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AML Policy

RMS stands for Risk Management System i.e. to manage the risk of the Company / clients from the volatility of the stock market

  1. Scope of Internal Audit / and or Compliance Function

    Internal Auditor has been appointed for checking compliances of requirements of SEBI/NSE and its rules and regulations. The role of Internal Auditor has been enhanced to ensure compliance of policies, procedures and controls related to prevention of Money Laundering and Financing of Terrorism including evaluation of the system for detection of suspected Money Laundering transactions and checking the adequacy of exception/alert reports generated on large and/or irregular suspicious transactions, the quality of reporting of irregular transactions and level of awareness of front office staff of their responsibilities in this regard.

    Qualified and experienced hands at senior levels have been deputed for complying with the rules and regulations of SEBI/NSE and provisions of AML/CFT for verification of suspicious transactions for detecting suspected money laundering transactions, the quality of reporting, generating from the system on large and/or irregular transactions.

    At the very outset, we must appreciate and acknowledge the Role and Extent of the Internal Audit requirement in the Organization which is based on the volumes of our operations, no. of our clients, no. of our Branches etc. Owing to our limited Broking Activities, we do not have too many Branches and overall activities are controlled from the Registered Office of the Company hence there are no scattered activities. To exercise better and effective control, the persons-in-charge in different fields have to play a constructive role to make and educate the persons involved in its implementation which include the other managerial staff in front office, back office and the clients about the need to control and prevent and not to indulge in suspicious transactions.

    It is now clarified that the Internal Audit functions are to be handled independently by persons not connected with us and all required Data, information, alerts and physical workings for suspicious transactions be made available to them and any suggestions and or advise and or defects, shortcomings are to be rectified/remedied on priority basis and to ensure non repetition of such shortcomings.

  2. Customer Due Diligence
    • To obtain sufficient information in order to identify persons who beneficially own or control securities account. In case it is found that the actual beneficial owner is someone other than the client that party is to be identified and additional papers shall be required to be collected from such prospective or existing client identified as PEP or high-risk clients. Beneficial owner is a natural person or persons who ultimately own, control or influence a client and or person on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement.
    • Verify the customer's identity using reliable, independent source documents, data or information and to verify the identity of the beneficial owner.
    • Identify beneficiary ownership and control ie which individual ultimately own and control the client and or the person on whose behalf transaction is conducted
    • Verify the identity of the beneficial ownership of the client and or the person on whose behalf a transaction is being conducted, corroborating the information provided in C of the policy stated above.
    • Understand the ownership & control structure of the client
    • Conduct ongoing due diligence and scrutiny ie perform ongoing scrutiny of the transaction and account through out the course of business relationship to ensure that the transactions being conducted are consistent with our knowledge of the client, its risk profile, where necessary, client source of fund. Perform ongoing scrutiny of the transactions and account throughout the course of the business relationship to verify that the transactions carried out are in line and consistent with the information provided by the clients previously.
  3. Policy for acceptance of clients:

    • No account is to be opened in a fictitious / benami name or on an anonymous basis and the identity of the beneficiary owner to be established by doing due diligence and taking appropriate papers to establish the identity, Pan, address proof etc .
    • Factors of risk perception (in terms of monitoring suspicious transactions) of the client are clearly defined having regard to clients' location (registered office address, correspondence addresses and other addresses if applicable), nature of business activity, trading turnover or obligation etc. and manner of making payment for transactions undertaken. Clients under special category require higher degree of due diligence and regular update of KYC profile periodically. Collection of documents shall vary according to Risk Profile of the client which shall be classified into Low, Medium, High Risk. CSC clients shall be under high risk category, if necessary to be classified even higher and shall require special due diligence.
    • Documentation requirement and other information should be collected with regard to the requirement to the Prevention of Money Laundering Act 2002 and guidelines issued by RBI and SEBI from time to time and are subject to such changes.
    • Ensure that an account is not opened where the Company is unable to apply appropriate KYC policies including photograph. This may be also applicable in cases where it is not possible to ascertain the identity of the client or non face to face clients or non genuine client or perceived non cooperation of the client to provide full or complete information and whether in terms of criminal or civil proceedings by any enforcement agency worldwide. Incase of non cooperation of clients for providing papers and documents and in case of our perception of non genuine client, transaction is not be carried out with such client and a report for suspicious transaction or Activity is to be filed. We have to be cautious to ensure we do not return benefits of money that may be from suspicious trade. We have to evaluate whether to freeze or close the account in consultation with authorities in case we suspect suspicious trading activity.
    • Ordinarily no client is permitted to act as an agent on behalf of the principal without approval of the senior directors and even if one is allowed to act as an agent it would be on proper and authenticated authorization of the principal wherein the limits shall be set by the principal and in case the set limits are exceeded, prior approval in writing shall be obtained from the principal before extending any additional facility. Under this arrangement the rights and responsibilities of the principal, the person on whose behalf the transaction is to be carried out and agent – client shall be specifically separately put in writing to avoid any complications in future. The foremost important thing is to verify the authority to act on behalf of the client shall also be carried out without leaving any doubts whatsoever.

