SEBI Master Circular - PML For FIU-IND
SEBI Master Circular - PML For FIU-IND
SEBI Master Circular - PML For FIU-IND
To,
All Intermediaries registered with SEBI under Section 12 of the Securities and Exchange
Board of India Act, 1992.
(Through the stock exchanges for stock brokers, depositories for depository participants,
Association of Mutual Funds in India (AMFI) for Asset Management Companies)
1. The Prevention of Money Laundering Act, 2002 (“PMLA”) was brought into force with
effect from 1st July 2005. Necessary Notifications / Rules under the said Act were
published in the Gazette of India on July 01, 2005 by the Department of Revenue, Ministry
of Finance, Government of India.
2. As per the provisions of the 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 (includes a stock-broker, sub-broker, share
transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, asset
management company, depository participant, merchant banker, underwriter, portfolio
manager, investment adviser and any other intermediary associated with the securities
market and registered under Section 12 of the Securities and Exchange Board of India
Act, 1992 (SEBI Act)) shall have to adhere to client account opening procedures and
maintain records of such transactions as prescribed by the PMLA and rules notified there
under.
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3. Pursuant to amendments made to the PMLA and Rules made thereunder, updated
guidelines in the context of recommendations made by Financial Action Task force (FATF)
on anti-money laundering standards is enclosed. These guidelines have been divided into
two parts; the first part is an overview on the background and essential principles that
concern combating Money Laundering (ML) and Terrorist Financing (TF). The second part
provides a detailed account of the procedures and obligations to be followed by all
registered intermediaries to ensure compliance with AML/ CFT directives. These
guidelines shall also apply to registered intermediaries’ branches and subsidiaries located
abroad, especially, in countries which do not or insufficiently apply the FATF
Recommendations, to the extent local laws and regulations permit. When local applicable
laws and regulations prohibit implementation of these requirements, the same shall be
brought to the notice of SEBI.
4. The key circulars/ directives issued with regard to KYC, CDD, AML and CFT have been
mentioned in Schedule I. These directives lay down the minimum requirements and it is
emphasized that the intermediaries may, according to their requirements, specify
additional disclosures to be made by clients to address concerns of money laundering and
suspicious transactions undertaken by clients. Reference to applicable statutes and
reporting guidelines for intermediaries is available at the website of the Financial
Intelligence Unit – India (FIU-IND).
5. This Master Circular shall supersede the earlier Master Circular on AML/ CFT dated July
04, 2018.
Yours faithfully,
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Table of Contents
Section 1: Overview
1.1. Introduction
1.2. Background
1.3. Policies and Procedures to Combat Money Laundering and Terrorist financing
SCHEDULE I
List of key circulars/ directives issued with regard to KYC, CDD, AML and CFT
ANNEXURES
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Section 1: Overview
1.1. Introduction
1.1.1 The Directives as outlined below provide a general background and summary of the
main provisions of the applicable anti-money laundering and anti-terrorist financing
legislations in India. They also provide guidance on the practical implications of the
Prevention of Money Laundering Act, 2002 (PMLA). The Directives also set out the
steps that a registered intermediary or its representatives shall implement to
discourage and to identify any money laundering or terrorist financing activities. The
relevance and usefulness of these Directives will be kept under review and it may be
necessary to issue amendments from time to time.
1.1.2 These Directives are intended for use primarily by intermediaries registered under
Section 12 of the Securities and Exchange Board of India Act, 1992 (SEBI Act). While
it is recognized that a “one- size-fits-all” approach may not be appropriate for the
securities industry in India, each registered intermediary shall consider the specific
nature of its business, organizational structure, type of clients and transactions, etc.
when implementing the suggested measures and procedures to ensure that they are
effectively applied. 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.
1.2. Background
1.2.1 The PMLA came into effect from 1st July 2005. Necessary Notifications / Rules under
the said Act were published in the Gazette of India on 1st July, 2005 by the
Department of Revenue, Ministry of Finance, Government of India. The PMLA has
been further amended vide notification dated March 6, 2009 and inter alia provides
that violating the prohibitions on manipulative and deceptive devices, insider
trading and substantial acquisition of securities or control as prescribed in Section 12
A read with Section 24 of the Securities and Exchange Board of India Act, 1992 (SEBI
Act) will now be treated as a scheduled offence under schedule B of the PMLA.
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1.2.2 As per the provisions of the 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 SEBI Act , shall have to maintain a record of all the transactions;
the nature and value of which has been prescribed in the Rules under the PMLA.
Such transactions include;
i. All cash transactions of the value of more than ` 10 lakh or its equivalent in
foreign currency.
ii. All series of cash transactions integrally connected to each other which have
been valued below ` 10 lakh or its equivalent in foreign currency where such
series of transactions have taken place within a month and the monthly
aggregate exceeds an amount of ten lakh rupees or its equivalent in foreign
currency
iii. 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.
