Capital market regulator Securities Exchange Board of India (SEBI) has directed the stock exchanges and market intermediaries to assess the development of new products and new business practices to identify the potential money laundering and terror financing risks.
In its updated guidelines on anti-money laundering standards and combating the financing of terrorism obligations of securities market intermediaries, SEBI asked the exchanges and intermediaries to undertake risk assessments before launching or using such products, practices, services, and technologies.
SEBI has mandated that intermediaries register their clients’ information, specifically if the client is a non-profit organisation, on the DARPAN portal of Niti Aayog. Intermediaries should also keep records of the business relationship with the client or the closure of the account for five years, said SEBI.
If a registered intermediary has a reasonable suspicion that transactions associated with money laundering or terrorist financing, stock exchanges and market intermediaries should file a report on the suspicious transaction with FIU-IND (Financial Intelligence Unit-India), which is responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions.
SEBI has also directed the intermediaries to undertake enhanced due diligence of politically exposed persons.
PEPs are “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 official,” it said.
The new guidelines have introduced additional measures, such as refining the definition of beneficial owners within the anti-money laundering law and requiring market intermediaries involved in reporting to gather information from their clients.
Under the amendments, individuals or groups holding a minimum of 10 per cent ownership of a ‘reporting entity’ client will now be categorized as beneficial owners. This marks a change from the previous ownership threshold of 25 per cent.