      Ensure that photograph need not be collected where the client is a judicial person, however the Company shall verify the identity of the person who is authorized to act on behalf of these type of clients.
    • 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 word wide or does not match with any list of names appearing at http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml and www.fatfgafi.org.
    • In case of any client having suspicions of money laundering or financing of terrorism, the CDD process should be revisited
    • Identification of Beneficial Ownership
    • The identification of beneficial ownership has to be done by the compliance department for all existing clients and all new clients shall be accepted only after verifying the beneficial owner of the client account which is either individual or non individual whether company/partner/unincorporated association/body of individuals on parameters stated below:

  1. The ownership of the individual account is to be identified at the time of opening of the account as stated in the Demat account and the bank account which stands in the name of the account holder.

  2. Identification of beneficial ownership of accounts other than individuals or trust shall be done based on the controlling ownership interest as an individual or identifiable group which means the following:
    • more than 25% of shares or capital or profits in case of a company
    • more than 15% of the capital or profits of the partnership in case of a Partnership.
    • more than 15% of the property or capital or profits of the unincorporated association or body of individuals in case of an unincorporated association or body of individuals.
  3. Where a trust is a client the beneficial ownership is to be identified and established by identifying the settler of the trust, the trustee, the protector or the beneficiaries with 15% or more interest in the trust and any other person exercising ultimate effective control over the trust through a chain control or ownership.

    The intention is to identify 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 controlling ownership interest. However, where the client or owner of controlling interest is a company listed on a recognized stock exchange or is a majority-owned subsidiary of such a company identification of the beneficial owner of such companies is not required.

    4.     (a) Risk-based Approach

  • It is generally recognized that certain clients may be of a higher or lower risk category depending on circumstances such as the customer’s background, type of business, our references, location, volume of transaction or payment pattern etc. As such, the Compliance Officer and the Principal Officer shall apply to each of the customers due diligence measures on a risk sensitive basis and shall divide the same in three categories HIGH, MEDIUM AND LOW which shall be reviewed every six months. Initially all the new clients are to be marked as high-risk category, however they may subsequently be recategorised depending on their performance based on our own experiences. All clients in future and option segment are to be covered in high risk category and shall remain so as long as they continue in the F/O segment. The basic principle enshrined in this approach is that the concerned persons 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, the type and amount of information and documents shall vary depending on the risk category of a particular customer and should be collected from the client and beneficial owner periodically depending on the risk category. In case of a client who subsequently has turned out to be Politically Exposed Person, proper risk management system shall be put in place to determine the beneficial ownership of such clients or potential clients. Once we are privy to such publicly available information or the commercial electronic database of PEPs, we should seek additional relevant information from such client pertaining to ownership issues and other risks associated with such persons. We should also take reasonable measures to verify the sources of funds as well as the wealth of such client and beneficial ownership who subsequently turnout to be PEPs. As a policy without concurrence of top management, no such identified account is to be opened. Suspicion of ML/FT activities or other factors give rise to belief that the client does not fall under in fact in low risk category, the risk perception shall according changed.

    It is advised that the delivery of shares to clients on their respective purchases may be held for collection of payments depending on the risk profile of the clients. Shares of high risk clients are to be withheld until payments are received.

