MASTER CIRCULAR
SEBI/ HO/ MIRSD/ DOS3/ CIR/ P/ 2018/ 104 July 04, 2018
To,
All Intermediaries registered with SEBI under Section 12 of the Securities and Exchange
Board of India Act, 1992.
(Through the stock exchanges for stock brokers and sub brokers, depositories for
depository participants, Association of Mutual Funds in India (AMFI) for Asset
Management Companies)
Subject: Guidelines on Anti-Money Laundering (AML) Standards and Combating the
Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the
Prevention of Money Laundering Act, 2002 and Rules framed there under
1. The Prevention of Money Laundering Act, 2002 (“PMLA”) was brought into force with
effect from 1st July 2005. Necessary Notifications / Rules under the said Act were
published in the Gazette of India on July 01, 2005 by the Department of Revenue, Ministry
of Finance, Government of India.
2. As per the provisions of the PMLA, 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 (includes a stock-broker, sub-broker, share
transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, asset
management company, depository participant, merchant banker, underwriter, portfolio
manager, investment adviser and any other intermediary associated with the securities
market and registered under Section 12 of the Securities and Exchange Board of India
Act, 1992 (SEBI Act)) shall have to adhere to client account opening procedures and
maintain records of such transactions as prescribed by the PMLA and rules notified there
under.
3. Pursuant to amendments made to the PMLA and Rules thereunder, updated guidelines in
the context of recommendations made by Financial Action Task force (FATF) on anti-
money laundering standards is enclosed. These guidelines have been divided into two
parts; the first part is an overview on the background and essential principles that concern
combating Money Laundering (ML) and Terrorist Financing (TF). The second part
provides a detailed account of the procedures and obligations to be followed by all
registered intermediaries to ensure compliance with AML/ CFT directives. These
guidelines shall also apply to their branches and subsidiaries located abroad, especially,
in countries which do not or insufficiently apply the FATF Recommendations, to the extent
local laws and regulations permit. When local applicable laws and regulations prohibit
implementation of these requirements, the same shall be brought to the notice of SEBI.
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4. The key circulars/ directives issued with regard to KYC, CDD, AML and CFT have been
mentioned in Schedule I. These directives lay down the minimum requirements and it is
emphasized 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. Reference to applicable statutes and
reporting guidelines for intermediaries is available at the website of the Financial
Intelligence Unit – India (FIU-IND).
5. This Master Circular shall supersede the earlier Master Circular on AML/ CFT dated
December 31, 2010.
Yours faithfully,
Surabhi Gupta
Deputy General Manager
Phone No. 022-26449315
Email id: surabhig@sebi.gov.in
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Table of Contents
Section 1: Overview
1.1. Introduction
1.2. Background
1.3. Policies and Procedures to Combat Money Laundering and Terrorist financing
Section 2: Detailed Directives
2.1. Written Anti Money Laundering Procedures
2.2. Client Due Diligence (CDD)
2.3. Record Keeping
2.4. Information to be maintained
2.5. Retention of Records
2.6. Monitoring of transactions
2.7. Suspicious Transaction Monitoring and Reporting
2.8. List of Designated Individuals/ Entities
2.9. Procedure for freezing of funds, financial assets or economic resources or related
services
2.10. Reporting to Financial Intelligence Unit-India
2.11. Designation of officers for ensuring compliance with provisions of PMLA
2.12. Employees’ Hiring/Employee’s Training/ Investor Education
SCHEDULE I
List of key circulars/ directives issued with regard to KYC, CDD, AML and CFT
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Section 1: Overview
1.1. Introduction
1.1.1 The Directives as outlined below provide a general background and summary of the
main provisions of the applicable anti-money laundering and anti-terrorist financing
legislations in India. They also provide guidance on the practical implications of the
Prevention of Money Laundering Act, 2002 (PMLA). The Directives also set out the
steps that a registered intermediary or its representatives shall implement to
discourage and to identify any money laundering or terrorist financing activities. The
relevance and usefulness of these Directives will be kept under review and it may be
necessary to issue amendments from time to time.
1.1.2 These Directives are intended for use primarily by intermediaries registered under
Section 12 of the Securities and Exchange Board of India Act, 1992 (SEBI Act). While
it is recognized that a “one- size-fits-all” approach may not be appropriate for the
securities industry in India, each registered intermediary shall consider the specific
nature of its business, organizational structure, type of clients and transactions, etc.
when implementing the suggested measures and procedures to ensure that they are
effectively applied. The overriding principle is that they shall be able to satisfy
themselves that the measures taken by them are adequate, appropriate and abide by
the spirit of such measures and the requirements as enshrined in the PMLA.
1.2. Background
1.2.1 The PMLA came into effect from 1st July 2005. Necessary Notifications / Rules under
the said Act were published in the Gazette of India on 1st July, 2005 by the
Department of Revenue, Ministry of Finance, Government of India. The PMLA has
been further amended vide notification dated March 6, 2009 and inter alia provides
that violating the prohibitions on manipulative and deceptive devices, insider
trading and substantial acquisition of securities or control as prescribed in Section 12
A read with Section 24 of the Securities and Exchange Board of India Act, 1992 (SEBI
Act) will now be treated as a scheduled offence under schedule B of the PMLA.
1.2.2 As per the provisions of the PMLA, 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 SEBI Act , shall have to maintain a record of all the transactions;
the nature and value of which has been prescribed in the Rules under the PMLA.
Such transactions include;
i. All cash transactions of the value of more than ` 10 lakh or its equivalent in
foreign currency.
ii. All series of cash transactions integrally connected to each other which have
been valued below ` 10 lakh or its equivalent in foreign currency where such
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series of transactions have taken place within a month and the monthly
aggregate exceeds an amount of ten lakh rupees or its equivalent in foreign
currency
iii. All suspicious transactions whether or not made in cash and including, inter-
alia, credits or debits into from any non-monetary account such as demat
account, security account maintained by the registered intermediary.