1.2.3 It may, however, be clarified that for the purpose of suspicious transactions reporting,
apart from ‘transactions integrally connected’, ‘transactions remotely connected or
related’ shall also be considered. In case there is a variance in CDD/AML standards
prescribed by SEBI and the regulators of the host country, branches/overseas
subsidiaries of intermediaries are required to adopt the more stringent requirements
of the two.
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1.3. Policies and Procedures to Combat Money Laundering and Terrorist financing
1.3.1.1 These Directives have taken into account the requirements of the PMLA as
applicable to the intermediaries registered under Section 12 of the SEBI Act.
The detailed Directives in Section II have outlined relevant measures and
procedures to guide the registered intermediaries in preventing ML and TF.
Some of these suggested measures and procedures may not be applicable in
every circumstance. Each intermediary shall consider carefully the specific
nature of its business, organizational structure, type of client and transaction,
etc. to satisfy itself that the measures taken by it are adequate and appropriate
and follow the spirit of the suggested measures in Section II and the
requirements as laid down in the PMLA.
1.3.2.1 Global measures taken to combat drug trafficking, terrorism and other
organized and serious crimes have all emphasized the need for financial
institutions, including securities market intermediaries, to establish internal
procedures that effectively serve to prevent and impede money laundering
and terrorist financing. The PMLA is in line with these measures and
mandates that all intermediaries ensure the fulfillment of the aforementioned
obligations.
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function shall be independent, adequately resourced and commensurate
with the size of the business and operations, organization structure,
number of clients and other such factors
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Section 2: Detailed Directives
2.1.1 Each registered intermediary shall adopt written procedures to implement the anti-
money laundering provisions as envisaged under the PMLA. Such procedures shall
include inter alia, the following three specific parameters which are related to the
overall ‘Client Due Diligence Process’:
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i. 1For clients other than individuals or trusts: Where the client is a person
other than an individual or trust, viz., company, partnership or unincorporated
association/body of individuals, the intermediary shall identify the beneficial
owners of the client and take reasonable measures to verify the identity of such
persons, through the following information:
aa) The identity of the natural person, who, whether acting alone or together,
or through one or more juridical person, exercises control through
ownership or who ultimately has a controlling ownership interest.
bb) In cases where there exists doubt under clause (aa) above as to whether
the person with the controlling ownership interest is the beneficial owner or
where no natural person exerts control through ownership interests, the
identity of the natural person exercising control over the juridical person
through other means.
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CIR/ MIRSD/2/ 2013 dated January 24, 2013
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cc) Where no natural person is identified under clauses (aa) or (bb) above, the
identity of the relevant natural person who holds the position of senior
managing official.
ii. For client which is a trust: Where the client is a trust, the intermediary shall
identify the beneficial owners of the client and take reasonable measures to
verify the identity of such persons, through the identity of the settler of the trust,
the trustee, the protector, the beneficiaries with 15% or more interest in the
trust and any other natural person exercising ultimate effective control over the
trust through a chain of control or ownership.
iii. Exemption in case of listed companies: Where the client or the owner of the
controlling interest is a company listed on a stock exchange, or is a majority-
owned subsidiary of such a company, it is not necessary to identify and verify
the identity of any shareholder or beneficial owner of such companies.
v. The Stock Exchanges and Depositories shall monitor the compliance of the
aforementioned provision on identification of beneficial ownership through half-
yearly internal audits. In case of mutual funds, compliance of the same shall
be monitored by the Boards of the Asset Management Companies and the
Trustees and in case of other intermediaries, by their Board of Directors
d) Verify the identity of the beneficial owner of the client and/or the person on whose
behalf a transaction is being conducted, corroborating the information provided in
relation to (c).
e) Understand the ownership and control structure of the client. .
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f) Conduct ongoing due diligence and scrutiny, 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 registered
intermediary’s knowledge of the client, its business and risk profile, taking into
account, where necessary, the client’s source of funds; and
g) Registered intermediaries shall periodically update all documents, data or
information of all clients and beneficial owners collected under the CDD process.
2.2.2.1 All registered intermediaries shall develop client acceptance policies and
procedures that aim to identify the types of clients that are likely to pose a
higher than average risk of ML or TF. By establishing such policies and
procedures, they will be in a better position to apply client due diligence on a
risk sensitive basis depending on the type of client business relationship or
transaction. In a nutshell, the following safeguards are to be followed while
accepting the clients:
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d) Ensure that an account is not opened where the intermediary is unable
to apply appropriate CDD measures/ KYC policies. This shall apply in
cases where it is not possible to ascertain the identity of the client, or the
information provided to the intermediary is suspected to be non - genuine,
or there is perceived non - co-operation of the client in providing full and
complete information. The market intermediary shall not continue to do
business with such a person and file a suspicious activity report. It shall
also evaluate whether there is suspicious trading in determining whether
to freeze or close the account. The market intermediary shall be cautious
to ensure that it does not return securities of money that may be from
suspicious trades. However, the market intermediary shall consult the
relevant authorities in determining what action it shall take when it
suspects suspicious trading.