    Similarly, it is the responsibility of the Dealers and Payment Collection Department to ensure collection of Margins from clients working under F&O in case of any shortfall or higher exposure urgently. In CM it has to be followed in terms of Risk Perception of the client either in form of early pay in or margin. The same Principal should apply for the seller of shares. Where any doubts exist or in case of high volume transaction, early pay in should be insisted.
  •     (b) Basis of Categorization of Clients

  • The payment pattern and the turnover of the client is to be considered to categorize the client into High, Low or Medium category. All clients in F/O category in spite of timely payment shall remain to continue in High Risk Category. However, square up client category of risk perception is based on his net outstanding position at the end of the day. The high Risk client continues to be in High Risk Category for his higher volumes/exposure in square up transaction. Higher exposures on day-to-day basis for F/O Segment as well as square up transactions result in higher risk. The clients who work both in square up and delivery-based trade may be categorized as Medium Risk or Low Risk clients as having capability to take delivery depending upon their volumes and payment pattern. The limits of square up clients are based on their net outstanding position at the end of the day and not on their exposure during the day. Dealers must pay special attention to this type of client group, to monitor their position before the end of the day trading. In case of delivery based clients with or without square up transactions they are to be considered safe provided the payment is received by us as per schedule hence to be considered as low risk clients. In case of delayed payments the category of risk perception is required to be enhanced to higher risk category. The income category of individual clients does not give any indication of the risks involved whereas analysis of Corporate clients Balance Sheet do provide some opportunity to assess the worth of the corporate client. This fact should be borne in mind at the time of analyzing risk perception or category. The high net worth client may have a debit balance in one client account in the group list but may have over all credit balance in the group. Though inter adjustments is not permissible by us but such clients may be allowed some flexibility despite of continuing with debit balances.
  •     (c) Risk Assessment

  • The intermediaries are required to carry out risk assessment to identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk with respect to their clients, countries or geographical areas, nature and volume of transaction, payment methods used by clients. The risk assessment shall also take into account any country specific information provided or circulated by Government of India and SEBI from time to time, as well as, the updated list of individuals and entities who are subjected to sanction measures as required under the various United Nations’ Security Council Resolutions which can be accessed at http://www.un.org/sc/committtees/1267/aq_sanctions_list .shtml and http://www.un.org/sc/committees/1988/list.shtml.

    The risk assessment carried out shall consider all the relevant risk factors before determining the level of overall risk and the appropriate risk level and type of mitigation to be applied. This assessment shall be documented, updated regularly and made available to competent authorities and self regulating bodies as and when required.
  •     (d) Payment Delays - Debit Points

  • Company has a policy for payment schedule by the clients which is to be cleared on T+5 basis. The SEBI / NSE have stipulated that if the debit balance is not cleared within T+5, the debit balance shall be treated as funding by the broker. In view of the above changes, payment has to be collected within the aforesaid period except allowing allowance for holiday. So far the small debit balances standing outstanding, it has been decided change the policy of the company to mark debit amounts exceeding 5,000/- outstanding for more than 15 days and allot a debit point against the client. If the debit continues for more than 30 days of the same account, the points are to be increased to two marks. However no trades shall be allowed beyond 30 days except for squaring up or sale transactions. This is to be done in case of continuation of same debit balances for all the clients. The payment collection department and the dealers have to monitor the continuous debit balances of such clients and reduce their period of debit balances. The small debit balances below Rs. 5,000.00 is to be monitored by the payment collection department and caution verbal advices are to be given to such clients.

    The high net worth clients who have group account may be allowed debit balances in one or more client accounts if they have net credit in their group accounts and no debit of points shall be allotted to them unless group account show negative net balance.
  •     (e) Setting of Limits

