AML Policy

The Prevention of Money Laundering Act, 2002 (PMLA) forms the core of the legal framework put in place by India to combat money laundering and related crimes. PMLA and the Rules notified thereunder came into force from 1st July, 2005.

Under PMLA, all the entities registered with SEBI are required to furnish information of all the suspicious transactions whether or not made in cash to the Financial Intelligence Unit-India (FIU-IND). Under Section 3 of PMLA, projecting of crime as untainted property is an offence of money laundering liable to be punished under Section 4 of the PMLA.

Money Laundering involves disguising financial assets so that they can be used without detection of the illegal activity that produced them. Through money laundering, the launderer transforms the monetary proceeds derived from criminal activity into funds with an apparently legal source.

Financial Intelligence Unit-India (FIU-IND) is the central national agency of India responsible for receiving, processing, analysing and disseminating information of suspect financial transactions. FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in combating money laundering and related crimes.

Suspicious Transactions Definition

Section 2 (1) (g) of PMLA Rules defines a suspicious transaction, whether or not made in cash, which, to a person acting in good faith:

• Gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or
• Appears to be made in circumstances of unusual or unjustified complexity; or
• Appears to have no economic rationale or bona fide purpose; or
• Gives rise to a reasonable ground of suspicion that it may involve financing of activities relating to terrorism.

The policy and procedures outlined below provide a general background on the subjects of money laundering and terrorist financing, summarize the main provisions of the applicable anti-money laundering and anti-terrorist financing legislation in India, and provide guidance on the practical implications of the Act.

These procedures also set out the steps that a registered intermediary and any of its representatives should implement to discourage and identify any money laundering or terrorist financing activities.

As per the provisions of the Act, every banking company, financial institution (which includes chit fund companies, co-operative banks, housing finance institutions, and non-banking financial companies) and intermediary (which includes stock-brokers, sub-brokers, share transfer agents, bankers to an issue, trustees to a trust deed, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers, and any other intermediary associated with the securities market and registered under Section 12 of the Securities and Exchange Board of India Act, 1992) shall maintain a record of all transactions; the nature and value of which has been prescribed in the Rules under the PMLA. Such transactions include:

• All cash transactions of the value of more than Rs. 10 Lakhs or its equivalent in foreign currency.
• 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.
• All suspicious transactions whether or not made in cash and including, inter-alias, credits or debits into or from any non-monetary account such as demat account, security account maintained by the registered intermediary.

We adopt written procedures to implement the anti-money laundering provisions as envisaged under the Anti-Money Laundering Act, 2002. Such procedures include, inter alia, three specific parameters related to the overall 'Client Due Diligence Process':

• a) Policy for acceptance of clients
• b) Procedure for identifying the clients
• c) Transaction monitoring and reporting especially Suspicious Transactions Reporting (STR)

The customer due diligence (“CDD”) measures comprise the following:

a. Obtaining sufficient information in order to identify persons who beneficially own or control securities account

b. Verify the customer’s identity

We adhere to SEBI KYC (Know Your Client) REGISTRATION AGENCY REGULATIONS and any subsequently amended regulations to verify the customer's identity in accordance with PMLA requirements.

As registered members of KRA Agencies including CVL KRA, NDML KRA, and BSE KRA, we validate and download the client's information from the KRA system. If the status of the clients or their KYC information changes, we update the information on the KRA system and keep the relevant physical documents.

c. Identify beneficial ownership and control

This involves determining which individual(s) ultimately own(s) or control(s) the customer and/or the person on whose behalf a transaction is being conducted.

Following safeguards are to be followed while accepting the clients:

• No account is opened in a fictitious / benami name or on an anonymous basis.
• Ensure that an account is not opened where you are unable to apply appropriate client's due diligence measures / collect basic KYC details (i.e. PAN card number).
• Ensure that the client is KYC registered.
• The client should not be permitted to act on behalf of another person / entity for service delivery.
• Do not accept clients with identities matching with banned persons / entities as per SEBI / Stock Exchanges in the capital market. Verify using the below regulatory portals before opening an account:
  BSE SEBI Debarred Entities | NSE SEBI Debarred Entities
• Conduct risk assessments taking into account country-specific information using the updated list of individuals and entities subjected to sanction measures as required under the United Nations' Security Council Resolutions. Do not onboard a client present in these lists:
  UN 1267 Committee List and UN 1988 Committee List

The 'Know Your Client' (KYC) policy should be strictly observed concerning the client identification procedures which need to be carried out at the time of establishing the client relationship (i.e. onboarding the client).

