Of the Group comprising of
ASHLAR SECURITIES PVT LTD being the member of NSE, BSE, MSEI, MCX & NCDEX & DP of NSDL vide SEBI Regn Nos INZ000203739
Policy Version No. : 1.07
Date of Last Policy Review: 02 March 2020
POLICY FRAMEWORK FOR IMPLEMENTATION OF the PROVISIONS OF PREVENTION AND MONEY LAUNDERING ACT (PMLA) 2002
The Prevention of Money Laundering Act, 2002 (PMLA) came in force with effect from 1st July 2005.
As per the provisions of the PMLA, each market intermediary (Reporting Entity) (which includes a stockbroker, sub-broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, asset management company, depositary participant, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary associated with the securities market and registered under Section 12 of the Securities and Exchange Board of India Act, 1992 (SEBI Act) 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.
Obligations of a “Reporting Entity” includes:-
relating to such transactions, whether attempted or executed, the nature and value of which may be prescribed
owners, account files and business correspondence relating to its clients and information related to transactions for specified period.
For the purpose of PMLA, transactions include:
Further, 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.
For the purpose “Suspicions Transaction” means a transaction whether or not made in cash which to a person acting in good faith:–
The Anti-Money Laundering Guidelines provides a general background on the subjects of money laundering and terrorist financing in India and provides guidance on the practical implications of the PMLA. The PMLA Guidelines sets out the steps that a registered intermediary and any of its representatives, need to implement to identify and discourage any “Money Laundering” (ML) or “Terrorist Financing” activities.
SEBI has issued various directives vide circulars, from time to time, covering issues related to Know Your Client (KYC) norms, Anti- Money Laundering (AML), Client Due Diligence (CDD) and Combating Financing of Terrorism (CFT). The directives lay down the minimum requirements and 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.
While it is recognized that a “one-size-fits-all” approach may not be appropriate for the securities industry in India, each registered intermediary is required to implement suggested measures and procedures considering the specific nature of its business, organizational structure, type of clients and transactions, etc. to ensure that they are effectively applied.
Global measures taken to combat drug trafficking, terrorism and other organized and serious crimes have all emphasized the need for financial institutions, including securities market intermediaries, to establish internal procedures that effectively serve to prevent and impede money laundering and terrorist financing.
To be in compliance with these obligations, 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.
The obligations of an intermediary under Prevention of Money Laundering Act, 2002 (PLMA) includes:-
Accordingly, we have drafted this written policy framework (hereinafter called as “PMLA Policy”) for our whole group (consisting of Ashlar Securities Pvt Ltd ) for policy which aims to have a system in place to identify, monitor and reporting the suspected money laundering or terrorist financing transactions to law enforcing authorities within the framework of current statutory and regulatory requirements.
All concerned are hereby advised to ensure that every possible measures are taken for the effective implementation of this Policy and that the measures taken are adequate, appropriate and abide by the spirit and requirements as enshrined in the PMLA.
Detailed PMLA Policy Framework
To ensure effective discharge of our legal obligations to report suspicious transactions to the authorities, we hereby appoint the “Principal Officer” who would act as a central reference point for the identification and assessment of potentially suspicious transactions and in facilitating onward reporting of suspicious transactions to FIU.
Complete Details of Principle are as given below:-
Name : Ankit Garg
Designation : DIRECTOR
Contact No : 0120-6633301
Email : email@example.com
Rights and Obligations of Principle Officer:
The Principal Officer shall ensure that:
For ensuring overall supervision and compliance with the obligations imposed under chapter IV of the Act and the Rules the group has appointed the “Designated Director”. The details of the designated Director are as given below:-
Name : Ankit Garg
Designation : DIRECTOR
Contact No : 0120-6633301
Email : firstname.lastname@example.org
The CDD measures comprise the following:
Suggestive measures for identification of beneficial ownership are as given below:-
Where the client is a person other than an individual or trust, viz., company, partnership or unincorporated association/body of individuals, identification of beneficial owners of the client may be done by applying following measures namely;
ascertain the identity of the natural person, who, whether acting alone or together or through one or more juridical person, exercises control through ownership or who ultimately has a controlling ownership interest.
Explanation: Controlling ownership interest means ownership of/entitlement to:
In cases where there exists doubt as to whether the person with the controlling ownership interest is the beneficial owner or where no natural person exerts control through ownership interests, the identity of the natural person exercising control over the juridical person through other means.
Explanation: Control through other means can be exercised through voting rights, agreement, arrangements or in any other manner.