1.2.3 It may, however, be clarified that for the purpose of suspicious transactions reporting,
apart from ‘transactions integrally connected’, ‘transactions remotely connected or
related’ shall also be considered. In case there is a variance in CDD/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.
1.3. Policies and Procedures to Combat Money Laundering and Terrorist financing
1.3.1 Essential Principles:
1.3.1.1 These Directives have taken into account the requirements of the PMLA as
applicable to the intermediaries registered under Section 12 of the SEBI Act.
The detailed Directives in Section II have outlined relevant measures and
procedures to guide the registered intermediaries in preventing ML and TF.
Some of these suggested measures and procedures may not be applicable in
every circumstance. Each intermediary shall consider carefully the specific
nature of its business, organizational structure, type of client and transaction,
etc. to satisfy itself that the measures taken by it are adequate and appropriate
and follow the spirit of the suggested measures in Section II and the
requirements as laid down in the PMLA.
1.3.2 Obligation to establish policies and procedures:
1.3.2.1 Global measures taken to combat drug trafficking, terrorism and other
organized and serious crimes have all emphasized the need for financial
institutions, including securities market intermediaries, to establish internal
procedures that effectively serve to prevent and impede money laundering
and terrorist financing. The PMLA is in line with these measures and
mandates that all intermediaries ensure the fulfillment of the aforementioned
obligations.
1.3.2.2 To be in compliance with these obligations, the senior management of a
registered intermediary shall be fully committed to establishing appropriate
policies and procedures for the prevention of ML and TF and ensuring their
effectiveness and compliance with all relevant legal and regulatory
requirements. The Registered Intermediaries shall:
a) issue a statement of policies and procedures, on a group basis where
applicable, for dealing with ML and TF reflecting the current statutory and
regulatory requirements
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b) ensure that the content of these Directives are understood by all staff
members
c) regularly review the policies and procedures on the prevention of ML and
TF to ensure their effectiveness. Further, in order to ensure the
effectiveness of policies and procedures, the person doing such a review
shall be different from the one who has framed such policies and
procedures
d) adopt client acceptance policies and procedures which are sensitive to the
risk of ML and TF
e) undertake client due diligence (“CDD”) measures to an extent that is
sensitive to the risk of ML and TF depending on the type of client,
business relationship or transaction
f) have in system a place for identifying, monitoring and reporting
suspected ML or TF transactions to the law enforcement authorities; and
g) develop staff members’ awareness and vigilance to guard against ML
and TF
1.3.2.3 Policies and procedures to combat ML shall cover:
a) Communication of group policies relating to prevention
of ML and TF to all management and relevant staff that handle account
information, securities transactions, money and client records etc.
whether in branches, departments or subsidiaries;
b) Client acceptance policy and client due diligence measures, including
requirements for proper identification;
c) Maintenance of records;
d) Compliance with relevant statutory and regulatory requirements;
e) Co-operation with the relevant law enforcement authorities, including the
timely disclosure of information; and
f) Role of internal audit or compliance function to ensure compliance with
the policies, procedures, and controls relating to the prevention of ML and
TF, including the testing of the system for detecting suspected money
laundering transactions, evaluating and checking the adequacy of
exception reports generated on large and/or irregular transactions, the
quality of reporting of suspicious transactions and the level of awareness
of front line staff, of their responsibilities in this regard. The internal audit
function shall be independent, adequately resourced and commensurate
with the size of the business and operations, organization structure,
number of clients and other such factors
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Section 2: Detailed Directives
2.1. Written Anti Money Laundering Procedures
2.1.1 Each registered intermediary shall adopt written procedures to implement the anti-
money laundering provisions as envisaged under the PMLA. Such procedures shall
include inter alia, the following three specific parameters which are 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).
2.2. Client Due Diligence (CDD)
2.2.1 The CDD measures comprise the following:
a) Obtaining sufficient information in order to identify persons who beneficially own
or control the securities account. Whenever it is apparent that the securities
acquired or maintained through an account are beneficially owned by a party other
than the client, that party shall be identified using client identification and
verification procedures. The beneficial owner is the natural person or persons who
ultimately own, control or influence a client and/or persons on whose behalf a
transaction is being conducted. It also incorporates those persons who exercise
ultimate effective control over a legal person or arrangement
b) Verify the client’s identity using reliable, independent source documents, data or
information
c) Identify beneficial ownership and control, i.e. determine which individual(s)
ultimately own(s) or control(s) the client and/or the person on whose behalf a
transaction is being conducted -
i. 1For clients other than individuals or trusts: Where the client is a person
other than an individual or trust, viz., company, partnership or unincorporated
association/body of individuals, the intermediary shall identify the beneficial
owners of the client and take reasonable measures to verify the identity of such
persons, through the following information:
aa) 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 a controlling ownership interest.
Explanation: Controlling ownership interest means ownership
of/entitlement to:
i. more than 25% of shares or capital or profits of the juridical person,
where the juridical person is a company;
1CIR/ MIRSD/2/ 2013 dated January 24, 2013
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ii. more than 15% of the capital or profits of the juridical person, where
the juridical person is a partnership; or
iii. more than 15% of the property or capital or profits of the juridical
person, where the juridical person is an unincorporated association
or body of individuals.
bb) In cases where there exists doubt under clause (aa) above as to whether
the person with the controlling ownership interest is the beneficial owner or
where no natural person exerts control through ownership interests, the
identity of the natural person exercising control over the juridical person
through other means.