The client should be identified using reliable sources including documents/information. Obtain adequate information to satisfactorily establish the identity of each new client and the purpose and intended nature of the relationship. The information should be adequate to satisfy competent regulatory and enforcement authorities in the future that due diligence was observed. Each original document must be seen before accepting a copy, and it should be verified and duly attested.

Failure by prospective clients to provide satisfactory evidence of identity should be noted and reported to the higher authority within the organization.

SEBI has prescribed the minimum requirements relating to KYC for certain classes of registered intermediaries. Taking into account the basic principles, internal guidelines must be followed in dealing with clients and legal requirements. We maintain continuous familiarity and follow-up when we notice inconsistencies in the information provided by the client. The principles of the PML Act, 2002 as well as the SEBI Act, 1992 should be followed, so that the Firm is aware of the clients on whose behalf it is dealing.

Maintenance of Records & Auditing

• Maintenance of Records: All the records of the clients are to be maintained for a minimum period of 10 Years, or in case of any regulatory action, till the time the action is completely resolved.
• Audit: Audit of Research Analyst activities must be done by an independent professional as allowed by the regulations. Any observations of the audit are to be addressed on a priority basis and corrective actions must be initiated immediately.

The only transaction encountered while delivering our service is the collection of fees, as we do not have access to the execution of transaction data of the clients. Accordingly, the fee collection should be through our bank account only. No cash transactions are allowed for fee payments by clients.

The nature and value of transactions prescribed in the PMLA Rules to maintain and record includes:

• All cash transactions of value more than Rs. 10 Lakhs or equivalent in foreign currency.
• Series of cash transactions connected to each other valued below Rs. 10 Lakhs taking place within one calendar month.
• All suspicious transactions whether or not made in cash, including credits/debits from any non-monetary accounts like demat or security accounts.

Any suspicious transactions will be immediately notified to the Compliance Officer. The notifications may be done in the form of a detailed report with specific references to the clients, transactions, and the nature/reason of suspicion. The compliance staff members will have timely access to customer identification data and other CDD information, transaction records, and other relevant information.

The Compliance Officer will carefully go through all the reporting requirements and formats as per the provisions of PMLA:

• The Principal Officer will be responsible for timely submission of CTR and STR to FIU-IND.
• Utmost confidentiality will be maintained in filling CTR and STR to FIU-IND.
• The reports will be transmitted by speed post, registered post, or fax at the notified address.
• No nil reporting will be made to FIU-IND in case there are no cash/suspicious transactions to be reported.

Reporting to FIU – India

In terms of PMLA rules, AKS Research Analyst will report information relating to cash and suspicious transactions to The Director, Financial Intelligence Unit India (FIU-IND) at the following address:

Principal Officer Responsibilities

The Principal Officer is responsible for the following:

• Communicating the policy on prevention of Money Laundering to the employees.
• Receiving reports from employees regarding any suspicious dealing noticed by them.
• Clarification of any queries from employees on this matter.
• Ensuring that the employees dealing with clients are aware of the guidelines and follow them strictly.
• Reporting any suspicious transactions to appropriate authorities.
• Handling compliance functions and ensuring compliance with the policies, procedures, and controls relating to the prevention of ML and TF.
• Evaluating processes in case any gaps are identified.

On-Boarding Staff Responsibilities

For staff members dealing with customers or handling customer-facing processes, it is essential to be sensitive to the AML requirements and obligations:

• The primary responsibility of compliance is on the onboarding staff since they deal face-to-face with customers.
• Onboarding staff must carry out the KYC process, customer due diligence, and any further checks required as per our processes during onboarding and renewals.
• Default on carrying out obligations under AML law can attract action as per established Firm policies.
• If you come to know of any suspicious activity, you must bring it to our notice immediately.

Communication of Policy

A copy of the above policy is provided to all management and relevant staff handling account information, securities transactions, money, and client records, etc. An internal awareness session of this policy is conducted on a yearly basis in the 1st week of April to spread awareness among all relevant persons.

It is to be ensured that all operations and activities are strictly in compliance with all relevant statutory and regulatory requirements.

As and when sought, appropriate information of the clients maintained by the firm will be shared with the relevant law enforcement authorities, and timely disclosures of information will be made in accordance with applicable laws.

The management of the Research Analyst firm reviews the policies and procedures on the prevention of Money Laundering and Terrorist Financing to ensure their effectiveness as and when there is a change in regulatory guidelines.