Where no natural person is identified under clauses mentioned above, the identity of the relevant natural person who holds the position of senior managing official.
Where the client is a trust, the beneficial ownership of the client shall be identifying by taking reasonable measures to verify the identity of the settler of the trust, the trustee, the protector, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.
Where the client or the owner of the controlling interest is a company listed on a stock exchange, or is a majority-owned subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.
Verify the identity of the beneficial owner of the client and/or the person on whose behalf a transaction is being conducted, corroborating the information provided in relation to (c);
Reliance on third party for carrying out due diligence
We may rely on a third party for the purpose of
Provided 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.
However as a registered intermediary we shall be ultimately responsible for CDD and undertaking enhanced due diligence measures
Our client acceptance policies and procedures aims to identify the types of clients that are likely to pose a higher than average risk of ML or TF so that we will be in a better position to apply client due diligence on a risk sensitive basis depending on the type of client business relationship or transactions.
In nutshell the following safeguards are to be followed while accepting the clients namely;
Such risk categorization may be arrived considering various factors of risk perception of the client having regard to:-
addresses and other addresses if applicable),
Clients of Special Category (CSC) (as defined later in this policy) may, if necessary, be classified even higher. Such clients require higher degree of due diligence and regular update of Know Your Client (KYC) profile.
We must obtain documentary evidence of each KYC information provided by the client and verify each such supporting document with originals prior to acceptance of a copy and same be stamped “Verified with the original” and each client must be met in person before registration.
The information collected by us should be enough to satisfy competent authorities (regulatory / enforcement authorities) in future that due diligence was observed by us in compliance with the Guidelines.
A complete identification record of person doing the In-person verification and verification of documents must be kept in readily available manner.
We shall not continue to do business with such a person and file a suspicious activity report. We shall also evaluate whether there is suspicious any trading in determining whether to freeze or close the account. We shall be cautious to ensure that we do not return securities or money that may be from suspicious trades.
Further, we shall consult the relevant authorities in determining what action we shall take when we suspects suspicious trading activity.
In case of non-individual clients only the person(s) having appropriate written authorization are allowed to deal for and on behalf of the client.
In all the cases, we must obtain the identification documents of the person so authorized to deal on behalf of the client and adequate verification of person’s authority to act on behalf of the client shall also be carried out.
The authorization letter should specify the manner in which the account shall be operated, transaction limits for the operation, additional authority (if any) required for transactions exceeding a specified quantity/value.
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.
For the purpose of above and elsewhere used in this policy framework, Clients of Special Category (CSC) shall include:-
The above mentioned list is only illustrative and the intermediary shall exercise independent judgment to ascertain whether any other set of clients shall be classified as CSC or not.
Client acceptance is a critical activity in AML compliance. Registering any client means providing such client with an entry point to local and international financial systems. Client acceptance, thus, becomes the first step in controlling money laundering and terrorist financing.
Regulatory guidelines stipulate that a sound KYC program should determine the true identity and existence of the customer and the risk associated with the customer. It is therefore imperative that we capture information about their background, sources of funds, nature and type of business, domicile and financial products used by them and how these are delivered to them in order to properly understand their risk profile.
It is generally recognized that certain clients may be of a higher or lower risk category depending on the circumstances such as the client’s background, type of business relationship or transaction etc. The basic principle enshrined in this approach is that the registered intermediaries shall adopt an enhanced client due diligence process for higher risk categories of clients. Conversely, a simplified client due diligence process may be adopted for lower risk categories of clients.
In line with the risk-based approach, the type and amount of identification information and documents that we shall obtain necessarily depend on the risk category of a particular client and for this purpose clients may be classified into following categories namely;-
Category – A: Low Risk
Category – B: Medium Risk
Category – C: High Risk
Category “A” clients are those pose low or nil risk. These clients have a respectable and verifiable social and financial standing. Their KYC Information and financial details is easily verifiable.
Category “B” clients are those who mostly deals on intra-day basis or on speculative basis. These are the clients who maintain running account with the Company.
Category “C” clients are those who have defaulted in the past, have suspicious background or the clients identified as CSC.
Further, low risk profile shall not apply when there are suspicions of ML/FT or when other factors give rise to a belief that the customer does not in fact pose a low risk.
Any business relationship with “High Risk Clients” including clients identified as CSC must not be commenced unless approved by Senior Management Officials.
As customer risk rating and KYC drives enhanced due diligence and ongoing monitoring it is critical that we conduct an ongoing comprehensive assessment to understand the risks associated with our business and customers and necessary modifications and improvements in associated Client acceptance and Due Diligence Policies and Procedures.
