Jan 23, 2024

SEBI Amends Guidelines on Anti-Money Laundering Standards and Combating Financing of Terrorism

The Securities and Exchange Board of India (‘SEBI’), by way of its Circular dated October 13, 2023, has amended the Master Circular 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 thereunder’ dated February 03, 2023, as amended from time to time in order to align the obligations of securities market intermediaries with the amendments made in the prevention of money laundering laws and to further enhance the effectiveness of the AML/CFT framework. Set out below are the key changes:

i.    Variation of AML/ CFT Standards Globally: In case the host country does not permit proper implementation of AML/CFT measures consistent with its requirements, financial groups will apply appropriate additional measures to manage the money-laundering and terror-financing (‘ML/TF’) risks and inform SEBI;

ii.   Group Wide Compliance: Financial groups will implement group wide programmes, in such form as stated in the Circular, for dealing with ML/TF, applicable to all branches and majority owned subsidiaries of the financial group;

iii.  Change in Criteria for Identifying Beneficial Ownership: The Circular has simplified the manner of determination of beneficial ownership where the client is a company, partnership firm, unincorporated association or body of individuals or a trust. Further, the threshold for determination of the: (i) controlling ownership interest, in case of a company, has been revised from 25% to 10% of the shares or capital or profits of the company; and (ii) beneficial ownership, in case of a partnership firm, has been revised from 15% to 10% of capital or profit of the partnership firm. Also, if a client or the owner of the controlling interest is an entity listed on a stock exchange in India, or resident in jurisdictions notified by the Central Government and listed on stock exchanges in such jurisdictions, or is a subsidiary of such listed entities, the intermediaries are not required to identify the shareholders or beneficial owners of such entities;

iv.   CDD Measures: Certain additional measures have been introduced for enhancing the effectiveness of client due diligence (‘CDD’) such as no transaction or account-based relationship must be undertaken without following the CDD procedure;

v.    Politically Exposed Persons (‘PEPs’): The definition of PEPs has been aligned with the definition of PEPs under Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (‘PML Rules’);

vi.   Enhanced Due Diligence (‘EDD’): Intermediaries are required to apply EDD measures proportionate to the risks, to business relationships and transactions with natural and legal persons (including financial institutions) from countries for which this is called for by the Financial Action Task Force (‘FATF’);

vii.  Records of Identity: If the registered intermediary does not have records of the identity of its existing clients, it is required to obtain such records, failing which, the registered intermediary must close the account of such clients after giving due notice;

viii. No Confidentiality Limitation: Information sharing among group entities is not to be restricted by the confidentiality requirement; and

ix.   Principal Officer: The definition of principal officer has been aligned with the PML Rules to mean an officer at the management level and is designated by the registered intermediary.




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