e) The circumstances under which the client is permitted to act on behalf of
another person / entity shall be clearly laid down. It shall be specified in
what manner the account shall be operated, transaction limits for the
operation, additional authority required for transactions exceeding a
specified quantity/value and other appropriate details. Further the rights
and responsibilities of both the persons i.e. the agent- client registered
with the intermediary, as well as the person on whose behalf the agent is
acting shall be clearly laid down. Adequate verification of a person’s
authority to act on behalf of the client shall also be carried out.
f) Necessary checks and balance to be put into 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
g) The CDD process shall necessarily be revisited when there are
suspicions of money laundering or financing of terrorism (ML/FT).
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2.2.3 Risk-based Approach:
2.2.3.1 It is generally recognized that certain clients may be of a higher or lower risk
category depending on the circumstances such as the client’s background,
type of business relationship or transaction etc. As such, the registered
intermediaries shall apply each of the client due diligence measures on a risk
sensitive basis. The basic principle enshrined in this approach is that the
registered intermediaries shall adopt an enhanced client due diligence
process for higher risk categories of clients. Conversely, a simplified client due
diligence process may be adopted for lower risk categories of clients. In line
with the risk-based approach, the type and amount of identification information
and documents that registered intermediaries shall obtain necessarily depend
on the risk category of a particular client.
2.2.3.2 Further, low risk provisions shall not apply when there are suspicions of ML/FT
or when other factors give rise to a belief that the customer does not in fact
pose a low risk
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SEBI Circular No. CIR/ MIRSD/ 1/ 2014 dated March 12, 2014
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b) The risk assessment carried out shall consider all the relevant risk factors
before determining the level of overall risk and the appropriate level and
type of mitigation to be applied. The assessment shall be documented,
updated regularly and made available to competent authorities and self-
regulating bodies, as and when required.
2.2.4 Clients of special category (CSC): Such clients shall include the following:
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However, this shall not preclude intermediaries from entering into
legitimate transactions with clients from or situate in such high risk
countries and geographic areas or delivery of services through such high
risk countries or geographic areas.
h) Non face to face clients
i) Clients with dubious reputation as per public information available etc.
The above mentioned list is only illustrative and the intermediary shall
exercise independent judgment to ascertain whether any other set of clients
shall be classified as CSC or not.
2.2.5.1 The KYC policy shall clearly spell out the client identification procedure to be
carried out at different stages i.e. while establishing the intermediary – client
relationship, while carrying out transactions for the client or when the
intermediary has doubts regarding the veracity or the adequacy of previously
obtained client identification data.
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intermediaries shall obtain senior management approval to continue the
business relationship.
c) Registered intermediaries shall also take reasonable measures to verify
the sources of funds as well as the wealth of clients and beneficial owners
identified as PEP.
d) The client shall be identified by the intermediary by using reliable sources
including documents / information. The intermediary shall obtain
adequate information to satisfactorily establish the identity of each new
client and the purpose of the intended nature of the relationship.
e) The information must be adequate enough to satisfy competent
authorities (regulatory / enforcement authorities) in future that due
diligence was observed by the intermediary in compliance with the
directives. Each original document shall be seen prior to acceptance of a
copy.
f) Failure by prospective client to provide satisfactory evidence of identity
shall be noted and reported to the higher authority within the intermediary
2.2.5.2 SEBI has prescribed the minimum requirements relating to KYC for certain
classes of registered intermediaries from time to time as detailed in Schedule
II. Taking into account the basic principles enshrined in the KYC norms which
have already been prescribed or which may be prescribed by SEBI from time
to time, all registered intermediaries shall frame their own internal directives
based on their experience in dealing with their clients and legal requirements
as per the established practices.
Further, the intermediary shall conduct ongoing due diligence where it notices
inconsistencies in the information provided. The underlying objective shall be
to follow the requirements enshrined in the PMLA, SEBI Act and Regulations,
directives and circulars issued thereunder so that the intermediary is aware of
the clients on whose behalf it is dealing.
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2.2.5.3 Every intermediary shall formulate and implement a CIP which shall
incorporate the requirements of the PML Rules Notification No. 9/2005 dated
July 01, 2005 (as amended from time to time), which notifies rules for
maintenance of records of the nature and value of transactions, the procedure
and manner of maintaining and time for furnishing of information and
verification of records of the identity of the clients of the banking companies,
financial institutions and intermediaries of securities market and such other
additional requirements that it considers appropriate to enable it to determine
the true identity of its clients.