  • It is the policy of the Company to provide the limits to the new clients based on the Income Range of the clients; however the average Bank balances and Demat stock values are also to be taken into account. Payment pattern of the clients and also our association with them irrespective of its risk category is also to be considered. It is not mandatory to collect the stock statement for the clients who work in CM segment therefore where ever possible should be considered. The clients shall be provided the limits mentioned below for turnover and obligations initially subject to review depending upon their turnover, payment pattern, background, references etc. The limits of clients are to be revised based on not only the income pattern but also more emphasis has been laid on their past performance consisting turnover, past pattern of payments for timely meeting the obligation requirements or earlier pay in etc. Consideration has to be made for turnovers and pay in obligations, which are ultimate requirements for meeting exchange monitory needs. Obligation for square up clients and delivery-based clients are different and cannot be treated in the same footing. Limits for delivery based clients are based on their past performance and or their ability to meet obligations from their resources. However, limits for clients only doing square up transactions, their obligation end of the day is only consideration and special attention is to be provided by the dealers. These clients enjoy maximum flexibility or restrictions compared with delivery based clients. The obligation parameters have been considered for fixing variations for 100% square up clients, only delivery based clients or 50-50 square up or delivery based clients. In some cases turnover is important consideration whereas in some cases obligation is the final consideration. The most important consideration is client meeting the T+ 2 obligation. It is the policy of the company to allot debit points to clients who exceeds limits for turnover and obligation keeping in mind his meeting of the payment requirements. If a client crosses his obligation limit and does not make payment within T+2 days then 1 debit point is given. If a client crosses the obligation and turnover limit and does not make payment within the pay-in obligation due date, then 2 points are to be alloted. However no debit point has to be allotted if only turnover limit is crossed and the obligation limit is not crossed. If the client exceeds 50 debit points in a financial year, he shall be first warned, then restrictions shall imposed on him for reducing the limit and on repeated failures, his account may be temporarily suspended by taking prior approval of the management. .
  • Income Group Limits PECENTAGE OBLIGATION
    Below 1 Lac 1 Lac 100
    1 Lacs to 5 Lacs 3 Lacs 100
    5 Lacs to 10 Lacs 7 Lacs 200
    10 Lacs to 25 Lacs 15 Lacs 200
    Above 25 Lacs 25 Lacs 200
  • As stated above, the limits mentioned above are based on clients’ turnover for delivery based and for square up clients on their daily obligation. The limits for square up clients shall only be restricted to his net obligation irrespective of their turnover limits and special attention is to be paid to them by the dealers.100% obligation may be subsequently revised to 200% after observing client performance when periodical review takes place. The criteria for the obligation and or turnover for clients shall be based on the 100% delivery or square up transaction or its mixture of delivery or square up ratio to provide obligation flexibility as shown in the chart here under :-
  • CM Existing Clients and Variations %
    Only Delivery based 200
    Only Square Up based 1000
    Delivery Square up Ratio Square up or near about. Delivery
    30% 70% 750
    50% 50% 500
    70% 30% 250
  • The limits for turnover or obligations shall be reviewed every 6 months and shall be due for up gradation or down gradation after observing the performance.
    The following shall be pattern of fixing the limits for corporate clients
  • Limit for Corporate Clients

    For Corporate Clients the policy of the company is based on the Paid-up Capital and Reserves of the Company taken together:
  • Paid-up Capital & Reserves Limit
    Upto 10 Lacs 3 Lacs
    10 Lacs to 50 Lacs 5 Lacs
    50 Lacs to 100 Lacs 10 Lacs
    100 Lacs to 500 Lacs 25 Lacs
  • The clients working in Future/Option segment, the limits shall be based on the margin in hand either in cash or in shares with daily MTM and cannot exceed 6.66 times of the margin i.e. 15% Margin basis and are subject to variation depending upon their Margins with us from time to time with MTM changes and are subject to changes as clients are not expected to retain constant margin. Some flexibility shall be allowed for Daily Square up volumes upto 250% of the limit of each client as long as the MTM is invariably met. However, the client has to meet his MTM requirements without fail otherwise restrictions shall be imposed by reducing the limits or by taking other suitable steps to control the risk. The requirement of margin in case of clients in this segment shall vary from client to client and shall be totally discretionary on the risk management team as long as the funds are provided immediately.

    In case it is the finding of the Principal Officer that any client has violated the limits for the purpose of manipulation of the market or prices or created false volumes or used Drug money or for financing the terrorist activity, it would be the duty of the Principal Officer to report the matter to the top management and to report the same to FIU-IND as per the policy laid down.
  • 5.     Clients of special category (CSC): CSC Clients `include:

  • Such clients shall include the following
    • Non resident clients
    • High net worth clients
    • Trust, Charitable, NGOs and organizations receiving donations
    • Companies having close family shareholdings or beneficial ownership
    • Politically exposed persons (PEP) including Head of States or of Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc. Additional norms applicable to PEPs shall be applied to the accounts of the family members or the close relations of PEPs
    • Companies offering foreign exchange offerings
    • Clients in high risk countries (where existence / effectiveness of money laundering controls is suspect or which do not or insufficiently apply FATP standards, 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. While dealing with clients in high risk countries where the existence/ effectiveness of money laundering controls are suspect Apart from being guided by the list published by FATF we should independently access and consider other publicly available information.
    • Non face to face clients
    • Clients with dubious reputation as per public information available etc.

