On 13-10-2023, the Securities and Exchange Board of India (‘SEBI’) notified amendments in its Master Circular dated 3-2-2023 on Guidelines on Anti-Money Laundering (‘AML’) Standards and Combating the Financing of Terrorism (‘CFT’) /Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002 and Rules framed there under.
On 04-09-2023, the Government of India, notified the Prevention of Money-laundering (Maintenace of Records) (Second Amendment) Rules, 2023 to amend the Prevention of Money-laundering (Maintenace of Records) Rules, 2005.
This modification in the Master Circular has been made to further enhance the effectiveness of the AML/CFT framework.
Key Points:
-
Paragraph 6, relating to the “Policies and Procedures to Combat Money Laundering and Terrorist Financing- Essential Principals”, has been revised and a new provision has been inserted which says that if the host country does not permit the proper implementation of AML/CFT measures consistent with the home country requirements, financial groups will be required to apply appropriate additional measures to manage the Money Laundering/Terrorist Financing risks, and inform SEBI.
-
Paragraph 7B, relating to “Obligations to establish Policies and Procedure”, has been introduced which talks about implementation of group wide programmes, by financial groups, to deal with Money Laundering/Terrorist Financing which will be applicable to all branches and majority owned subsidiaries of the financial group.
-
Paragraph 11, relating to measures taken for “Client Due Diligence” (‘CDD’), has been revised:
-
In case of a Trust’s, the reporting entity will have to ensure that the trustees disclose their status at the time of commencement of an account-based relationship.
-
The provision relating to identification of beneficial ownership and control has been revised in the following cases:
-
Where the client is company;
-
Where the client is partnership firm;
-
Where the client is an unincorporated association or body of individuals;
-
Where no natural person is identified;
-
Where the client is a where the client or the owner of the controlling interest is an entity listed on a stock exchange in India trust;
-
Applicability for foreign investors.
-
-
-
Paragraph 11-A has been inserted which says that no transaction or account-based relationship will be undertaken without following the CDD procedure.
-
Paragraph 41-A, relating to “Record Keeping”, has been introduced which says that where the registered entity does not have records of the identity of its existing clients, it will have to obtain the records. In case it fails to do so, the registered intermediary will close the account of the client after giving due notice to the client.
