presented by ca. hiren mehta brv & associates in pmla implementation... · broker, depository...
TRANSCRIPT
� Prevention of Money Laundering Act, 2002(PMLA) came into effect from July 1, 2005
� Necessary Notifications / Rules under the saidact were published in the Gazette of India onJuly 01, 2005.act were published in the Gazette of India onJuly 01, 2005.
� SEBI Intermediaries like Stock Broker, Sub-broker, Depository Participant, PortfolioManager, Merchant Banker, InvestmentAdvisor, etc. are covered.
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� Whether appointment of Principal Officer isdone?
� Whether appointment or change in PrincipalOfficer is intimated to FIU-India?
� Whether written Policy relating to PMLA isprepared and adopted?
� Whether Policy is updated on periodical basis?
� Whether PMLA Policy is implemented?
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� Broad Contents� Client Due diligence Process
� Policy for acceptance of clients
� Risk based approach
� Clients of Special Category (CSC)
� Client Identification Procedure� Client Identification Procedure
� Record Keeping & Retention of records
� Monitoring of transactions
� Suspicious transactions Monitoring & reporting
� Reports to FIU – India
� Employees Hiring / Training
� Investor Education
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� Whether Due Diligence Process is followed?
� Whether beneficial owner or controller ofsecurities account has been identified in eachcase?case?
� Whether Ongoing Due diligence & scrutiny isconducted?
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� Obtain sufficient information to identifypersons who beneficially own or control thesecurities account
� Verify client’s identity using reliableindependent source documents, data orindependent source documents, data orinformation
� Identify beneficial ownership & control
� Verify identity of the beneficial owner
� Conduct ongoing due diligence and scrutiny
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� Whether Risk profiling of the clients is done?
� Whether Risk profiling is reviewed on periodical /regular basis?
� Whether CSC has been identified?� Whether CSC has been identified?
� Whether enhance due diligence process ormonitoring is conducted for high risk clients andCSC?
� Whether risk profiling and CSC has been capturedin the system?
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� Illustrative factors for Risk Profiling� Geographical Location
� Nature of Business Activity
� Trading Turnover – Daily and Accumulated
� Manner of making payment for transactions� Manner of making payment for transactions
� Income Range
� Experience in Investing in Securities Market
� Delivery based Trans. v/s Intraday Trans.
� Funded Clients (7 day / BTST)
� Investment Pattern (approved securities / illiquid)
� Category of client (individual, corporate, Trust, etc.)
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� Whether adequate system is in place to generatealerts for suspicious transactions?
� Whether alerts generated by the system arelooked into by Principal Officer?
� Whether system is in place to scrutinize alerts &arrive at suspicious transactions?
� Whether Suspicious transactions are reported toFIU-India?
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� Steps for Reporting� Generation of Alerts
� Analysis / Scrutiny of alerts
� Call for information / details� Call for information / details
� Identification of Suspicious Transactions
� Decision to report
� Filing of STR with FIU-India
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� Alerts� Potentially suspicious
� Should have potential of being suspicious
� Suspicious Transactions� Suspicious Transactions� Alert is only the starting point. Suspicious need notbe limited to the basis of alert
� The process of analysing alerts need to be clear tothose analysing alerts
� All alerts need not be suspicious
� Feedback from analysts to alert generation
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� Appears to be an agent of an undisclosed principal
� Unwilling to provide personal background information
� Multiple Accounts with no apparent reason
� Unexplained third party transfers
� Unexplained high activity
� Unexplained high level funds activity with low securitiestransactionstransactions
� Immediate liquidation of high amt of investments
� Off market transfers of shares
� Dormant account suddenly becomes active withoutplausible explanation
� Change of address, bank account, etc. immediately afterregistration
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� PQR Ltd. approached broker ABC Ltd.
� Mr. P director of PQR Ltd. is a good friend of MD A of ABC Ltd.
� Since PQR Ltd. is a know entity, KYC team hasregister the client without customer verification /due diligencedue diligence
� However, Compliance officer has conductedindependent verification and found that Mr. Q ofPQR Ltd is closely related to an alleged well knowncriminal
� What is to be done further???
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� Mr. H registers with broker ABC Ltd.
� After due diligence, he is allotted client code andhe commenced trading activity on a low scale
� One day, he places a large order to buy shares ofan illiquid scrip, order gets executed at one go
� Later on during the day, places sell order for thoseshares at a loss, also gets executed
� On enquiry, explained that it was due to wrong tiprecd.
� What is to be done by Principal Officer???
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� Mr. M registers with broker ABC Ltd.
� As per KYC, annual income of Mr. M is less than 5lacs and Net worth about 6 lacs
� Mr. M started trading on a low scale
� After 8 months, ABC Ltd. Has generated an alert forexcessive trading activity compared to knownexcessive trading activity compared to knownfinancial information of the client
� Avg. daily trading activity of the client is jumped from1 lac to 15 lacs
� Principal Officer enquires and reveal that the clienthas received a large inheritance in the recent past
� What Principal Officer has to do???
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� Mr. Y & Mr. Z registers with broker ABC Ltd.
� As per KYC, annual income of Mr. Y is more than 5lacs and of Mr. Z is less than 1 Lac
� Mr. Y has given margin of Rs. 5 lacs and his avgdaily delivery activity is about 10 lacs
� Mr. Z has given margin of Rs. 40 lacs, but his avgdaily trading turnover is about 50 lacs
� What Principal Officer has to do???� Whether transactions of both Mr. Y and Mr. Z to be reportedas Suspicious Transactions??
� Whether to place extra monitoring on transactions??
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� Whether records prescribed in PMLA are maintained?
� Whether adequate screening procedures are in placeto ensure high standards when hiring Employees?
� Whether ongoing basis employee’s training programsare conducted?are conducted?
� Whether adequate records relating to training aremaintained?
� Whether Education relating to PMLA has beenprovided to Investors?
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� To ensure compliance with the Policies,Procedures and Controls relating to PMLA
� Testing of the system for detecting suspectedmoney laundering transactions
� Evaluating and checking the adequacy ofexception reports generated on large and / orexception reports generated on large and / orirregular transactions
� The quality of reporting of suspicioustransactions
� The level of awareness of front line staff, oftheir responsibilities in this regard.
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