    The above-mentioned list is only illustrative and the Compliance officer should not accept any client falling under the above categories without taking approval from the Directors of the Company. Additional papers shall be sought from the clients falling in these categories as in case of clients falling under high risk category and until satisfied no such account is to be opened. Additionally the cases falling in the category of CSC clients , the authorities are to be satisfied subsequently that proper due diligence was carried out

    6.     Client identification procedure:

  • The ‘Know your Client’ (KYC) policy should clearly spell out the client identification procedure to be carried out at different stages i.e. while establishing the Company – client relationship, while carrying out transactions for the client or when the Concerned persons have doubts regarding the veracity or the adequacy of previously obtained client identification data. The Compliance officer has to follow KYC/client identification procedures as specified and strengthened by SEBI from time to time.
    • The client should be identified by the Company by using reliable sources including based on documents / information apart from the papers collected. The intermediary should obtain adequate information to satisfactorily establish the identity of each new client and the purpose of the intended nature of the relationship and no exemption in this regard should be given. Address proof, photo graph, Pan, bank and demat proof etc are such documents which can proof identity of the person concerned. Additionally for companies in case of change of director or change in address it is to be verified from MCA site in case of any doubt. This is applicable for the clients which are directly identifiable but in case of corporate or trust or unincorporated corporate the beneficiary person has to be identified based on the parameters stated above in para 3 h.
    • Each original document should be seen prior to acceptance of a copy. PAN of every client should be verified through the income tax site and a printout of such verification is to kept in record..
    • Failure by prospective client to provide satisfactory evidence of identity should be noted and reported to the higher authority within the Company.
    • To check that the client identity do not match with the list of banned clients or from the list provided under CFT as provided by SEBI/ NSE/RBI and as updated through various circulars and notifications and relevant sites.
    • To obtain senior management approval for establishing business relationships with Politically Exposed persons and to take reasonable measures to verify source of funds of clients identified as PEP where a client has been accepted or beneficial owner is subsequently found to be or subsequently becomes PEP, senior management approval is to be obtained to continue business relationships and additional steps to be taken to verify the source of funds, wealth .or beneficial ownership.
    • Appropriate risk management system is to be put in place to determine whether any of the existing client or any prospective or potential client or the beneficial owner of such client is PEP. Rreferring to such publicly available information or accessing the commercial electronic database, we have to seek additional information from the client. Enhanced CDD measures are applicable where the beneficial owner is PEP. Additional measures are required to be taken to verify source of the fund as well as the wealth of clients and beneficial owners of clients identified as PEP.
    • Risk based approach is to be adopted at the time of accepting relationship with the client and also required to be periodically reviewed.
    • Reliance on third party for carrying out Client Due Diligence (CDD)
    • The Company 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 record-keeping requirements in line with the obligations under the PML Act.
    • Such reliance shall be subjected 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, the company shall be ultimately responsible for CDD and undertaking enhanced due diligence measures, as applicable.
  • 7.    Record Keeping

    • We should ensure compliance with the record keeping requirements contained in the SEBI Act, 1992, PMLA Rules and Regulations made there-under, as well as other relevant legislation, Rules, Regulations, Exchange Bye-laws and Circulars.
    • For the suspected drug related, laundered money, terrorist property trail the financial profile of the suspect account needs to be reconstructed, if necessary, evidence for prosecution of criminal behavior through the Company. In case of suspected drug related or other laundered money of terrorists properties, we should retain the following information for the account of clients in order to maintain satisfactory Audit trail.

    1.    The beneficial owner of the account and the volume of the funds flowing through the account.

      FOR SELECTED TRANSACTIONS

      1. The origin of the funds;
      2. The form in which the funds were offered or withdrawn.
      3. The identity of the person undertaking the transaction.
      4. The destination of the funds.
      5. The form of instruction and authority

    We should ensure that all customer and transaction records and information are available on a timely basis to the competent investigating authorities.

