On February 3, 2023, Securities and Exchange Board of India (SEBI) published the ‘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’ vide its Master Circular SEBI/HO/MIRSD/MIRSD-SEC-5/P/CIR/2023/022.
In simple words, the guidelines outline the principles and procedures for combating Money Laundering (ML) and Terrorist Financing (TF) for registered intermediaries, including branches of Stock Exchanges and their subsidiaries abroad. The guidelines are based on the Prevention of Money Laundering Act, 2002 and provide guidance on the practical implications of the statute. The registered intermediaries are expected to implement measures to identify and discourage money laundering and terrorist financing activities and to adhere to the client account opening procedures, maintenance records and reporting of transactions as prescribed by the act and rules. The Maintenance of Records Rules empower the Securities and Exchange Board of India (SEBI) to specify the information required to be maintained by intermediaries and mandate reporting entities to have an internal mechanism for detecting specified transactions and furnishing information. Violating the prohibitions on manipulative and deceptive devices, insider trading and substantial acquisition of securities or control will be treated as a scheduled offense under PMLA.
Please find below a brief overview of these guidelines:
It is acknowledged that a universal approach may not be suitable for the securities sector in India. Thus, each registered intermediary is responsible for taking into account their unique business characteristics, such as their organizational structure, clients, and transactions, when implementing the proposed measures and procedures. 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 update has been contributed by Namitha Mathews (Partner) and Anukriti Goswami (Associate).
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