2.2.5.4 It may be noted that irrespective of the amount of investment made by clients,
no minimum threshold or exemption is available to registered intermediaries
(brokers, depository participants, AMCs etc.) from obtaining the minimum
information/documents from clients as stipulated in the PML Rules/ SEBI
Circulars (as amended from time to time) regarding the verification of the
records of the identity of clients. Further no exemption from carrying out CDD
exists in respect of any category of clients. In other words, there shall be no
minimum investment threshold/ category-wise exemption available for
carrying out CDD measures by registered intermediaries. This shall be strictly
implemented by all intermediaries and non-compliance shall attract
appropriate sanctions.
2.2.6 Reliance on third party for carrying out Client Due Diligence (CDD)3
2.2.6.1 Registered intermediaries may rely on a third party for the purpose of
a) identification and verification of the identity of a client and
b) Determination of whether the client is acting on behalf of a beneficial
owner, identification of the beneficial owner and verification of the identity
of the beneficial owner. Such third party shall be regulated, supervised or
monitored for, and have measures in place for compliance with CDD and
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SEBI Circular No. CIR/ MIRSD/ 1/ 2014 dated March 12, 2014
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record-keeping requirements in line with the obligations under the PML
Act.
2.2.6.2 Such reliance shall be subject to the conditions that are specified in Rule 9 (2)
of the PML Rules and shall be in accordance with the regulations and
circulars/ guidelines issued by SEBI from time to time. Further, it is clarified
that the registered intermediary shall be ultimately responsible for CDD and
undertaking enhanced due diligence measures, as applicable.
2.3.1 Registered intermediaries shall ensure compliance with the record keeping
requirements contained in the SEBI Act, 1992, Rules and Regulations made there-
under, PMLA as well as other relevant legislation, Rules, Regulations, Exchange Bye-
laws and Circulars.
2.3.2 Registered Intermediaries shall maintain such records as are sufficient to permit
reconstruction of individual transactions (including the amounts and types of
currencies involved, if any) so as to provide, if necessary, evidence for prosecution of
criminal behaviour.
2.3.3 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 a financial profile of the suspect account. To enable this
reconstruction, registered intermediaries shall retain the following information for the
accounts of their clients in order to maintain a satisfactory audit trail:
2.3.5 More specifically, all the intermediaries shall put in place a system of maintaining
proper record of transactions prescribed under Rule 3 of PML Rules as mentioned
below:
a) all cash transactions of the value of more than ten lakh rupees or its equivalent
in foreign currency;
b) all series of cash transactions integrally connected to each other which have
been individually valued below rupees ten lakh or its equivalent in foreign
currency where such series of transactions have taken place within a month and
the monthly aggregate exceeds an amount of ten lakh rupees or its equivalent in
foreign currency;
c) all cash transactions where forged or counterfeit currency notes or bank notes
have been used as genuine or where any forgery of a valuable security or a
document has taken place facilitating the transactions;
d) all suspicious transactions whether or not made in cash and by way of as
mentioned in the Rules.
2.4.1 Intermediaries are required to maintain and preserve the following information in
respect of transactions referred to in Rule 3 of PML Rules:
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d) the parties to the transaction.
2.5.1 Intermediaries shall take appropriate steps to evolve an internal mechanism for
proper maintenance and preservation of such records and information in a manner
that allows easy and quick retrieval of data as and when requested by the competent
authorities. Further, the records mentioned in Rule 3 of PML Rules have to be
maintained and preserved for a period of five years from the date of transactions
between the client and intermediary.
2.5.2 As stated in sub-section 2.2.5, intermediaries are required to formulate and implement
the CIP containing the requirements as laid down in Rule 9 of the PML Rules and
such other additional requirements that it considers appropriate. Records evidencing
the identity of its clients and beneficial owners as well as account files and business
correspondence shall be maintained and preserved for a period of five years after the
business relationship between a client and intermediary has ended or the account
has been closed, whichever is later.
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2.5.4 In situations where the records relate to on-going investigations or transactions which
have been the subject of a suspicious transaction reporting, they shall be retained
until it is confirmed that the case has been closed.
2.6.1 Regular monitoring of transactions is vital for ensuring effectiveness of the AML
procedures. This is possible only if the intermediary has an understanding of the
normal activity of the client so that it can identify deviations in transactions / activities.
2.6.2 The intermediary shall pay special attention to all complex unusually large
transactions / patterns which appear to have no economic purpose. The intermediary
may specify internal threshold limits for each class of client accounts and pay special
attention to transactions which exceeds these limits. The background including all
documents/office records /memorandums/clarifications sought pertaining to such
transactions and purpose thereof shall also be examined carefully and findings shall
be recorded in writing. Further such findings, records and related documents shall be
made available to auditors and also to SEBI/stock exchanges/FIUIND/ other relevant
Authorities, during audit, inspection or as and when required. These records are
required to be maintained and preserved for a period of five years from the date of
transaction between the client and intermediary.