Explanation: Control through other means can be exercised through voting
rights, agreement, arrangements or in any other manner.
cc) Where no natural person is identified under clauses (aa) or (bb) above, the
identity of the relevant natural person who holds the position of senior
managing official.
ii. For client which is a trust: Where the client is a trust, the intermediary shall
identify the beneficial owners of the client and take reasonable measures to
verify the identity of such persons, through the identity of the settler of the trust,
the trustee, the protector, the beneficiaries with 15% or more interest in the
trust and any other natural person exercising ultimate effective control over the
trust through a chain of control or ownership.
iii. Exemption in case of listed companies: Where the client or the owner of the
controlling interest is a company listed on a stock exchange, or is a majority-
owned subsidiary of such a company, it is not necessary to identify and verify
the identity of any shareholder or beneficial owner of such companies.
iv. Applicability for foreign investors: Intermediaries dealing with foreign
investors’ may be guided by the clarifications issued vide SEBI circulars
CIR/MIRSD/11/2012 dated September 5, 2012 and CIR/ MIRSD/ 07/ 2013
dated September 12, 2013, for the purpose of identification of beneficial
ownership of the client.
v. The Stock Exchanges and Depositories shall monitor the compliance of the
aforementioned provision on identification of beneficial ownership through half-
yearly internal audits. In case of mutual funds, compliance of the same shall
be monitored by the Boards of the Asset Management Companies and the
Trustees and in case of other intermediaries, by their Board of Directors
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d) Verify the identity of the beneficial owner of the client and/or the person on whose
behalf a transaction is being conducted, corroborating the information provided in
relation to (c).
e) Understand the ownership and control structure of the client. .
f) Conduct ongoing due diligence and scrutiny, i.e. Perform ongoing scrutiny of the
transactions and account throughout the course of the business relationship to
ensure that the transactions being conducted are consistent with the registered
intermediary’s knowledge of the client, its business and risk profile, taking into
account, where necessary, the client’s source of funds; and
g) Registered intermediaries shall periodically update all documents, data or
information of all clients and beneficial owners collected under the CDD process.
2.2.2 Policy for acceptance of clients:
2.2.2.1 All registered intermediaries shall develop client acceptance policies and
procedures that aim to identify the types of clients that are likely to pose a
higher than average risk of ML or TF. By establishing such policies and
procedures, they will be in a better position to apply client due diligence on a
risk sensitive basis depending on the type of client business relationship or
transaction. In a nutshell, the following safeguards are to be followed while
accepting the clients:
a) No account is opened in a fictitious / benami name or on an anonymous
basis.
b) 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 etc.
and manner of making payment for transactions undertaken. The
parameters shall enable classification of clients into low, medium and
high risk. Clients of special category (as given below) may, if necessary,
be classified even higher. Such clients require higher degree of due
diligence and regular update of Know Your Client (KYC) profile.
c) Documentation requirements and other information to be collected in
respect of different classes of clients depending on the perceived risk and
having regard to the requirements of Rule 9 of the PML Rules, Directives
and Circulars issued by SEBI from time to time.
d) Ensure that an account is not opened where the intermediary is unable
to apply appropriate CDD measures/ KYC policies. This shall apply in
cases where it is not possible to ascertain the identity of the client, or the
information provided to the intermediary is suspected to be non - genuine,
or there is perceived non - co-operation of the client in providing full and
complete information. The market intermediary shall not continue to do
business with such a person and file a suspicious activity report. It shall
also evaluate whether there is suspicious trading in determining whether
to freeze or close the account. The market intermediary shall be cautious
to ensure that it does not return securities of money that may be from
suspicious trades. However, the market intermediary shall consult the
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relevant authorities in determining what action it shall take when it
suspects suspicious trading.
e) The circumstances under which the client is permitted to act on behalf of
another person / entity shall be clearly laid down. It shall be specified in
what manner the account shall be operated, transaction limits for the
operation, additional authority required for transactions exceeding a
specified quantity/value and other appropriate details. Further the rights
and responsibilities of both the persons i.e. the agent- client registered
with the intermediary, as well as the person on whose behalf the agent is
acting shall be clearly laid down. Adequate verification of a person’s
authority to act on behalf of the client shall also be carried out.
f) Necessary checks and balance to be put into place before opening an
account so as 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 worldwide
g) The CDD process shall necessarily be revisited when there are
suspicions of money laundering or financing of terrorism (ML/FT).
2.2.3 Risk-based Approach:
2.2.3.1 It is generally recognized that certain clients may be of a higher or lower risk
category depending on the circumstances such as the client’s background,
type of business relationship or transaction etc. As such, the registered
intermediaries shall apply each of the client due diligence measures on a risk
sensitive basis. The basic principle enshrined in this approach is that the
registered intermediaries shall adopt an enhanced client due diligence
process for higher risk categories of clients. Conversely, a simplified client due
diligence process may be adopted for lower risk categories of clients. In line
with the risk-based approach, the type and amount of identification information
and documents that registered intermediaries shall obtain necessarily depend
on the risk category of a particular client.
2.2.3.2 Further, low risk provisions shall not apply when there are suspicions of ML/FT
or when other factors give rise to a belief that the customer does not in fact
pose a low risk
2.2.3.3 Risk Assessment2
a) Registered intermediaries shall carry out risk assessment to identify,
assess and take effective measures to mitigate its money laundering and
terrorist financing risk with respect to its clients, countries or geographical
areas, nature and volume of transactions, payment methods used by
clients, etc. The risk assessment shall also take into account any country
specific information that is circulated by the 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
2SEBI Circular No. CIR/ MIRSD/ 1/ 2014 dated March 12, 2014
10
various United Nations' Security Council Resolutions (these can be
accessed at the URL -
http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml and
http://www.un.org/sc/committees/1988/list.shtml)
b) The risk assessment carried out shall consider all the relevant risk factors
before determining the level of overall risk and the appropriate level and
type of mitigation to be applied. The assessment shall be documented,
updated regularly and made available to competent authorities and self-
regulating bodies, as and when required.
