PMLA POLICY
POLICY on
ANTI MONEY LAUNDERING
adopted by
YOKE SECURITIES LTD
(Updated on 30.06.2022)
(Approved by BOD on 02.07.2022)
PMLA POLICY
YOKE Securities Ltd.
had designed this policy of PMLA
and effective AML program to prohibit and actively prevent the money laundering
and any activity that facilitates money laundering or the funding of terrorist
or criminal activities or flow of illegal money or hiding money to avoid paying
taxes. To discourage and identify any Money Laundering or Terrorist financing
Activities. Money laundering is generally defined as engaging in acts designed
to conceal or disguise the true origins of criminally derived proceeds so that
the unlawful proceeds appear to have derived from legitimate origins or
constitute legitimate assets. Maintenance of records of the Nature and Value of
Transactions. To protect the interests of investors in securities and to promote
the development of and to regulate the securities Market.
This policy provides a detailed
Account of the procedures and obligations to be followed to ensure compliance
with issues related to KNOW YOUR CLIENT (KYC) Norms, ANTI MONEY LAUNDERING
(AML), CLIENT DUE DILIGENCE (CDD) and COMBATING FINANCING OF TERRORISM (CFT).
Policy specifies the need for Additional disclosures to be made by the
clients to address concerns of Money Laundering and Suspicious transactions
undertaken by clients and reporting to FINANCE INTELLIGENT UNIT (FIU-IND).
These policies are applicable to both Branch and Head office Operations and
are reviewed from time to time.
Every possible measures are taken
for the effective implementation of the Policy. The measures taken are adequate,
appropriate and abide by the spirit of such measures and requirements as
enshrined in the PMLA to the best of our satisfaction.
INTRODUCTION:
Background:
Pursuant to the recommendation made
by the Financial Action Task Force on Anti Money Laundering standards, SEBI had
issue the guidelines on Anti Money Laundering standards vide their notification
no. ISD/CIR/RR/AML/1/6 dated 18th
January 2006 and vide letter
no. ISD/CIR/RR/AML/2/6 dated 20th
March 2006 had issue the
obligation of Intermediateries registered under section 12 of the Securities and
Exchange Board of India Act, 1992. As per the SEBI guidelines, all
Intermediateries have been advice to ensure that proper policy frameworks are
put in place as per the guidelines on Anti Money Laundering standards notify by
SEBI
What is Anti
Money Laundering?
Money Laundering can be defined as
engaging in financial transaction that involve income derived from criminal
activities, transaction designated to conceal the true origin of criminally
derived proceeds and appears to have been received through legitimate sources /
funds.
This is done in
below mentioned three phase
1. Placement
Phase
2. Layering
Phase
3. Integration
Phase
Financial
Intelligent Unit (FIU)
The government of India set up
Financial Intelligent Unit -India (FIU) on 18th
November 2004 as an
independent body to report directly to the Economic Intelligence council (EIC)
headed by the Finance Minister.
FIU-IND has been established as the
central national agency responsible for receiving, processing, analyzing and
disseminating information relating to suspect financial transaction. FIU-IND is
also responsible for coordinating and stretching efforts of national and
international intelligence and enforcement agencies in pursuing the global
efforts against Money Laundering and related Crimes.
The
Prevention of Money Laundering Act, 2002 (PMLA)
The Prevention of Money Laundering
Act, 2002 (PMLA) has been brought into force with effect from 1st July,
2005. Necessary Notifications / Rules under the said Act have been published in
the Gazette of India on 1st
July 2005 by the Department
of Revenue, Ministry of Finance and Government of India.
As per 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 Securities and Exchange Board of India Act,
1992) shall have to maintain a record of all the transactions, the nature and
value of which has been prescribed in the Rules notified under the PMLA. For the
purpose of PMLA, transactions include:
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, such series of transactions within one
calendar month.
All suspicious transactions whether
or not made in cash and including, inter-alia, credits or debits into from any
non monetary account such as demat account, security account maintained by the
registered intermediary.
For the purpose of suspicious
transactions reporting apart from `transactions integrally connected',
`transactions remotely connected or related’ need to be considered.
“Suspicions Transactions”
means a transaction whether or not made in cash which to a person acting in good
faith –
(a) Gives rise to a reasonable
ground of suspicion that it may involve the proceeds of crime; or
(b) Appears to be made in
circumstances of unusual or unjustified complexity; or
(c) Appears to have no economic
rationale or bonafide purpose.