    As per Prevention of Money Laundering Act (PMLA), 2002 the following transactions should be tracked and proper records to be maintained as mentioned below:

    (i) All cash transactions of the value of more than Rupees Ten lakh or its equivalent in foreign currency;

    (ii) All series of cash transactions integrally connected to each other which have been valued below Rupees Ten lakh or its equivalent in foreign currency but taken place within a month and the aggregate value of such transactions exceeds rupees Ten lakh;

    (iii) All cash transactions where forged or counterfeit currency notes or blank notes have been used as genuine and forgery of a valuable security has taken place.

    (iv) All suspicious transactions whether or not made in cash and by way of as mentioned in the Rules.

    (v) To ensure that with clients no cash transactions are allowed.


    8.     Information to be maintained

    • We are required to maintain and preserve the following information in respect of transactions referred to in Rule3 of PMLA Rules:

      Information to be maintained

      i. Nature of transactions

      ii. Amount of transaction and the currency in which it is denominated.

      iii. Date of transaction done.

      iv. Parties to the transaction.

    9.    Retention of Records

    • The records mentioned in Rule 3 of PMLA Rules have to be maintained and preserved in a manner to allow easy and quick retrieval of data as and when required by competent authority for a period of ten years from the date of termination of an account or business relationship between the client and the Company.
    • The following document retention terms should be observed:
      • All necessary records on transactions, both domestic and international, should be maintained at least for the minimum period of 10 years as per PMLA and SEBI Acts
      • Records on identification of customer and beneficial owners i.e. copies or records of official identification documents like passports, identity cards, driving licenses, or similar documents, along with account files and business correspondence should be kept for the same period of five years after the business relationship between the client and us has ended or the account has been closed, whichever is later.
    • In situations where the records relate to on-going investigations 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.
    • Record of Information reported to the Director, Financial Intelligence Unit – India (FIU-IND):
      The Company shall maintain and preserve the record of information related to transactions, whether attempted or executed, which are reported to the Director, FIU-IND, as required under Rules 7 & 8 of the PML Rules, for a period of five years from the date of the transaction between the client and the intermediary.

    10.    Monitoring of transactions

    • Regular monitoring of transactions is vital for ensuring effectiveness of the Anti Money Laundering procedures. This is possible only if the intermediary has an understanding of the normal activity of the client so that they can identify the deviations in transactions / activities.
    • We have to pay special attention to all complex, unusually large transactions or pattern which has no economic purpose. All documents/office records of such transactions and purpose thereof shall be examined carefully and findings, if any, to be recorded and to be made available to authorities/SEBI/Stock Exchanges/FIU-IND and other authorities during audit, inspection or as and when required . The Company has prescribed internal threshold limits for each class of client accounts and pay special attention to the transaction which exceeds these limits in obligation and or turnover is to be studied and scrutinized and a report is to be prepared and submitted to the management by the Principal Officer if any manipulative or suspicious transaction or transaction for the purpose of financing any terrorist activity is noticed. These records are to be preserved for ten years as required under PMLA provisions.
    • We have to ensure that record of transaction is preserved and maintained along with transaction of a suspicious nature or any other transaction notified under Section 12 of the Act are reported to the Director, FUI-IND. Suspicious transaction shall also be reported to higher authorities / head of the department in the organization.
    • It is the responsibility of the Principal Officer and Compliance officer to randomly examine transactions of the clients to check whether it is in the nature of suspicious transaction or not?
    • To verify the identify of clients while carrying out:

      (i) Transaction of an amount equal to or exceeding rupees fifty thousand, whether conducted as single transaction or several transactions that appear to be connected, or

      (ii) Any international money transfer operations.

    • Cash TransactionsTo
      To ensure there are no cash transactions with the clients in the company and in case of single transaction of Rs. 10 lacs or series of integrated transactions within a month to bring the same to the notice of the Board of Directors immediately and to report the same to FIU by following the procedure and maintain records as stated and file CTR in the prescribed format as stated in procedure for reporting to FIU below.

    11.    Suspicious Transaction Monitoring & Reporting

    As our company is a Stock Broking Company having dealings with clients and also doing proprietary trades, transactions are to be monitored at dealer level in the front office and also at back office to ensure that suspicious transactions are monitored and recognized properly and if required explanations are sought from clients for doing the transactions if found suspicious. You are required to monitor in addition to the points mentioned in the above Internal Circulars.

