Sebi asks bourses to identify money laundering risks from new product

Sebi on Friday asked the stock exchanges and market intermediaries to identify and assess the money laundering and terror financing risks that may arise from the development of new products and new business practices.

In addition, they have been directed to undertake such risk assessments before the launch or use of such products, practices, services and technologies, Sebi said in its updated guidelines on anti-money laundering standards and combating the financing of terrorism obligations of securities market intermediaries.

The development comes after the government amended the Prevention of Money Laundering (Maintenance of Records) Rules or PMLA rules in March.

In its guidelines, Sebi said that every intermediary will have to register the details of a client, in case of the client is a non-profit organisation, on the DARPAN portal of Niti Aayog and maintain the records for five years after the business relationship between a client and the intermediary has ended or the account has been closed, whichever is later.

The exchanges and the registered intermediaries will have to leverage the latest technological innovations and tools for the effective implementation of name screening to meet the sanctions requirements.

In case, a registered intermediary is suspicious that transactions related to money laundering or terrorist financing, and reasonably believes that performing the client due diligence process will tip off the client, then the registered intermediary will not pursue such process, and will instead file a suspicious transaction report with FIU-IND (Financial Intelligence Unit-India).

FIU-IND is the central national agency of India responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions.

Also, the regulator asked registered intermediaries to undertake enhanced due diligence of politically exposed persons (PEP).

Under the modified rules, PEP has been defined as "individuals who have been entrusted with prominent public functions by a foreign country, including the heads of states or governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials".

The guidelines also include tightening the definition of beneficial owners under the anti-money laundering law and mandating reporting market intermediaries to collect information from their clients.

As per the amendments, any individual or group holding 10 per cent ownership in the client of a 'reporting entity' will now be considered a beneficial owner against the ownership threshold of 25 per cent applicable earlier.