We have formulated a periodic risk assessment mechanism to, identify money laundering and terrorist financing risk, assess and take effective measures to mitigate them with respect to our clients, countries or geographical areas, nature and volume of transactions, payment methods used by our clients, etc.
The risk assessment shall also take into account 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 (these can be accessed at the URL - http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml and http://www.un.org/sc/ committees/1988/list.shtml)
Our risk assessment process consider all the relevant factors before determining the level of overall risk and the appropriate level and type of mitigation to be applied and assessment is documented and updated regularly and made available to competent authorities and self-regulating bodies, as and when required.
6.Client Identification Procedures:-
We carry out client identification procedure at different stages i.e. while establishing the relationship with the client, while carrying out transactions for the client or when there is any doubt regarding the veracity or the adequacy of previously obtained client identification data.
7.Transaction based Monitoring and Identification of Suspicious Transactions
Broad category of triggers that will require the complete analysis of transaction may include:-
A list of circumstances which may be in the nature of suspicious transactions is given below. This list is only illustrative and whether a particular transaction is suspicious or not will depend upon the background, details of the transactions and other facts and circumstances:-
Findings of transaction analysis must be recorded in writing, as the same along with records and related documents may required to be provided to auditors, SEBI, Stock Exchanges, FIUIND, other relevant authorities during audits or as and when asked for.
These records are required to be maintained and preserved for a period of five years from the date of transaction between the client and intermediary.
The Principal Officer would act as a central reference point in playing an active role in the identification and assessment of potentially suspicious transactions and facilitating onward reporting of suspicious transactions.
Accordingly, any potential suspicious transaction shall immediately be notified to Principle Officer which may be a detailed report with specific reference to the clients, transactions and the nature / reason of suspicion and for this purpose, transactions abandoned or aborted by clients on being asked to give some details or to provide documents are also to be reported even if not completed by clients, irrespective of the amount of the transaction.
We must ensure continuity in dealing with the reported client as normal until told otherwise and the client not be told of the report/suspicion i.e. group officials and employees shall be prohibited from “Tipping off” the fact that a STR or related information is being reported or provided to the FIU-IND.
The Principal Officer shall examine the transaction in details and if reaches to the conclusion that the notified transaction is “Suspicious” shall report the same to Financial Intelligence Unit (FIU) within 7 days from the date of arriving at such conclusion by filing the Suspicion Transaction Report (STR).
It is clarified that the STR must be filed irrespective of the amount of transaction and/or the threshold limit, if there are reasonable grounds to believe that the transactions involve proceeds of crime.
We, as an SEBI registered Intermediary, shall maintain all the records to ensure compliance of requirements contained in SEBI Act 1992, Rules and Regulations made there under, PMLA as well as other relevant legislation, Rules, Regulations, Exchange Bye-laws and Circulars.
We are required to maintain such records 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.
Should 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, we shall retain the following information for the accounts of their clients in order to maintain a satisfactory audit trail:
i. the origin of the funds
ii. the form in which the funds were offered or withdrawn, e.g. cheques, demand drafts etc
iii. the identity of the person undertaking the transaction;
iv. the destination of the funds;
v. the form of instruction and authority.
We shall ensure maintaining proper record of transactions namely;-
To enable this reconstruction, we need to retain the following information:-
Records to be maintained in a way that all client and transaction records and information are available on a timely basis to the competent investigating authorities.
Following Document Retention Terms should be observed:
Records may be maintained in both hard and / or soft copies.
All the staff members involved in front office dealings, back office, KYC & Compliances, Risk Management or any kind of client dealings need to be adequately trained in AML and CFT (Combating Financing of Terrorism) procedures. They should fully understand the rationale behind these directives, obligations and requirements, implement them consistently and are sensitive to the risks of our systems being misused by unscrupulous elements.
Accordingly, we have an ongoing employee-training programme (in-house as well as sending employees for attending of independent training workshops) so that the concerned staff are adequately trained in AML and CFT procedures.
Further, the Principle Officer is authorized to ensure that all the concerned staff is well versed with latest modifications in the PMLA policy framework and is adequately sensitized to the risks of ML & TF.
We have adequate screening procedures in place to ensure high standard when hiring employees. We have identified the key positions within the Company structure having regard to the risk of money laundering and terrorist financing.
The HR Department is instructed to verify the identity, cross check all the references, family background and should take adequate safeguards to establish the authenticity and genuineness of the persons before recruiting.
