshore financial centers, tax havens, countries where fraud is highly prevalent. While dealing with clients in high risk countries other than FATF Recommendations, published by the FATF on its website (www.fatf-gafi.org), we shall also independently access and consider other publicly available information.
The procedure shall include
An ongoing due diligence shall be conducted where inconsistencies in the information provided by the client has been identified. The underlying objective shall be to follow the requirements preserved in the PMLA, SEBI Act and Regulations, directives and circulars issued, so as to be aware of the clients on whose behalf the company is dealing.
It may be noted that irrespective of the amount of investment made by clients, no minimum threshold or exemption is available from obtaining the minimum information/documents from clients as stipulated in the PML Rules/ SEBI Circulars (as amended from time to time) regarding the verification of the records of the identity of clients. Further no exemption from carrying out CDD exists in respect of any category of clients. In other words, there shall be no minimum investment threshold/ category-wise exemption available for carrying out CDD measures.
Reliance may be placed on a third party for the purpose of (a) identification and verification of the identity of a client and (b) 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.
Such reliance shall be subject to condition that are specified in rule 9(2) of the PML Rules and further in line with the regulations and circular / guidelines as may be issued by SEBI from time to time.
Records pertaining to transactions of clients shall be maintained and preserved for a period of five years from the date of the transaction. Record of documents evidencing the identity of the 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 shall be maintained and preserved for a period of eight years even after the business relationship with the client has ended or the account has been closed, whichever is later. Records shall be maintained as are sufficient to permit reconstruction of individual transactions (including the amounts and types of currencies involved, if any) so as to provide, if necessary, evidence for prosecution of criminal behavior or if there be any suspected drug related or other laundered money or terrorist property, the competent investigating authorities would need to trace through the audit trail for reconstructing a financial profile of the suspect account. To enable this reconstruction, the following information of the client shall be maintained in order to maintain a satisfactory audit trail:
System is been maintained to record all such transaction as prescribed under rule 3 of the PML Rules as follows:
Record of information related to transactions, whether attempted or executed, which are reported to the Director, FIU‐IND, as required under Rules 7 & 8 of the PML Rules, shall be maintained and preserved for a period of five years from the date of the transaction with the client.
In the case of transactions where any investigations by any authority has been commenced and in the case of transactions which have been the subject of suspicious transactions reporting all the records shall be maintained till the authority in forms of closure of the case.
Following information in respect of transactions referred to in Rule 3 of PML Rules shall be maintained:
Special attention shall be paid to all complex unusually large transactions / patterns which appear to have no economic purpose. Internal threshold limits for each class of client accounts shall be defined and special attention shall be paid 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 shall be preserved for a period of five years from the date of transaction with such client.
Record of the transactions in terms of Section 12 of the PMLA shall be preserved and those transactions of a suspicious nature or any other transactions notified under Section 12 of the Act shall be reported to the Director, FIU-IND. Suspicious transactions shall be regularly reported to the Senior Management.
All are requested to analyze and furnish details of suspicious transactions, whether or not made in cash. It should be ensured that there is no undue delay in analysis and arriving at a conclusion.
What is a Suspicious Transaction?
Irrespective of the amount of transaction and/or the threshold limit envisaged for predicate offences specified in part B of Schedule of PMLA, 2002, file STR if we have reasonable grounds to believe that the transactions involve proceeds of crime.”
What to Report?
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 http://www.un.org/sc/committees/1267/consolist.shtml.
Precaution shall be taken to ensure that no account is opened whose name shall be appearing in such list.
Periodic review of the existing account shall be conducted to ensure that no existing account are linked to any of the entity or individual included in the list.