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 discourage and
identify any money laundering or terrorist financing activities.
OBJECTIVE :
The main objectives of the PMLA are
as follows:
1. To have a proper Customer Due
Diligence (CDD) process before registering clients.
2. To monitor / maintain records of
all cash transactions of the value of more than Rs.10 lacs.
3. To maintain records of all
series of integrally connected cash transactions within one calendar month.
4. To monitor and report suspicious
transactions.
5. To discourage and identify money
laundering or terrorist financing activities.
6. To take adequate and appropriate
measures to follow the spirit of the PMLA.
GUIDELINES:
Broker being a SEBI registered
intermediaries have to comply with spirit of anti money laundering provisions.
To comply with PMLA, the following three specific parameters should be observed,
which are related to the overall `Client Due Diligence Process':
1. Policy for acceptance of
clients;
2. Procedure for identifying the
clients;
3. Transaction monitoring and
reporting especially Suspicious Transactions Reporting (STR).
Client /
Customer Due Diligence (CDD):
For the purpose
of CDD, if the Broker is dealing with institutional clients, according to SEBI
regulation / rules Institutional clients includes:
1. Banks
2. Mutual Funds
3. Foreign
Institutional Investors (FII)
4. Financial
Institutions
5. Insurance
Companies
According to SEBI, all trades done
by institutional client should be settled through Clearing House. In clearing
house trade, trades are settled by Broker and Custodian of the respective
client. In view of above, following steps to be taken to comply with `Customer
Due Diligence' process before registering as client:
1. Obtain basic details for the
purpose of the complying with KYC norms prescribed by SEBI.
2. List of Directors and authorized
person to trade on behalf of client and copy of Board Resolution to that effect.
3. Obtain SEBI Registration Number.
4. Obtain Custodian details with
whom client trades to be settled.
5. Obtain contact details of client
front / back office and contact person.
6. Obtain PAN No. (Income Tax
Number).
7. Obtain Risk Disclosure Document
duly executed by prospective client as prescribed by SEBI.
The client
/ customer due diligence (CDD) measures comprise the following:
1.
Client Information & Identity :
Before registering client, obtain
antecedent information. Verify independently information submitted by client but
not limited to his identity, registered office address, correspondence address,
contact details, occupation, Promoters / Directors, source of income, experience
in securities market, PAN No. etc. Obtain as many as information as possible.
Generally Institutional clients are recognize at global level. We need to verify
client’s identity and origin using services of Bloomberg, Reuters, internet
services or any other reliable independent source documents, data or
information. After verifying information, registration form along with other
supporting documents should be approved by Director for verification.
2.
Beneficial Ownership and
Control:
The “Beneficial Owner” is
the natural person or persons who ultimately own, control or influence a client
and / or persons on whose behalf a transaction is being conducted. It also
incorporates those persons who exercise ultimate effective control over a legal
person or arrangement. After completing registration process, client account
should be verified by independent employee to check the actual beneficial
ownership and control of the particular account. We need to obtain the details
with respect to Shareholders, Promoters from the client and it has to be
verified independently. In this process we should find out who is authorized to
operate the client's account and who is ultimately controlling the account. Also
verify the sources of funds for funding the transaction. We also have to take
care at the time of settlement regarding nature of transaction, movement /
source of transaction, etc. Periodically ask for client's financial details to
determine the genuineness of transaction.
3.
Ongoing due diligence and
scrutiny:
Periodically we need to conduct due
diligence and scrutiny of client's transaction and accounts to ensure that
transactions are being conducted in knowledge, to find out the risk profile,
source of funds, etc. At regular interval, ongoing due diligence and scrutiny
need to be conducted i.e. perform ongoing scrutiny of the transactions and
account throughout the course of the business relationship to ensure that the
transactions being conducted are consistent with the organization’s knowledge of
the client, its business and risk profile, taking into account, where necessary,
the customer's source of funds.
4. Policy for
acceptance of clients:
Before registering client, we need
to identify the following details of the prospective client :
1. Ascertain the category of
clients before registration as Client. (i.e. Individual or Corporate, FII,
Mutual Fund, PMS or other).