The department should obtain the following documents:
Implementation of AML/CFT measures requires us to demand certain information from investors which may be of personal nature or which have never been called for. Such information can include documents evidencing source of funds/income tax returns/bank records etc. This can sometimes lead to raising of questions by the clients with regard to the motive and purpose of collecting such information. We, therefore need to sensitize prospective client that these requirements emanating from AML and CFT framework.
This may either be done by preparing specific literature or by educating the clients/sub-brokers/Authorised Person on the objectives of the Anti Money Laundering (AML) / Combating Financing of Terrorism (CFT) programme.
The policy shall be reviewed periodically so as to incorporate the latest change(s) in the Anti Money Laundering Act 2002 or change in any other act, bye-lows, rules, regulations of SEBI, CBI or in any statutory and regulatory government department related to or affect to this.
Further the review of this policy framework shall be undertaken by the person other than the one who has framed this policy.
Section 51A, of the Unlawful Activities (Prevention) Act, 1967 (UAPA), relating to the purpose of prevention of, and for coping with terrorist activities was brought into effect through UAPA Amendment Act, 2008. In this regard, the Central Government has issued an Order dated August 27, 2009 detailing the procedure for the implementation of Section 51A of the UAPA. Under the aforementioned Section, the Central Government is empowered to freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of, or at the direction of the individuals or entities listed in the Schedule to the Order, or any other person engaged in or suspected to be engaged in terrorism. The Government is also further empowered to prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of the individuals or entities listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism.
Accordingly, we need to ensure the effective and expeditious implementation of said Order has been issued vide SEBI Circular ref. no : ISD/AML/CIR-2/2009 dated October 23, 2009, which needs to be complied with scrupulously.
WRITEUP ON “PREVENTION OF ANTI MONEY LAUNDERING ACT 2002” FOR THE INFORMATION OF CUSTOMERS
The Prevention of Money Laundering Act, 2002 (PMLA) was brought into force with effect from 1st July 2005. Necessary Notifications / Rules under the said Act were published in the Gazette of India on July 01, 2005.
The purpose of this act is to prevent financing of terrorism and to prevent laundering of money i.e. to legalize or channelize the money generated from illegal activities like drug trafficking, organized crimes, hawala rackets and other serious crimes.
The PMLA are applicable to all 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.
All these entities 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 is the obligation of an Intermediary to report certain kind of transactions routed through them to FINANCIAL INTELLEGENCE UNIT (FIU) – INDIA a department specially set up to administer this Act under the Ministry of Finance.
Any such type of transaction, though not executed but attempted and failed are also required to be reported.
In order to comply with the provisions of the Act, we as an intermediary need to:-
measures / KYC policies or where client`s identity verification seems difficult or client appears not to co-operate.
It is generally recognized that certain clients may be of a higher or lower risk category depending on the circumstances such as the client’s background, type of business relationship or transaction etc. The basic principle enshrined in this approach is that an enhanced client due diligence process is required for higher risk categories of clients. Such clients shall include:-
Trust, Charities, NGOs and organizations receiving donations
Companies with close family holdings or beneficial Ownership
Politically Exposed Persons
Companies offering foreign exchange offerings
Clients in high risk countries
Non face to face clients
Clients with dubious reputation as per public information available etc
ii. Clients transferring large sums of money to or from overseas locations with instructions for payment in cash
iii. Attempted transfer of investment proceeds to unrelated third parties
It may be noted that no account trading / demat can be opened in the name of entities whose name appear in the list of UNSC or entities debarred by SEBI.
The end clients are therefore advised to co-operate with us by providing additional information / documents if asked at the time to opening of the account and / or for during the course of dealings with us to ensure due compliance of the requirements under the PMLA Act.
As a responsible citizen it is our statutory as well as moral duty to be vigilant and refrain from temptation of easy monetary gains by knowingly or unknowingly supporting the people who are involved in activities which are endangering our freedom and causing damage to nation and to us as well.
For any further clarification, you may please refer to detailed PMLA Policy published on our website or contact Principle Office of the company.
Four Lists of Red Flag Indicators for Terrorist Financing
Indicators linked to the financial transactions:
Activity Inconsistent With the Customer’s Business:
It may be noted that a single indicator on its own may seem insignificant, but combined with others, could provide reasonable grounds to suspect that the transaction is related to terrorist financing activity.
The red flags indicators noted above can conveniently be shared with staff to create the awareness amongst them for tracking and reporting suspicious transactions and for enhancing the efforts to counter-terrorism.