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Saturday, December 20, 2008

[SEBI intermediaries]Money Laundering Master Circular dec 2008

As per the provisions of the Prevention of Money Laundering Act, every banking company, financial institution (which includes chit fund company, a co-operative bank, a housing finance institution and a non-banking financial company) and intermediary (which includes a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary associated with securities market and registered under section 12 of the Securities and Exchange Board of India Act, 1992) shall have to maintain a record of all the transactions; the nature and value of which has been prescribed in the Rules notified under the PMLA. Such transactions include :
Ø All cash transactions of the value of more than Rs 10 lakhs or its equivalent in foreign currency.
Ø All series of cash transactions integrally connected to each other which have been valued below Rs 10 lakhs or its equivalent in foreign currency where such series of transactions take place within one calendar month.
Ø All suspicious transactions whether or not made in cash.

The Guidelines laid down the minimum requirements and it was emphasised 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. All intermediaries were also advised to ensure that a proper policy framework as per the Guidelines on anti-money laundering measures is put into place and to designate an officer as 'Principal Officer' who would be responsible for ensuring compliance of the provisions of the PMLA. Names, designation and addresses (including e-mail addresses) of 'Principal Officer' shall also be intimated to the Office of the Director-FIU, 6th Floor, Hotel Samrat, Chanakyapuri, New Delhi -110021, India on an immediate basis.
This Master circular consolidates all the requirements/obligations issued with regard to AML/CFT till December 15, 2008. This Circular is being issued to all the intermediaries as specified at para above. The circular shall also apply to their branches and subsidiaries located abroad, especially, in countries which do not or insufficiently apply the Financial Action Task Force (FATF) Recommendations, to the extent local laws and regulations permit. When local applicable laws and regulations prohibit implementation of these requirements, the same should be brought to the notice of SEBI. In case there is a variance in Know Your Customer / Anti-Money Laundering [KYC/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.
It has the following parts,


1 Introduction

2 Background

3 Policies and Procedures to Combat Money Laundering and Terrorist financing

3.1 Guiding Principles

3.2 Obligations to establish policies and procedures


4 Written Anti Money Laundering Procedures

5 Customer Due Diligence

5.1 Elements of Customer Due Diligence

5.2 Policy for acceptance of clients

5.3 Risk Based Approach

5.4 Clients of special category (CSC)

5.5 Client identification procedure

6 Record Keeping

7 Information to be maintained

8 Retention of Records

9 Monitoring of transactions

10 Suspicious Transaction Monitoring & Reporting

11 Reports to Financial Intelligence Unit- India

12 Designation of an officer for reporting of suspicious transaction

13 Employees' Hiring/Training and Investor Education

14 List of Key Circulars/Guidelines issued having a bearing on AML/CFT framework

15 Annexure- List of various Reports and their formats

The detailed master circular is available in


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