2. Obtain all necessary documents
for registration. (Photograph, Photo Identity, Proof of Address, copy of PAN,
etc.). Documents should be verified with original and same to be counter signed
by authorized representative of the organization.
3. Obtain copy of Bank Statement
for ascertaining the mode of payment of transaction.
4. Registration of clients to be
made on physical presence of the prospective client.
5. Obtain antecedent details of the
prospective client.
6. Ensure that new registration is
to be made in clients name only.
7. Ensure that account should not
be opened in fictitious or benami name.
8. Obtain details of Client's
occupation, sources of income.
9. Determine the parameter to
categories of client as per risk.
10. Obtain financial statement for
at least for last 2 years duly certified by Chartered Accountants.
11. Ensure that all details of KYC
form should be complete in all respect. Incomplete KYC should not accept by the
organization.
12. Organization should not
register client in case any kind of doubt has been raised by client (i.e. unable
to submit required form / proof, any suspicious behavior noticed at the time of
registration, etc.)
13. Account should not be opened
where organization cannot apply Customer Due Diligence / KYC policies.
14. The client's account should be
scrutinized regularly for determining nature of transaction taken place. In case
of any suspicious transaction, the account should be freez or securities / money
should not be delivered to client.
The following safeguards are to be
followed while accepting the clients:
a) The client account should not be
opened in a fictitious / benami name or on an anonymous basis.
b) Risk perception of the client
need to defined having regarded to:
1. Client's' location (registered
office address, correspondence addresses and other addresses if applicable);
2. Nature of business activity,
tracing turnover etc. and
3. Manner of making payment for
transactions undertaken.
The parameters of clients into
Clients of special category (as given below) may be classified as higher risk
and higher degree of due diligence and regular update of KYC profile should be
performed.
A) Low Risk
B) Medium Risk and
C) High Risk
should be classified.
c) Documentation like KYC,
Broker-Client Agreement and Risk Disclosure Document and other information from
different category of client prescribed by SEBI and any other regulatory
authority to be collected depending on perceived risk and having regard to the
requirement to the Prevention of Money Laundering Act, 2002, guidelines issued
by RBI and SEBI from time to time.
d) Ensure that a client account is
not opened where the organization is unable to apply appropriate client's due
diligence measures / KYC policies. This may be applicable in cases where it is
not possible to ascertain the identity of the client, information provided to
the organization is suspected to be non-genuine, perceived non-co-operation of
the client in providing full and complete information. Discontinue to do
business with such a person and file a suspicious activity report. We can also
evaluate whether there is suspicious trading in determining whether to freeze or
close the account. Should be cautious to ensure that it does not return
securities or money that may be from suspicious trades. However, we can consult
the relevant authorities in determining what action should be taken when it
suspects suspicious trading.
e) We need to comply with adequate
formalities when client is permitted to act on behalf of another person /
entity. It should be clearly specified the manner in which the account should be
operated, transaction limits for the operation, additional authority required
for transactions exceeding a specified quantity / value and other appropriate
details. The rights and responsibilities of both the persons (i.e. the
agent-client registered with Broker, as well as the person on whose behalf the
agent is acting) should be clearly laid down. Adequate verification of a
person's authority to act on behalf the customer should be carried out.
f) Necessary checks and balance to
be put in place before opening an account so as to ensure that the identity of
the client does not match with any person having known criminal background or is
not banned in any other manner, whether in terms of criminal or civil
proceedings by any enforcement agency worldwide.
5.
Acceptance of clients through Risk-Based Approach:
The clients may be of a higher or
lower risk category depending on circumstances such as the customer's
background, type of business relationship or transaction etc. We should apply
each of the clients due diligence measures on a risk sensitive basis. We should
adopt an enhanced customer due diligence process for higher risk categories of
customers. Conversely, a simplified customer due diligence process may be
adopted for lower risk categories of customers. In line with the risk-based
approach, we should obtain type and amount of identification information and
documents necessarily dependent on the risk category of a particular customer.
6. Clients
of special category (CSC):
CSC clients include the following:
1. Non-resident clients (NRI);
2. High Net worth clients (HNI)
3. Trust, Charities, NGOs and
organizations receiving donations.
4. Companies having close family
shareholdings or beneficial ownership.