2.6.3 The intermediary shall ensure a record of the transactions is preserved and
maintained in terms of Section 12 of the PMLA and that transactions of a suspicious
nature or any other transactions notified under Section 12 of the Act are reported to
the Director, FIU-IND. Suspicious transactions shall also be regularly reported to the
higher authorities within the intermediary.
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2.6.4 Further, the compliance cell of the intermediary shall randomly examine a selection
of transactions undertaken by clients to comment on their nature i.e. whether they are
in the nature of suspicious transactions or not.
2.7.1 Intermediaries shall ensure that appropriate steps are taken to enable suspicious
transactions to be recognized and have appropriate procedures for reporting
suspicious transactions. While determining suspicious transactions, intermediaries
shall be guided by the definition of a suspicious transaction contained in PML Rules
as amended from time to time.
2.7.2 A list of circumstances which may be in the nature of suspicious transactions is given
below. This list is only illustrative and whether a particular transaction is suspicious or
not will depend upon the background, details of the transactions and other facts and
circumstances:
a) Clients whose identity verification seems difficult or clients that appear not to
cooperate
b) Asset management services for clients where the source of the funds is not clear
or not in keeping with clients’ apparent standing /business activity;
c) Clients based in high risk jurisdictions;
d) Substantial increases in business without apparent cause;
e) Clients transferring large sums of money to or from overseas locations with
instructions for payment in cash;
f) Attempted transfer of investment proceeds to apparently unrelated third parties;
g) 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.
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2.7.3 Any suspicious transaction shall be immediately notified to the Money Laundering
Control Officer or any other designated officer within the intermediary. The notification
may be done in the form of a detailed report with specific reference to the clients,
transactions and the nature /reason of suspicion. However, it shall be ensured that
there is continuity in dealing with the client as normal until told otherwise and the client
shall 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. The
Principal Officer/ Money Laundering Control Officer and other appropriate
compliance, risk management and related staff members shall have timely access to
client identification data and CDD information, transaction records and other relevant
information.
2.7.4 It is likely that in some cases transactions are abandoned or aborted by clients on
being asked to give some details or to provide documents. It is clarified that
intermediaries shall report all such attempted transactions in STRs, even if not
completed by clients, irrespective of the amount of the transaction.
2.7.5 Clause 2.2.4 (g) of this Master Circular categorizes clients of high risk countries,
including countries where existence and effectiveness of money laundering controls
is suspect or which do not or insufficiently apply FATF standards, as ‘CSC’.
Intermediaries are directed that such clients shall also be subject to appropriate
counter measures. These measures 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.
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2.8. List of Designated Individuals/ Entities
2.8.1 An 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 established pursuant to various United
Nations' Security Council Resolutions (UNSCRs) can be accessed at its website at
http://www.un.org/sc/committees/1267/consolist.shtml. Registered intermediaries are
directed to ensure that accounts are not opened in the name of anyone whose name
appears in said list. Registered intermediaries shall continuously scan all existing
accounts to ensure that no account is held by or linked to any of the entities or
individuals included in the list. Full details of accounts bearing resemblance with any
of the individuals/entities in the list shall immediately be intimated to SEBI and FIU-
IND.
2.9.1 Section 51A of the Unlawful Activities (Prevention) Act, 1967 (UAPA), relating to the
purpose of prevention of, and for coping with terrorist activities was brought into effect
through UAPA Amendment Act, 2008. In this regard, the Central Government has
issued an Order dated August 27, 2009 (Annexure 1) detailing the procedure for the
implementation of Section 51A of the UAPA.6
2.9.2 In view of the reorganization of Divisions in the Ministry of Home Affairs and allocation
of work relating to countering of terror financing to the Counter Terrorism and Counter
Radicalization (CTCR) Division, the Government has modified the earlier order dated
August 27, 2009 by the order dated March 14, 2019 (Annexure 2) for strict
compliance.7
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SEBI Circular No. ISD/ AML/ CIR – 2/ 2009 dated October 23, 2009
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SEBI Circular No. SEBI/HO/MIRSD/DOP/CIR/P/2019/69 dated May 28, 2019
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2.10. Reporting to Financial Intelligence Unit-India
2.10.1 In terms of the PML Rules, intermediaries are required to report information relating
to cash and suspicious transactions to the Director, Financial Intelligence Unit-India
(FIU-IND) at the following address:
Director, FIU-IND,
Financial Intelligence Unit-India,
6th Floor, Hotel Samrat,
Chanakyapuri,
New Delhi-110021.