2.2.4 Clients of special category (CSC): Such clients shall include the following:
a) Non - resident clients
b) High net-worth clients,
c) Trust, Charities, Non-Governmental Organizations (NGOs)and
organizations receiving donations
d) Companies having close family shareholdings or beneficial ownership
e) Politically Exposed Persons (PEP) are individuals who are or have been
entrusted with prominent public functions in a foreign country, e.g., Heads
of States or of Governments, senior politicians, senior
government/judicial/military officers, senior executives of state-owned
corporations, important political party officials, etc. The additional norms
applicable to PEP as contained in the subsequent para 2.2.5 of this
circular shall also be applied to the accounts of the family members or
close relatives of PEPs.
f) Companies offering foreign exchange offerings
g) Clients in high risk countries where existence / effectiveness of money
laundering controls is suspect, 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 control
is suspect, intermediaries apart from being guided by the Financial Action
Task Force (FATF) statements that identify countries that do not or
insufficiently apply the FATF Recommendations, published by the FATF
on its website (www.fatf-gafi.org), shall also independently access and
consider other publicly available information.
h) Non face to face clients
i) Clients with dubious reputation as per public information available etc.
The above mentioned list is only illustrative and the intermediary shall
exercise independent judgment to ascertain whether any other set of clients
shall be classified as CSC or not.
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2.2.5 Client identification procedure:
2.2.5.1 The KYC policy shall clearly spell out the client identification procedure to be
carried out at different stages i.e. while establishing the intermediary – client
relationship, while carrying out transactions for the client or when the
intermediary has doubts regarding the veracity or the adequacy of previously
obtained client identification data.
Intermediaries shall be in compliance with the following requirements while
putting in place a Client Identification Procedure (CIP):
a) All registered intermediaries shall proactively put in place appropriate
risk management systems to determine whether their client or potential
client or the beneficial owner of such client is a politically exposed person.
Such procedures shall include seeking relevant information from the
client, referring to publicly available information or accessing the
commercial electronic databases of PEPS. Further, the enhanced CDD
measures as outlined in clause 2.2.5 shall also be applicable where the
beneficial owner of a client is a PEP.
b) All registered intermediaries are required to obtain senior management
approval for establishing business relationships with PEPs. Where a
client has been accepted and the client or beneficial owner is
subsequently found to be, or subsequently becomes a PEP, registered
intermediaries shall obtain senior management approval to continue the
business relationship.
c) Registered intermediaries shall also take reasonable measures to verify
the sources of funds as well as the wealth of clients and beneficial owners
identified as PEP.
d) The client shall be identified by the intermediary by using reliable sources
including documents / information. The intermediary shall obtain
adequate information to satisfactorily establish the identity of each new
client and the purpose of the intended nature of the relationship.
e) The information must be adequate enough to satisfy competent
authorities (regulatory / enforcement authorities) in future that due
diligence was observed by the intermediary in compliance with the
directives. Each original document shall be seen prior to acceptance of a
copy.
f) Failure by prospective client to provide satisfactory evidence of identity
shall be noted and reported to the higher authority within the intermediary
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2.2.5.2 SEBI has prescribed the minimum requirements relating to KYC for certain
classes of registered intermediaries from time to time as detailed in Schedule
II. Taking into account the basic principles enshrined in the KYC norms which
have already been prescribed or which may be prescribed by SEBI from time
to time, all registered intermediaries shall frame their own internal directives
based on their experience in dealing with their clients and legal requirements
as per the established practices.
Further, the intermediary shall conduct ongoing due diligence where it notices
inconsistencies in the information provided. The underlying objective shall be
to follow the requirements enshrined in the PMLA, SEBI Act and Regulations,
directives and circulars issued thereunder so that the intermediary is aware of
the clients on whose behalf it is dealing.
2.2.5.3 Every intermediary shall formulate and implement a CIP which shall
incorporate the requirements of the PML Rules Notification No. 9/2005 dated
July 01, 2005 (as amended from time to time), which notifies rules for
maintenance of records of the nature and value of transactions, the procedure
and manner of maintaining and time for furnishing of information and
verification of records of the identity of the clients of the banking companies,
financial institutions and intermediaries of securities market and such other
additional requirements that it considers appropriate to enable it to determine
the true identity of its clients.
2.2.5.4 It may be noted that irrespective of the amount of investment made by clients,
no minimum threshold or exemption is available to registered intermediaries
(brokers, depository participants, AMCs etc.) from obtaining the minimum
information/documents from clients as stipulated in the PML Rules/ SEBI
Circulars (as amended from time to time) regarding the verification of the
records of the identity of clients. Further no exemption from carrying out CDD
exists in respect of any category of clients. In other words, there shall be no
minimum investment threshold/ category-wise exemption available for
carrying out CDD measures by registered intermediaries. This shall be strictly
implemented by all intermediaries and non-compliance shall attract
appropriate sanctions.
2.2.6 Reliance on third party for carrying out Client Due Diligence (CDD)3
2.2.6.1 Registered intermediaries 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.
3SEBI Circular No. CIR/ MIRSD/ 1/ 2014 dated March 12, 2014
13
2.2.6.2 Such reliance shall be subject 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, it is clarified
that the registered intermediary shall be ultimately responsible for CDD and
undertaking enhanced due diligence measures, as applicable.
2.3. Record Keeping
2.3.1 Registered intermediaries shall ensure compliance with the record keeping
requirements contained in the SEBI Act, 1992, Rules and Regulations made there-
under, PMLA as well as other relevant legislation, Rules, Regulations, Exchange Bye-
laws and Circulars.
2.3.2 Registered Intermediaries shall maintain such records as are sufficient to permit
reconstruction of individual transactions (including the amounts and types of
currencies involved, if any) so as to provide, if necessary, evidence for prosecution of
criminal behaviour.
2.3.3 Should there be any suspected drug related or other laundered money or terrorist
property, the competent investigating authorities would need to trace through the
audit trail for reconstructing a financial profile of the suspect account. To enable this
reconstruction, registered intermediaries shall retain the following information for the
accounts of their clients in order to maintain a satisfactory audit trail:
a) the beneficial owner of the account;
b) the volume of the funds flowing through the account; and
c) for selected transactions:
i. the origin of the funds
ii. the form in which the funds were offered or withdrawn, e.g. cheques, demand
drafts etc.
iii. the identity of the person undertaking the transaction;
iv. the destination of the funds;
v. the form of instruction and authority.