    The Compliance Officer and Principal Officer should ensure that they take appropriate steps to enable suspicious transactions to be recognized and take appropriate steps to report the suspicious transactions to the senior management immediately. A list of circumstances, which may be in the nature of suspicious transactions, which includes an attempted transaction whether or not in cash, 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:

    • Clients whose identity verification seems difficult or clients appears not to cooperate
    • Asset Management Services for clients where source of the funds is not clear or not on keeping with clients apparent standing/business activity.
    • Substantial increases in business without apparent cause:
      Special attention to be provided for:
      • Deviations in transactions / activities.
      • Unusual large transaction with no apparent economic gains.
      • Daily/weekly scrutinizing the client transaction to insure these are within limits and excess exposure have taken place with consent of Risk management team and top Management..
      • On a monthly Basis to analyze client’s trade in illiquid stocks to observe any particular trend or percentage of clients’ trade visa vice total volume and to verify if any booking of loss in one account being transferred form one account of the group to any other account in the group and also to verify if any pattern is noticed for price manipulative transaction being conducted. A monthly report on the illiquid stock trade is also prepared and submitted by the Principal Officer.
      • Special attention is to be given for transactions which appear to be non genuine or with price manipulative intent or for creation of false volume or market or with circular trading objective.
      • Terminal wise/ clientwise/ srcipwise working to be done on weekly basis and the pattern of trade to be observed and corrective measures if any to be taken
    • Clients in high-risk jurisdictions or not in keeping with clients apparent business activity.
    • Clients transferring large sums of money to or from overseas locations with instructions for payment in cash;
    • Attempted transfer of investment proceeds to apparently unrelated third parties;
    • 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.
    • The Principal Officer and Compliance officer shall have timely access to customer identification data and other CDD information, transaction records and other relevant information
    • The Principal Officer should examine all documents/office records/memorandums/clarifications pertaining to suspicious transaction and record all such findings in writing and preserve such records for ten years as required under PMLA 2002.Such findings, records and related documents should be made available to auditors, and also to SEBI/Stock Exchanges/FIU-IND and other relevant authorities as and when required by them.

      Any suspicious transaction should be immediately notified to the Money Laundering control officer/ Principal Officer who will intimate the same in the form of a detailed report giving particulars of the clients, transactions and the nature /reason of suspicion to the Senior authorities of the Company. However, it should be ensured that there is continuity in dealing with the client, as normal and the client should not be told of the report/suspicion until instructed by the senior authorities. The Principal Officer shall arrange to submit necessary report to Financial Intelligence Unit.

      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.

      Clause 5 .4(vii) of this master circular categorizes clients of high risk countries, including countries where existence and effectiveness of money laundering controls is suspect or which donot or insufficiently apply FATF standards, as “CSC”. We have to be extra cautious to deal with such clients who 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 relationship with the identified country or person of that country etc.

    12.     List of Designated Individuals / Entities

    An updated list of individuals & 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, can be assessed at its website at the following link: http//www/un. Org/sc/committees/1267/consolist.shtml. We have to ensure we do not open an account in the name of any one whose name appears in the aforesaid list. Scanning of old accounts is also a continuous process to identify any or similar resembling name to be immediately intimated to SEBI & FIU-IND


    13.    Procedure for Reporting to Financial Intelligence Unit-India by the Principal Officer

    • In terms of the PMLA rules, we 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,
        NewDelhi-110021 Website:http://fiuindia.gov.in/

    • Mr. Ranjan Verma as the Principal Officer is entrusted with the responsibility of reporting the CTR and/or STR to the Director, FIU within the stipulated period as per the rules framed under PMLA and has to follow SEBI CIR NO ISD/AML/CIR-2/2009 of OCT,23,2009 and SEBI CIR/ISD/AML/3/2010 dated 31st December 2010 para 16 as Annexures, the new format of reporting has been handed over in sort copy for complying with necessary requirements as stipulated.
    • The Principal Officer should file STR if he has reasonable grounds to believe that the transactions involve proceeds of crime.
    • The Principal Officer shall have access to and be able to report to senior management above his next reporting level or the Board of Directors.
    • No NIL report is to be filed by the Principal Officer and Principal Officer shall be responsible for timely submission of the report and the connected employees shall keep it strictly confidential.
    • The “tipping off” (i.e. NO STR should be leaked to the Suspicious Client) does not extend only to filing of the STR and/or related information but even before, during and after the submission of an STR and applies to temporary and permanent employees, and directors. It is to be ensured that there is no tipping off to the client at any level.
    • FORMAT FOR REPORTING