Website: http://fiuindia.gov.in
2.10.2 Intermediaries shall carefully go through all the reporting requirements and formats
that are available on the website of FIU – IND under the Section Obligation of
Reporting Entity – Furnishing Information – Reporting Format
(https://fiuindia.gov.in/files/downloads/Filing_Information.html). These documents
contain detailed directives on the compilation and manner/procedure of submission
of the reports to FIU-IND. The related hardware and technical requirement for
preparing reports, the related data files and data structures thereof are also detailed
in these documents While detailed instructions for filing all types of reports are given
in the instructions part of the related formats, intermediaries shall adhere to the
following:
a) The Cash Transaction Report (CTR) (wherever applicable) for each month shall
be submitted to FIU-IND by 15th of the succeeding month.
b) The Suspicious Transaction Report (STR) shall be submitted within 7 days of
arriving at a conclusion that any transaction, whether cash or non-cash, or a
series of transactions integrally connected are of suspicious nature. The
Principal Officer shall record his reasons for treating any transaction or a series
of transactions as suspicious. It shall be ensured that there is no undue delay
in arriving at such a conclusion.
c) The Non Profit Organization Transaction Reports (NTRs) for each month shall
be submitted to FIU-IND by 15th of the succeeding month.
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d) The Principal Officer will be responsible for timely submission of CTR, STR and
NTR to FIU-IND;
e) Utmost confidentiality shall be maintained in filing of CTR, STR and NTR to FIU-
IND.
f) No nil reporting needs to be made to FIU-IND in case there are no cash/
suspicious/ non – profit organization transactions to be reported.
2.10.3 Intermediaries shall not put any restrictions on operations in the accounts where an
STR has been made. Intermediaries and their directors, officers and employees
(permanent and temporary) shall be prohibited from disclosing (“tipping off”) the fact
that a STR or related information is being reported or provided to the FIU-IND. This
prohibition on tipping off extends not only to the filing of the STR and/ or related
information but even before, during and after the submission of an STR. Thus, it shall
be ensured that there is no tipping off to the client at any level
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2.11. Designation of officers for ensuring compliance with provisions of PMLA
2.11.1.1 To ensure that the registered intermediaries properly discharge their legal
obligations to report suspicious transactions to the authorities, the Principal
Officer would act as a central reference point in facilitating onward reporting
of suspicious transactions and for playing an active role in the identification
and assessment of potentially suspicious transactions and shall have access
to and be able to report to senior management at the next reporting level or
the Board of Directors. Names, designation and addresses (including email
addresses) of ‘Principal Officer’ including any changes therein shall also be
intimated to the Office of the Director-FIU. As a matter of principle, it is
advisable that the ‘Principal Officer’ is of a sufficiently senior position and is
able to discharge the functions with independence and authority.
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SEBI Circular No. CIR/ MIRSD/ 1/ 2-014 dated March 12, 2014
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e) a person or individual, as the case may be, who controls and manages
the affairs of the reporting entity if the reporting entity is an unincorporated
association or a body of individuals, and
f) such other person or class of persons as may be notified by the
Government if the reporting entity does not fall in any of the categories
above.”
2.11.2.2 In terms of Section 13 (2) of the PMLA, the Director, FIU – IND can take
appropriate action, including levying monetary penalty, on the Designated
Director for failure of the intermediary to comply with any of its AML/CFT
obligations.
29
2.12.2 Employees’ Training:
30
SCHEDULE I
List of key circulars/ directives issued with regard to KYC, CDD, AML and CFT
31
CDD directives of SEBI
stipulated in Master Circular
dated September 14, 2016
7. CIR/ MIRSD/ 66/ July 21, 2016 Operationalization of Authorization of Central
2016 Central KYC Records Registry of Securitization
Registry (CKYCR) and Asset Reconstruction
and Security interest of
India (CERSAI) for
receiving, storing,
safeguarding, retrieving the
KYC records and finalizing
template of KYC
8. CIR/ IMD/ FPI&C/ June 10, 2016 Know Your Client Applicability of Indian
59/ 2016 (KYC)norms for ODI KYC/AML norms for Client
subscribers, transferability Due Diligence, KYC
of ODIs, reporting of Review, Suspicious
suspicious transactions, Transactions Report,
periodic review of Reporting of complete
systems and modified ODI transfer trail of ODIs,
reporting format Reconfirmation of ODI
positions, Periodic
Operational Evaluation