5. Politically exposed persons
(PEP) of foreign origin
6. Current /Former Head of State,
Current or Former Senior High profile politicians and connected persons
(immediate family, close advisors and companies in which such individuals have
interest or significant influence);
7. Companies offering foreign
exchange offerings;
8. Clients in high risk countries
(where existence / effectiveness of money laundering controls is suspect, 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;
9. Non-face to face clients;
10. Clients with dubious reputation
as per public information available etc.;
The above mentioned list is only
illustrative and we should exercise independent judgment to ascertain whether
new clients should be classified as CSC or not.
7. Client
identification procedure:
To follow the
Client Identification procedure we need to follow the following factors:
The `Know Your Client' (KYC) policy
should be strictly observed with respect to the client identification procedures
which need to be carried out at different states i.e. while establishing the
Broker – Client relationship, while carrying out transactions for the client or
when have any doubts regarding the veracity or the adequacy of previously
obtained client identification data.
The client should be identified by
using reliable sources including documents / information. Obtain adequate
information to satisfactorily establish the identity of each new client and the
purpose of the intended nature of the relationship.
The information should be adequate
enough to satisfy competent authorities (regulatory / enforcement authorities)
in future that due diligence was observed in compliance with the Guidelines.
Each original document should be seen prior to acceptance of a copy and it is
verified and duly attested.
Failure by prospective client to
provide satisfactory evidence of identity should be noted and reported to the
higher authority within the organization.
SEBI has prescribed the minimum
requirements relating to KYC for certain class of the registered intermediaries
from time to time. Taking into account the basic principles enshrined in the KYC
norms, internal guidelines should be followed in dealing with clients and legal
requirements as per the established practices. Also maintain continuous
familiarity and follow-up where it notices inconsistencies in the information
provided by the client. The principles enshrined in the PML Act, 2002 as well as
the SEBI Act, 1992 should be followed, so that the Company is aware of the
clients on whose behalf it is dealing.
8. Record
Keeping:
For the purpose of the record
keeping provision, we should ensure compliance with the record keeping
requirements contained in the SEBI Act, 1992, Rules and Regulations made
there-under, PLM act, 2002 as well as other relevant legislation, Rules,
Regulations, Exchange Bye-laws and Circulars. Records to be maintained should be
sufficient to permit reconstruction of individual transactions (including the
amounts and type 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 financial profile of the suspect's account. To enable this
reconstruction, Organization should retain the following information for the
accounts of their customers in order to maintain a satisfactory audit trail.
A. The beneficial owner of the
account;
B. The volume of the funds flowing
through the account and for selected transactions;
C. The origin of the funds;
D. The form in which the funds were
offered or withdrawn, e.g. cash, cheques, etc;
E. The identity of the person
undertaking the transaction;
F. The destination of the funds;
G. The form of instruction and
authority.
Organization should ensure that all
client and transaction records and information are made available on a timely
basis to the competent investigating authorities.
Retention
of Records:
The following
document retention terms should be observed:
1.
All necessary records on
transactions, both domestic and international, should be maintained at least for
the minimum period of 5 years from the date of cessation of the transaction.
2.
Records on customer identification
(e.g. copies or records of official identification documents like passports,
identity cards, driving licenses or similar documents), account files and
business correspondence should also be kept for the ten years from the date of
cessation of the transaction.
3.
Records shall be maintained in hard
and soft copies.
In situations where the records
relate to on-going investigation or transactions, which have been the subject of
a suspicious transaction reporting, they should be retained until it is
confirmed that the case has been closed.
9.
Monitoring of transactions:
1. Regular monitoring of
transactions is required for ensuring effectiveness of the Anti Money Laundering
procedures.
2. Special attention required to
all complex, unusually large transactions / patterns which appear to have no
economic purpose.
3. Internal threshold limits to
specify for each class of client's accounts and pay special attention to the
transaction, which exceeds these limits.
4. Should ensure that the records
of transaction is preserved and maintained in terms of the PMLA 2002 and that
transaction of suspicious nature or any other transaction notified under section
12 of the act is reported to the appropriate authority.
5. Suspicious transactions should
also be regularly reported to the higher authorities / head of the department.
Further the Management should
randomly examine select transaction undertaken by clients to comment on their
nature i.e. whether they are in the suspicious transactions or not.
10.