2.3.4 Registered Intermediaries shall ensure that all client and transaction records and
information are available on a timely basis to the competent investigating authorities.
Where required by the investigating authority, they shall retain certain records, e.g.
client identification, account files, and business correspondence, for periods which
may exceed those required under the SEBI Act, Rules and Regulations framed there-
under PMLA, other relevant legislations, Rules and Regulations or Exchange bye-
laws or circulars.
2.3.5 More specifically, all the intermediaries shall put in place a system of maintaining
proper record of transactions prescribed under Rule 3 of PML Rules as mentioned
below:
a) all cash transactions of the value of more than ten lakh rupees or its equivalent
in foreign currency;
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b) all series of cash transactions integrally connected to each other which have
been individually valued below rupees ten lakh or its equivalent in foreign
currency where such series of transactions have taken place within a month and
the monthly aggregate exceeds an amount of ten lakh rupees or its equivalent in
foreign currency;
c) all cash transactions where forged or counterfeit currency notes or bank notes
have been used as genuine or where any forgery of a valuable security or a
document has taken place facilitating the transactions;
d) all suspicious transactions whether or not made in cash and by way of as
mentioned in the Rules.
2.4. Information to be maintained
2.4.1 Intermediaries are required to maintain and preserve the following information in
respect of transactions referred to in Rule 3 of PML Rules:
a) the nature of the transactions;
b) the amount of the transaction and the currency in which it is denominated;
c) the date on which the transaction was conducted; and
d) the parties to the transaction.
2.5. Retention of Records4
2.5.1 Intermediaries shall take appropriate steps to evolve an internal mechanism for
proper maintenance and preservation of such records and information in a manner
that allows easy and quick retrieval of data as and when requested by the competent
authorities. Further, the records mentioned in Rule 3 of PML Rules have to be
maintained and preserved for a period of five years from the date of transactions
between the client and intermediary.
2.5.2 As stated in sub-section 2.2.5, intermediaries are required to formulate and implement
the CIP containing the requirements as laid down in Rule 9 of the PML Rules and
such other additional requirements that it considers appropriate. Records evidencing
the identity of its clients and beneficial owners as well as account files and business
correspondence shall be maintained and preserved for a period of five years after the
business relationship between a client and intermediary has ended or the account
has been closed, whichever is later.
2.5.3 Thus the following document retention terms shall be observed:
a) All necessary records on transactions, both domestic and international, shall be
maintained at least for the minimum period prescribed under the relevant Act and
Rules (PMLA and rules framed thereunder as well SEBI Act) and other
legislations, Regulations or exchange bye-laws or circulars.
b) Registered intermediaries shall maintain and preserve the records of documents
evidencing the identity of its clients and beneficial owners (e.g. copies or records
of official identification documents like passports, identity cards, driving licenses
4SEBI Circular No. CIR/ MIRSD/ 1/ 2014 dated March 12, 2014
15
or similar documents) as well as account files and business correspondence for
a period of five years after the business relationship between a client and
intermediary has ended or the account has been closed, whichever is later.
2.5.4 In situations where the records relate to on-going investigations or transactions which
have been the subject of a suspicious transaction reporting, they shall be retained
until it is confirmed that the case has been closed.
2.5.5 Records of information reported to the Director, Financial Intelligence Unit –
India (FIU – IND)5: Registered Intermediaries shall maintain and preserve the records
of information related to transactions, whether attempted or executed, which are
reported to the Director, FIU – IND, as required under Rules 7 and 8 of the PML Rules,
for a period of five years from the date of the transaction between the client and the
intermediary.
2.6. Monitoring of transactions
2.6.1 Regular monitoring of transactions is vital for ensuring effectiveness of the AML
procedures. This is possible only if the intermediary has an understanding of the
normal activity of the client so that it can identify deviations in transactions / activities.
2.6.2 The intermediary shall pay special attention to all complex unusually large
transactions / patterns which appear to have no economic purpose. The intermediary
may specify internal threshold limits for each class of client accounts and pay special
attention to transactions which exceeds these limits. The background including all
documents/office records /memorandums/clarifications sought pertaining to such
transactions and purpose thereof shall also be examined carefully and findings shall
be recorded in writing. Further such findings, records and related documents shall be
made available to auditors and also to SEBI/stock exchanges/FIUIND/ other relevant
Authorities, during audit, inspection or as and when required. These records are
required to be maintained and preserved for a period of five years from the date of
transaction between the client and intermediary.
2.6.3 The intermediary shall ensure a record of the transactions is preserved and
maintained in terms of Section 12 of the PMLA and that transactions of a suspicious
nature or any other transactions notified under Section 12 of the Act are reported to
the Director, FIU-IND. Suspicious transactions shall also be regularly reported to the
higher authorities within the intermediary.
2.6.4 Further, the compliance cell of the intermediary shall randomly examine a selection
of transactions undertaken by clients to comment on their nature i.e. whether they are
in the nature of suspicious transactions or not.
5 SEBI Circular No. CIR/ MIRSD/ 1/ 2014 dated March 12, 2014
16
2.7. Suspicious Transaction Monitoring and Reporting
2.7.1 Intermediaries shall ensure that appropriate steps are taken to enable suspicious
transactions to be recognized and have appropriate procedures for reporting
suspicious transactions. While determining suspicious transactions, intermediaries
shall be guided by the definition of a suspicious transaction contained in PML Rules
as amended from time to time.
2.7.2 A list of circumstances which may be in the nature of suspicious transactions 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:
a) Clients whose identity verification seems difficult or clients that appear not to
cooperate
b) Asset management services for clients where the source of the funds is not clear
or not in keeping with clients’ apparent standing /business activity;
c) Clients based in high risk jurisdictions;
d) Substantial increases in business without apparent cause;
e) Clients transferring large sums of money to or from overseas locations with
instructions for payment in cash;
f) Attempted transfer of investment proceeds to apparently unrelated third parties;
g) 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.