9. CIR/ MIRSD/ 29/ January 22, Know Your Client Client identification and
2016 2016 Requirements - authentication from UIDAI,
Clarification on voluntary Investment Limit and mode
adaptation of Aadhaar of payment to Mutual
based e-KYC process Funds, PAN verification,
additional due diligence in
case of material difference
in information
32
10. CIR/ IMD/ FIIC/ 11/ June 16, 2014 Know Your Client (KYC) Process to be followed by
2014 requirements for Foreign DDPs to share the relevant
Portfolio Investors (FPIs) KYC documents of FPIs
with
the banks and record of
transfer of documents
11. CIR/ MIRSD/ 1/ March 12, 2014 Anti-Money Consequential
2014 Laundering/Countering the modifications and
Financing of Terrorism additions to Master
(AML/CFT) Circular CIR/ ISD/ AML/ 3/
Obligations of Securities 2010 dated December 31,
Market Intermediaries 2010 in respect of Risk
under the Prevention of Assessment, Reliance on
Money laundering third party for carrying out
Act, 2002 and Rules framed Client Due Diligence
there under (CDD), Record keeping
requirements, Records of
information reported to the
Director, Financial
Intelligence Unit - India
(FIU-IND), Appointment of
a Designated Director
12. CIR/ MIRSD/ 13/ December 26, Know Your Client Shifting of certain
2013 2013 requirements information in Section C of
Part I to Part II of the AOF,
information required to be
captured in the systems of
KRAs
13. CIR/ MIRSD/ 09/ October 8, 2013 Know Your Client Acceptance of e-KYC
2013 Requirements service launched by UIDAI
as a valid process for
KYC verification
33
14. CIR/ MIRSD/ 07 / September 12, Know Your Client Partial modification to the
2013 2013 Requirements for Eligible provisions of circular No
Foreign Investors CIR/MIRSD/ 11 /2012
dated September 5, 2012,
Classification of Eligible
foreign investors investing
under Portfolio Investment
Scheme ('PIS') route as
Category I, II and III
15. CIR /MIRSD/ 4 March 28, 2013 Amendment to SEBI Modification of circulars
/2013 {(Know Your Client) dated December 23, 2011
Registration Agency} and April 13, 2012, to the
Regulations, extent of requirement for
2011 and relevant circulars sending original KYC
documents of the clients to
the KRA
16. CIR/ MIRSD/ 2/ January 24, Guidelines on Identification Client Due Diligence to
2013 2013 of Beneficial Ownership identify and verify the
identity of persons who
beneficially own or control
the securities account for
clients other than
individuals or trusts and
client which is a trust.
Exemption in case of listed
companies, Applicability for
foreign investors and
Implementation
17. CIR/ MIRSD/ 01 January 04, Rationalization process for Verification the PAN of
/2013 2013 obtaining PAN by Investors clients online at the Income
Tax website
34
18. CIR/ MIRSD/ 11/ September 5, Know Your Client Clarifications for Foreign
2012 2012 Requirements Investors viz. FIIs, Sub
Accounts and QFIs w.r.t.
implementation of SEBI
circulars no. CIR /MIRSD/
16/ 2011 dated August 22,
2011 and MIRSD/ SE/ Cir-
21/ 2011 dated October 5,
2011 on know your client
norms
19. CIR/ MIRSD/ 09 / August 13, 2012 Aadhaar Letter as Proof of Admissibility of Aadhaar
2012 Address for Know Your letter issued by UIDAI as
Client (KYC) norms. Proof of Address in addition
to its presently being
recognized as Proof of
Identity
20. MIRSD/ Cir-5 / 2012 April 13, 2012 Uploading of the existing Process to avoid
clients’ KYC details in the duplication of KYC,
KYC Registration guidelines for uploading
Agency (KRA) system by the KYC data of the
the intermediaries existing clients, Schedule
for implementation
35
22. MIRSD/ Cir-23/ December 2, The Securities and Centralization of the KYC
2011 2011 Exchange Board of India records to avoid duplication
(KYC Registration Agency) of KYC process
Regulations, 2011.
23. CIR/ MIRSD/ 22/ October 25, ‘In-person’ verification Clarification w.r.t ultimate
2011 2011 (IPV) of clients by responsibility for ‘in-person’
subsidiaries of stock verification
exchanges, acting as stock
brokers
24. MIRSD/ SE/ Cir-21/ October 5, 2011 Uniform Know Your Client Clarification w.r.t different
2011 (KYC) Requirements for KYC forms used by Market
the Securities Markets Intermediaries, Guidelines
for KYC form capturing the
basic details about the
client and additional details
specific to the area of
activity of the intermediary
being obtained
25. CIR/ MIRSD/ 16/ August Simplification and Client account opening
2011 22, 2011 Rationalization of Trading Process, Client Account
Account Opening Process Opening Form, Rights &
Obligations of stock broker,
sub-broker and client for
trading on exchanges
Uniform Risk Disclosure
Documents, Guidance Note
detailing Do’s and Don’ts for
trading
26. CIR/ ISD/ AML/ 3/ December 31, Master Circular on Anti - Money Laundering
2010 2010 AML/CFT (AML) Standards/
Combating the Financing of
36
Terrorism (CFT) /
Obligations of Securities
Market Intermediaries
under the Prevention of
Money Laundering Act,
2002 and Rules framed
there under
27. CIR/ MRD/ DP / 37/ December Acceptance of third party Capturing of address other
2010 14, 2010 address as correspondence than that of the BO as the
address correspondence address.