Suspicious Transaction Monitoring & Reporting:
Whether a particular transaction is
suspicious or not will depend upon the background, details of the transactions
and other facts and circumstances. Followings are the circumstances, which may
be in the nature of suspicious transactions:-
1. Clients whose identify
verification seems difficult or clients appears to be not co-operating.
2. Asset management services for
clients where the source of the funds is not clear or not in keeping with
client's apparent standing / business activity; Clients in high-risk
jurisdictions or clients introduced by banks or affiliates or other clients
based in high risk jurisdictions;
3. Substantial increases in
business without apparent cause.
4. Unusually large cash deposits
made by an individual or business;
5. Clients transferring large sums
of money to or from overseas locations with instructions for payment in cash;
6. Transfer of investment proceeds
to apparently unrelated third parties;
7. Unusual transactions by ‘Client
of Special Category (CSCs)’ and businesses undertaken by corporations,
offshore banks / financial services, business reported to be in the nature of
export-import of small items.
Any suspicion transaction needs to
be notified immediately to the “Designated Principal Officer”. The notification
may be done in the form of a detailed report with specific reference to the
client's transactions and the nature / reason of suspicion.
However, it should be ensured that
there is continuity in dealing with the client as normal until told other wise
and the client should not be told of the report / suspicion. In exceptional
circumstances, consent may not be given to continue to operate the account, and
transactions may be suspended, in one or more jurisdictions concerned in the
transaction, or other action taken.
In accordance with “Designated
Principal Officer” for Compliance with the provisions of “Prevention of Money
Laundering Act, 2002 (PMLA):”
11.
Employees’ Hiring / Employee’s Training / Investor Education:
1 Hiring of
Employees:
We shall have adequate screening
procedures in place to ensure high standards when hiring employees, having
regard to the risk of money laundering and terrorist financing and the size of
the business, we ensure that all the employees taking up such key positions are
suitable and competent to perform their duties.
2 Employees’
Training:
We have an ongoing employee
training program conducted by the Principal Officer and the Management,
Participation of all the Key Employees in the Seminars conducted by various
Regulatory bodies from time to time, so that the members of the staff are
adequately trained in AML and CFT procedures.
All the Circulars issued by various
regulatory bodies including that of PMLA, are circulated to all the staff
members and the same are also being discussed in length, in the Training
Program. Training program shall have special emphasis on frontline staff, back
office staff, compliance staff, risk management staff and staff dealing with new
clients. It is crucial that all those concerned fully understand the rationale
behind these directives, obligations and requirements, implement them
consistently and are sensitive to the risks of their systems being misused by
unscrupulous elements.
Our training will include, at a
minimum: how to identify red flags and signs of money laundering that arise
during the course of the employees’ duties; what to do once the risk is
identified; what employees' roles are in the firm's compliance efforts and how
to perform them; the firm's record retention policy; and the disciplinary
consequences (including civil and criminal penalties) for non-compliance with
the PMLA Act.
3 Investors
Education:
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 hitherto
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 the company at frequent intervals of time. The importance of the same is also
made known to them at the time of opening the Account.
4.
Monitoring Employee Conduct and
Accounts:
We will subject employee accounts
to the same AML procedures as customer accounts, under the supervision of the
Principal Officer. We will also review the AML performance of supervisors, as
part of their annual performance review. The Principal Officer’s accounts will
be reviewed by the Board of Directors.
5.
Confidential Reporting of AML
Non-Compliance:
Employees will report any
violations of the company’s AML compliance program to the Principal Officer,
unless the violations implicate the Principal Officer, in which case the
employee shall report to the Director. Such reports will be confidential, and
the employee will suffer no retaliation for making them.
Board of
Directors Approval:
We have approved this AML program
as reasonably designed to achieve and monitor our company’s ongoing compliance
with the requirements of the PMLA and the implementing regulations under it. All
STRs will be reported quarterly to the Board of Directors, with a clear reminder
of the need to maintain the confidentiality of the STRs.
Designated
Principal Officer:
In the Case of any further
Information/clarification is required in this regards, the “Principal
Officer” may be contacted.
Mr. Suresh U.
Trevadia
Designated
Director of YOKE Securities Ltd
Yoke Arcade,
Bhavani Shankar Road,
Dadar (West),
Mumbai - 400 028.
Tel. No. :
022 - 48907400
Fax No. :
022 - 48907446
E-mail : yoke_ltd@rediffmail.com