2.7.3 Any suspicious transaction shall be immediately notified to the Money Laundering
Control Officer or any other designated officer within the intermediary. The notification
may be done in the form of a detailed report with specific reference to the clients,
transactions and the nature /reason of suspicion. However, it shall be ensured that
there is continuity in dealing with the client as normal until told otherwise and the client
shall not be told of the report/ suspicion. In exceptional circumstances, consent may
not be given to continue to operate the account, and transactions may be suspended,
in one or more jurisdictions concerned in the transaction, or other action taken. The
Principal Officer/ Money Laundering Control Officer and other appropriate
compliance, risk management and related staff members shall have timely access to
client identification data and CDD information, transaction records and other relevant
information.
2.7.4 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.
17
2.7.5 Clause 2.2.4 (g) of this Master Circular categorizes clients of high risk countries,
including countries where existence and effectiveness of money laundering controls
is suspect or which do not or insufficiently apply FATF standards, as ‘CSC’.
Intermediaries are directed that such clients 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 relationships with the identified country or persons in that country etc.
2.8. List of Designated Individuals/ Entities
2.8.1 An updated list of individuals and 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 established pursuant to various United
Nations' Security Council Resolutions (UNSCRs) can be accessed at its website at
http://www.un.org/sc/committees/1267/consolist.shtml. Registered intermediaries are
directed to ensure that accounts are not opened in the name of anyone whose name
appears in said list. Registered intermediaries shall continuously scan all existing
accounts to ensure that no account is held by or linked to any of the entities or
individuals included in the list. Full details of accounts bearing resemblance with any
of the individuals/entities in the list shall immediately be intimated to SEBI and FIU-
IND.
2.9. Procedure for freezing of funds, financial assets or economic resources or
related services
2.9.1 Section 51A of the Unlawful Activities (Prevention) Act, 1967 (UAPA), relating to the
purpose of prevention of, and for coping with terrorist activities was brought into effect
through UAPA Amendment Act, 2008. In this regard, the Central Government has
issued an Order dated August 27, 2009 detailing the procedure for the implementation
of Section 51A of the UAPA.
2.9.2 Under the aforementioned Section, the Central Government is empowered to freeze,
seize or attach funds and other financial assets or economic resources held by, on
behalf of, or at the direction of the individuals or entities listed in the Schedule to the
Order, or any other person engaged in or suspected to be engaged in terrorism. The
Government is also further empowered to prohibit any individual or entity from making
any funds, financial assets or economic resources or related services available for
the benefit of the individuals or entities listed in the Schedule to the Order or any other
person engaged in or suspected to be engaged in terrorism.
2.9.3 The stock exchanges, depositories and registered intermediaries shall ensure
effective and expeditious implementation of the procedure laid down in the UAPA
Order dated August 27, 2009 as listed below6
a) On receipt of the updated list of individuals/ entities subject to UN sanction
measures (hereinafter referred to as 'list of designated individuals/ entities)from
6SEBI Circular No. ISD/ AML/ CIR – 2/ 2009 dated October 23, 2009
18
the Ministry of External Affairs (MHA)’; SEBI will forward the same to stock
exchanges, depositories and registered intermediaries for the following purposes:
i. To maintain updated designated lists in electronic form and run a check on
the given parameters on a regular basis to verify whether individuals or
entities listed in the schedule to the Order (referred to as designated
individuals/entities) are holding any funds, financial assets or economic
resources or related services held in the form of securities with them.
ii. In the event, particulars of any of customer/s match the particulars of
designated individuals/entities, stock exchanges, depositories and
intermediaries shall immediately, not later than 24 hours from the time of
finding out such customer, inform full particulars of the funds, financial assets
or economic resources or related services held in the form of securities, held
by such customer on their books to the Joint Secretary (IS.I), Ministry of Home
Affairs, at Fax No.011-23092569 and also convey over telephone on 011-
23092736. The particulars apart from being sent by post should necessarily
be conveyed through e-mail at jsis@nic.in.
iii. Stock exchanges, depositories and registered intermediaries shall send the
particulars of the communication mentioned in (ii) above through post/fax and
through e-mail (sebi_uapa@sebi.gov.in) to the UAPA nodal officer of SEBI,
Officer on Special Duty, Integrated Surveillance Department, Securities and
Exchange Board of India, SEBI Bhavan, Plot No. C4-A, “G” Block, Bandra
Kurla Complex, Bandra (E), Mumbai 400 051 as well as the UAPA nodal
officer of the state/UT where the account is held, as the case may be, and to
FIU-IND.
iv. In case the aforementioned details of any of the customers match the
particulars of designated individuals/entities beyond doubt, stock exchanges,
depositories and registered intermediaries would prevent designated persons
from conducting financial transactions, under intimation to Joint Secretary
(IS.I), Ministry of Home Affairs, at Fax No. 011-23092569 and also convey
over telephone on 011-23092736. The particulars apart from being sent by
post should necessarily be conveyed through e-mail at jsis@nic.in.
v. Stock exchanges, depositories and registered intermediaries shall also file a
Suspicious Transaction Report (STR) with FIU-IND covering all transactions
in the accounts covered by paragraph 2.9.2 (a) (ii) above carried through or
attempted, as per the prescribed format.
b) On receipt of the particulars as mentioned in paragraph 2.9.3 (a) (ii) above, IS-I
Division of MHA would cause a verification to be conducted by the State Police
and /or the Central Agencies so as to ensure that the individuals/ entities identified
by the stock exchanges, depositories, registered intermediaries are the ones
listed as designated individuals/entities and the funds, financial assets or
economic resources or related services, reported by stock exchanges,
depositories, registered intermediaries are held by the designated
individuals/entities. This verification would be completed within a period not
exceeding 5 working days from the date of receipt of such particulars.
c) In case, the results of the verification indicate that the properties are owned by or
held for the benefit of the designated individuals/entities, an order to freeze these
assets under section51A of the UAPA would be issued within 24 hours of such
19
verification and conveyed electronically to the concerned depository under
intimation to SEBI and FIU-IND. The order shall take place without prior notice to
the designated individuals/entities.
d) Implementation of requests received from foreign countries under U.N.