28. CIR/ MRD/ DMS/ August 31, Guidelines on the Execution Clarifications on the
13/ 2010 2010 of Power of Attorney by the Execution of the POA by
Client in favour of Stock the client
Broker/ DP
29. CIR/ MRD/ DMS/ April 23, Guidelines on the Execution Guidelines on the
13/ 2010 2010 of Power of Attorney by the Execution of Power of
Client in favour of Stock Attorney by the Client
Broker/ DP
30. CIR/ ISD/ AML/ 2/ June 14, Additional Requirements for Additional Requirements on
2010 2010 AML/ CFT retention of documents,
monitoring, tipping off,
updation of records and
other clarifications.
31. CIR/ ISD/ AML/ 1/ February 12, Master Circular –AML/ CFT Framework for AML/ CFT
2010 2010 including procedures for
CDD, client identification,
record keeping & retention,
monitoring and reporting of
STRs
32. SEBI/ MIRSD/ Cir January 18, Mandatory Requirement of In-person verification done
No.02/ 2010 2010 in-person verification of for opening beneficial
clients. owner’s account by a DP
will hold good for opening
37
trading account for a stock
broker and vice versa, if the
DP and the stock broker is
the same entity or if one of
them is the holding or
subsidiary.
33. ISD/ AML/ CIR-2/ October 23, Directives on CFT under Procedure to be followed
2009 2009 Unlawful Activities for the freezing of assets of
(Prevention) Act, 1967 individual or entities
engaged in terrorism
34. ISD/ AML/ CIR-1/ September Additional AML/ CFT Additional AML/ CFT
2009 01, 2009 obligations of requirements and
Intermediaries under PMLA, clarifications thereon
2002 and rules framed
35. ISD/ AML/ CIR- December Master Circular on AML/ Framework for AML/ CFT
1/ 2008 19, 2008 CFT directives including procedures for
CDD, client identification,
record keeping & retention,
monitoring and reporting of
suspicious transactions.
36. MIRSD/ DPSIII/ July 2, In-Person verification of Responsibility of stock
130466/ 2008 2008 clients by stock-brokers brokers to ensure in -
person verification by its
own staff.
37. MRD/ DoP/ Cir-20/ June 30, Mandatory Requirement of Exception for certain
2008 2008 PAN classes of persons from
PAN being the sole
identification number for all
participants trading in the
securities market.
38. F.No.47/ 2006/ ISD/ April 4, In-person verification of In-person verification to be
SR/ 122539 2008 BO’s when opening demat carried out by staff of
accounts depository participant.
38
39. MRD/ DoP/ Cir- 20/ April 3, Exemption from mandatory Exemption for investors
2008 2008 requirement of PAN. residing in the State of
Sikkim from PAN being the
sole identification number
for trading in the securities
market.
40. F.No.47- 2006 /ISD/ February In-Person verification of Clarification on various
SR/ 118153/ 2008 22, 2008 clients by depositories topics relating to ‘in person’
verification of BOs at the
time of opening demat
accounts
41. MRD/ DoP/ Dep/ September KYC Norms for Proof of Identity (POI) and
Cir- 12/ 2007 7, 2007 Depositories Proof of Address (POA) for
opening a Beneficiary
Owner (BO) Account for
non - body corporates
42. MRD/ DoP/ Cir-05/ April 27, PAN to be the sole Mandatory requirement of
2007 2007 identification number for all PAN for participants
transactions in the transacting in the securities
securities market market.
43. ISD /CIR/ RR/ AML/ March 20, PMLA Obligations Of Procedure for maintaining
2/ 06 2006 intermediaries in terms of and preserving records,
Rules notified there under reporting requirements and
formats of reporting cash
transactions and suspicious
transactions
44. ISD/ CIR/ RR/ AML/ January 18, Directives on AML Framework for AML and
1/ 2006 Standards CFT including policies and
06 procedures, Client Due
Diligence requirements,
record keeping, retention,
monitoring and reporting
39
45. SEBI/ MIRSD/ DPS August 26, Uniform Documentary Uniform KYC documentary
- 1/ Cir-31/ 2004 2004 Requirements for trading requirements for trading on
different segments and
exchanges
46. MRD/ DoP/ Dep/ August 24, Proof of Identity (POI) and Broadening the list of
Cir- 29/ 2004 2004 Proof of Address (POA) for documents that may be
opening a Beneficiary accepted as Proof of
Owner Identity (POI) and/or Proof
of Address (POA) for the
purpose of opening a BO
Account
47. SEBI/ MRD/ SE /Cir- August 27, Mode of payment and Prohibition on acceptance/
33/ 2003/ 27/ 08 2003 delivery giving of cash by brokers
and on third party transfer
of securities
48. SMDRP/ Policy/ Cir- August 4, KYC Norms for Documentary requirements
36/ 2000 2000 Depositories for opening a beneficiary
account.
49. SMD/ POLICY/ April 11, Client Registration Form Formats of client
CIRCULARS /5-97 1997 Registration Form and
broker clients agreements
50. SMD-1/ 23341 Nov. 18, Regulation of transaction Mandatory requirement to
1993 between clients and obtain details of clients by
members brokers.
40