BACKGROUND DATA OF BIG DEALS WILL HAVE TO BE STORED FOR 10 YEARS UNDER THE PREVENTION OF MONEY LAUNDERING ACT (PMLA), 2002, MANDATES SEBI

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THE Securities and Exchange Board of India (Sebi) has clarified / enhanced some of the antimoney laundering (AML) standards for market intermediaries.

The regulator has made it mandatory for intermediaries to maintain background records for all complex, unusually large transactions, for at least 10 years under the Prevention of Money Laundering Act (PMLA), 2002. It also said all records should be made available to auditors, Sebi and stock exchanges.

The new measure is among the additions to the existing Anti-Money Laundering (AML) Standards/Combating Financing of Terrorism (CFT)/obligations of securities market intermediaries under the Prevention of Money Laundering Act (PMLA), 2002.

Registered intermediaries, irrespective of the amount of transaction or the threshold limit envisaged for predicate offences specified under PMLA, 2002, have been asked to file a suspicious transaction report (STR) if they have ‘reasonable grounds’ to believe that the transactions involve proceeds of crime.

The regulator also re-classified the definition of ‘politically exposed persons’ (PEP) under its list of ‘clients of special category’ (CSC) as individuals who are or have been entrusted with prominent public functions in a foreign country, eg, heads of states or of governments, senior politicians, senior government / judicial / military officers, senior executives of state owned corporations, important political party officials, etc. The additional norms applicable to PEP would also be applied to the accounts of the family members or close relatives of PEPs.

Sebi has also amended a clause under suspicious transaction monitoring & reporting to “unusual transactions by CSCs and businesses undertaken by, offshore banks/financial services, businesses reported to be in the nature of export-import of small items.”

It also added a new clause under suspicious transaction monitoring and reporting, but relating to the “clients of special category,” whereby intermediaries have been directed that such clients should also be subject to appropriate counter measures. These may include a further enhanced scrutiny of transactions, enhanced relevant reporting mechanisms or systematic reporting of financial transactions, and applying enhanced due diligence while expanding business relationships with the identified country or persons in that country, etc.

Registered intermediaries have also been directed that before opening any new account, it should ensure that the names of the proposed customer does not appear in the 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.

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