Securities Council Resolution 1373 of 2001.
i. U.N. Security Council Resolution 1373 obligates countries to freeze without
delay the funds or other assets of persons who commit, or attempt to commit,
terrorist acts or participate in or facilitate the commission of terrorist acts; of
entities or controlled directly or indirectly by such persons; and of persons and
entities acting on behalf of, or at the direction of such persons and entities,
including funds or other assets derived or generated from property owned or
controlled, directly or indirectly, by such persons and associated persons and
entities.
ii. To give effect to the requests of foreign countries under U.N. Security Council
Resolution 1373, the Ministry of External Affairs shall examine the requests
made by the foreign countries and forward it electronically, with their
comments, to the UAPA nodal officer for IS-I Division for freezing of funds or
other assets.
iii. The UAPA nodal officer of IS-I Division of MHA, shall cause the request to be
examined, within five working days so as to satisfy itself that on the basis of
applicable legal principles, the requested designation is supported by
reasonable grounds, or a reasonable basis, to suspect or believe that the
proposed designee is a terrorist, one who finances terrorism or a terrorist
organization, and upon his satisfaction, request would be electronically
forwarded to the nodal officer in SEBI. The proposed designee, as mentioned
above would be treated as designated individuals/entities.
iv. Upon receipt of the requests from the UAPA nodal officer of IS-I Division, the
list would be forwarded to stock exchanges, depositories and intermediaries
and the procedure as enumerated at paragraphs 2.9.2 (a) and (b) shall be
followed.
v. The freezing orders shall take place without prior notice to the designated
persons involved.
e) Procedure for unfreezing of funds, financial assets or economic resources
or related services of individuals/entities inadvertently affected by the
freezing mechanism upon verification that the person or entity is not a
designated person
i. Any individual or entity, if it has evidence to prove that the freezing of funds,
financial assets or economic resources or related services, owned/held by
them has been inadvertently frozen, shall move an application giving the
requisite evidence, in writing, to the concerned stock exchanges/depositories
and registered intermediaries. The stock exchanges/depositories and
registered intermediaries shall inform and forward a copy of the application
together with full details of the asset frozen given by any individual or entity
informing of the funds, financial assets or economic resources or related
services have been frozen inadvertently, to the nodal officer of IS-I Division
of MHA as per the contact details given in paragraph 5(ii) above within two
20
working days. The Joint Secretary (IS-I), MHA, being the nodal officer for (IS-
I) Division of MHA, shall cause such verification as may be required on the
basis of the evidence furnished by the individual/entity and if he is satisfied,
he shall pass an order, within fifteen working days, unfreezing the funds,
financial assets or economic resources or related services, owned/held by
such applicant under intimation to the concerned stock exchanges,
depositories and registered intermediaries. However, if it is not possible for
any reason to pass an order unfreezing the assets within fifteen working
days, the nodal officer of IS-I Division shall inform the applicant.
f) Communication of Orders under section 51A of Unlawful Activities
(Prevention) Act.
i. All Orders under section 51A of the UAPA relating to funds, financial assets
or economic resources or related services, would be communicated to stock
exchanges, depositories and intermediaries through SEBI.
2.10. Reporting to Financial Intelligence Unit-India
2.10.1 In terms of the PML Rules, intermediaries 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,
New Delhi-110021.
Website: http://fiuindia.gov.in
2.10.2 Intermediaries shall carefully go through all the reporting requirements and formats
that are available on the website of FIU – IND under the Section Obligation of
Reporting Entity – Furnishing Information – Reporting Format
(https://fiuindia.gov.in/files/downloads/Filing_Information.html). These documents
contain detailed directives on the compilation and manner/procedure of submission
of the reports to FIU-IND. The related hardware and technical requirement for
preparing reports, the related data files and data structures thereof are also detailed
in these documents While detailed instructions for filing all types of reports are given
in the instructions part of the related formats, intermediaries shall adhere to the
following:
a) The Cash Transaction Report (CTR) (wherever applicable) for each month shall
be submitted to FIU-IND by 15th of the succeeding month.
b) The Suspicious Transaction Report (STR) shall be submitted within 7 days of
arriving at a conclusion that any transaction, whether cash or non-cash, or a
series of transactions integrally connected are of suspicious nature. The
Principal Officer shall record his reasons for treating any transaction or a series
21
of transactions as suspicious. It shall be ensured that there is no undue delay
in arriving at such a conclusion.
c) The Non Profit Organization Transaction Reports (NTRs) for each month shall
be submitted to FIU-IND by 15th of the succeeding month.
d) The Principal Officer will be responsible for timely submission of CTR, STR and
NTR to FIU-IND;
e) Utmost confidentiality shall be maintained in filing of CTR, STR and NTR to FIU-
IND.
f) No nil reporting needs to be made to FIU-IND in case there are no cash/
suspicious/ non – profit organization transactions to be reported.
2.10.3 Intermediaries shall not put any restrictions on operations in the accounts where an
STR has been made. Intermediaries and their directors, officers and employees
(permanent and temporary) shall be prohibited from disclosing (“tipping off”) the fact
that a STR or related information is being reported or provided to the FIU-IND. This
prohibition on tipping off extends not only to the filing of the STR and/ or related
information but even before, during and after the submission of an STR. Thus, it shall
be ensured that there is no tipping off to the client at any level
It is clarified that the registered intermediaries, irrespective of the amount of
transaction and/or the threshold limit envisaged for predicate offences specified in
part B of Schedule of PMLA, 2002, shall file STR if they have reasonable grounds to
believe that the transactions involve proceeds of crime.