Any resemblance found shall be reported to SEBI and FIU-IND.
i. Any individual or entity, if it has evidence to prove that the freezing of funds, financial assets or economic resources or related services, owned/held by them has been inadvertently frozen, shall move an application giving the requisite evidence, in writing, to the concerned stock exchanges/depositories and to us. On receipt of such request we shall inform and forward a copy of the application together with full details of the asset frozen given by any individual or entity informing of the funds, financial assets or economic resources or related services have been frozen inadvertently, to the nodal officer of IS-I Division of MHA as per the contact details given within two working days. The Joint Secretary (IS-I), MHA, being the nodal officer for (IS-I) Division of MHA, shall cause such verification as may be required on the basis of the evidence furnished by the individual/entity and if he is satisfied, he shall pass an order, within fifteen working days, unfreezing the funds, financial assets or economic resources or related services, owned/held by such applicant under intimation to the concerned stock exchanges, depositories and registered intermediaries. However, if it is not possible for any reason to pass an order unfreezing the assets within fifteen working days, the nodal officer of IS-I Division shall inform the applicant.
In terms of the PMLA rules, brokers and sub-brokers are required to report information relating to cash and suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND) 6th Floor, Hotel Samarat, Chanakyapuri, New Delhi - 110021 as per the schedule given below:
Report | Description | Due Date |
---|---|---|
CTR |
All cash transactions of the value of more than Rs.10 Lakhs or its equivalent in foreign currency All series of cash transactions integrally connected to each other which have been valued below Rs.10 Lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month |
15th day of the succeeding Month |
STR |
All suspicious transactions whether or not being made in cash |
Not later than seven days on satisfied that the transaction is suspicious |
NTR |
Non Profit Organization Transaction Report |
15th day of the succeeding Month |
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.No nil reporting needs to be made to FIU-IND in case there are no cash/ suspicious/ non – profit organization transactions to be reported.
Irrespective of the amount of transaction and/or the threshold limit envisaged for predicate offences specified in the PMLA, 2002, an STR shall be filed, if there is reasonable grounds to believe that the transactions involves proceeds of crime.
The company has designated the Principal Officer who shall be responsible for implementation and compliance of this policy shall include the following:
“Designated Director” means a person designated by the Board of Directors to ensure over all compliance with the obligations imposed under The Prevention of Money Laundering Act, 2002 and the Rules framed there under, as amended from time to time, and include the Managing Director or a Whole‐time Director duly authorized by the Board of Directors. The Company shall appoint a Designated Director and communicate the details of the Designated Director, such as, name, designation and address to the Office of the Director, FIU‐IND and update the same whenever there is any change.
Name |
Chirag Shah |
Rima Patel |
Designation |
Designated Director |
Principal Officer |
Office Address |
"Prudent House", Panjrapole cross road, near Polytechnic, Ambawadi, Ahmedabad-380 015 |
"Prudent House", Panjrapole cross road, near Polytechnic, Ambawadi, Ahmedabad-380 015 |
Telephone Number |
079-40209600 |
079-40209600 |
Mobile Number |
9825407859 |
9727822388 |
Email ID |
chirag@prudentcorporate.com |
compliancemf@prudentcorporate.com |
As the implementation of AML/CFT measures being sensitive subject and requires us to demand and collect certain information from investors which may be of personal in nature or has here to never been called for, which information include documents evidencing source of funds/income tax returns/bank records etc. and can sometimes lead to raising of questions by the client with regard to the motive and purpose of collecting such information. There is, therefore, a need for us to sensitize the clients about these requirements, as the ones emanating from AML and CFT framework. We shall circulate the PMLA Circulars and other specific literature/pamphlets etc. so as to educate the client of the objectives of the AML/CFT program. The same shall also be emphasized on, in the Investor Awareness Programs conducted by us at frequent intervals of time. The importance of the same is also made known to them at the time of opening the Account.
Note: This policy has been reviewed in terms of SEBI’s circular no. SEBI/ HO/ MIRSD/ DOP/ CIR/ P/ 2019/113 dated 15/10/2019 by Board of Directors of erstwhile Prudent Corporate Advisory Services Ltd. during its meeting held on 23/10/2020 and is being circulated to all concerned for compliance of the same.