    • SEBI has identified and provided formats for reporting of any suspicious cash or other transactions.
      Once the Principal Officer comes to a conclusion that the such incident has taken place after informing the management, he should ensure that all steps as narrated below are followed urgently.
      • Principal Officer has to record his reasons for coming to the aforesaid conclusion in the format provided in Point 3 (III) as above.
      • Once he brings the same to the knowledge of the management, he should not divulge the information to anyone inside or outside the organization and also inform others connected with him or in the knowledge of the matter not to divulge the same to any one not only at the time of filing of the STR and/or related information but even before, during and after the submission of an STR.
      • He should ensure that no restrictions are put to restrict the transaction or any other transaction.
      • CTR is to be submitted to the Designated Authority within 15 days in the next month by following instructions set out for cash transactions as provided by FIU-IND as per their circular dated 31.03.2011 and following FIN net Gateway user guide and reporting guide .
      • STR is to be submitted to the Designated Authority within 7 working days of coming to the aforesaid conclusion at the level of Principal Officer by following the instructions set out for suspicious transactions as provided by FUI-IND as per circular dated 31.03.2011 and following FIN net Gateway user guide and reporting guide .
      • Report for counterfeit is to be submitted in Form CCR 1 and CCR 2.
    • Appointment of a Designated Director
    • i) The company designates Mr. Abhishek Kayan, the Managing Director as the Designated Director of the company who has been duly authorized by the Board in terms of Rule 2(ba) of the PML Rules, to ensure overall compliance with the obligations imposed under chapter IV of the Act and Rules thereunder. The above information was also provided to FIU -India by the Principal Officer on 5/10/2013.

      ii) In terms of Section 13(2) of the PML Act (as amended by the Prevention Of Money- Laundering (Amendment) Act, 2012), the Director, FIU-IND can take appropriate action, including levying monetary penalty, on the Designated Director for failure of the company to comply with any of its AML/CFT obligations.

      iii) The company shall communicate the details of the Designated Director, such as name, designation and address to the Office of the Director, FIU-IND.


    14.    Procedure for freezing of funds / Asset

    Any cash or assets which has been generated from Drug dealing or other Money Laundering Acts or forms part of a Terrorist Property which are in our hands, can be freeze by the designated officers who have powers. The matter is to be brought to the knowledge of the seniors in the organization urgently.

    In the event, particulars of the clients match with particulars of the clients as listed in the schedule of the order dated 27/08/2009 of UAPA or website at http://www.un.org/se/committees/12671/congolist.shtmt and we are holding funds, assets, or economic resources, or related services in the form of securities, the Principal Officer has to inform Joint Secretary (I.S.I), Ministry of Home Affairs at Fax No. 011-23092569 and convey over phone on 011-230902736 and also send email at
    jsis@nic.in.

    The Principal Officer has to follow instructions as enclosed herewith and marked ‘A’ as provided by FIU-IND.


    15.    High standards in hiring policies and employee training with respect to anti-money laundering

    The Company has adequate screening procedures in place to ensure high standards when hiring employees. The Principal Officer has been entrusted with the responsibility of complying with the provisions of the Act and reporting of the suspicious transactions, if any. The employees of the Company has been briefed up and trained with the provisions and intention of the Act putting stress to anti- money laundering and anti –terrorist financing and any new employee is to be briefed separately as and when required.


    16.Investors Education

    To implement AML/CFT measures requires the Stock Broker to demand certain information from clients which may be of personal nature or has hitherto never been called for. Such information can include documents evidencing source of funds/income tax returns/bank records etc. This 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 the Stock Broker to sensitize their clients about these requirements as the ones emanating from AML and CFT framework. It is the duty of the Compliance Officer and Principal Officer including the dealers and other senior members to educate the clients for the objective of AML/ CFT programme and its needs and seek their full cooperation to implement the same.

    The list of Key Circulars are lying in the file for Guidance
    26.03.2014 along with various forms which are to be filed as per guidelines.

    This Circular is being issued for and on behalf of the Company for Prevention of Money Laundering.