2.11. Designation of officers for ensuring compliance with provisions of PMLA
2.11.1 Appointment of a Principal Officer:
2.11.1.1 To ensure that the registered intermediaries properly discharge their legal
obligations to report suspicious transactions to the authorities, the Principal
Officer would act as a central reference point in facilitating onward reporting
of suspicious transactions and for playing an active role in the identification
and assessment of potentially suspicious transactions and shall have access
to and be able to report to senior management at the next reporting level or
the Board of Directors. Names, designation and addresses (including email
addresses) of ‘Principal Officer’ including any changes therein shall also be
intimated to the Office of the Director-FIU. As a matter of principle, it is
advisable that the ‘Principal Officer’ is of a sufficiently senior position and is
able to discharge the functions with independence and authority.
22
2.11.2 Appointment of a Designated Director:7
2.11.2.1 In addition to the existing requirement of designation of a Principal Officer, the
registered intermediaries shall also designate a person as a 'Designated
Director'. In terms of Rule 2 (ba) of the PML Rules, the definition of a
Designated Director reads as under:
“Designated director means a person designated by the reporting entity to
ensure overall compliance with the obligations imposed under chapter IV of
the Act and the Rules and includes –
a) the Managing Director or a Whole-Time Director duly authorizes by the
Board of Directors if the reporting entity is a company,
b) the managing partner if the reporting entity is a partnership firm,
c) the proprietor if the reporting entity is a proprietorship firm,
d) the managing trustee if the reporting entity is a trust,
e) a person or individual, as the case may be, who controls and manages
the affairs of the reporting entity if the reporting entity is an unincorporated
association or a body of individuals, and
f) such other person or class of persons as may be notified by the
Government if the reporting entity does not fall in any of the categories
above.”
2.11.2.2 In terms of Section 13 (2) of the PMLA, the Director, FIU – IND can take
appropriate action, including levying monetary penalty, on the Designated
Director for failure of the intermediary to comply with any of its AML/CFT
obligations.
2.11.2.3 Registered intermediaries shall communicate the details of the Designated
Director, such as, name designation and address to the Office of the Director,
FIU – IND.
2.12. Employees’ Hiring/Employee’s Training/ Investor Education
2.12.1 Hiring of Employees
2.12.1.1 The registered intermediaries shall have adequate screening procedures in
place to ensure high standards when hiring employees. They shall identify the
key positions within their own organization structures having regard to the risk
of money laundering and terrorist financing and the size of their business and
ensure the employees taking up such key positions are suitable and
competent to perform their duties.
7SEBI Circular No. CIR/ MIRSD/ 1/ 2-014 dated March 12, 2014
23
2.12.2 Employees’ Training:
2.12.2.1 Intermediaries must have an ongoing employee training programme so that
the members of the staff are adequately trained in AML and CFT procedures.
Training requirements shall have specific focuses for frontline staff, back office
staff, compliance staff, risk management staff and staff dealing with new
clients. It is crucial that all those concerned fully understand the rationale
behind these directives, obligations and requirements, implement them
consistently and are sensitive to the risks of their systems being misused by
unscrupulous elements.
2.12.3 Investors Education
2.12.3.1 Implementation of AML/CFT measures requires intermediaries to demand
certain information from investors 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
intermediaries to sensitize their clients about these requirements as the ones
emanating from AML and CFT framework. Intermediaries shall prepare
specific literature/ pamphlets etc. so as to educate the client of the objectives
of the AML/CFT programme.
24
SCHEDULE I
List of key circulars/ directives issued with regard to KYC, CDD, AML and CFT
S. Circular Number Date of Subject Broad area covered
No. Circular
1. SEBI/ HO/ IMD/ June 30, 2017 Acceptance of e -PAN card E-PAN issued by CBDT for
FIIC/ CIR/ P/ 2017/ for KYC purpose KYC compliance by FPI
068
2. SEBI/ HO/ MRD/ December 15, Master Circulars for Opening of BO Accounts
DP/ CIR/ P/ 2016/ 2016 Depositories
134
3. CIR/ IMD/ FPIC/ November 17, Review of requirement for Verification and submission
123/ 2016 2016 copy of PAN Card to open of PAN Card by FPI
accounts of FPIs
4. CIR/ MIRSD/ 120 / November 10, Uploading of the existing Time lines for registered
2016 2016 clients' KYC details with intermediaries in respect of
Central KYC Records uploading KYC data of the
Registry (CKYCR) System new and existing individual
by the registered c lients with CKYCR
intermediaries
5. SEBI/ HO/ IMD / September 14, Master Circular for Compliance with AML/ CFT
DF3/ CIR/ P / 2016/ 2016 Mutual Funds CDD directives of SEBI
84 stipulated in Master Circular
dated September 14, 2016
6. CIR/ MIRSD/ 66/ July 21, 2016 Operationalization of Authorization of Central
2016 Central KYC Records Registry of Securitization
Registry (CKYCR) and Asset Reconstruction
and Security interest of
India (CERSAI) for
receiving, storing,
safeguarding, retrieving the
KYC records and finalizing
template of KYC
7. CIR/ IMD/ FPI&C/ June 10, 2016 Know Your Client Applicability of Indian
59/ 2016 (KYC)norms for ODI K YC/AML norms for Client
subscribers, transferability Due Diligence, KYC
of ODIs, reporting of R eview, Suspicious
suspicious transactions, Transactions Report,
periodic review of R eporting of complete
systems and modified ODI transfer trail of ODIs,
reporting format Reconfirmation of ODI
positions, Periodic
Operational Evaluation
8. CIR/ MIRSD/ 29/ January 22, Know Your Client Client identification and
2016 2016 Requirements - authentication from UIDAI,
Clarification on voluntary Investment Limit and mode
25
adaptation of Aadhaar of payment to Mutual
based e-KYC process Funds, PAN verification,
additional due diligence in
case of material difference
in information
9. CIR/ IMD/ FIIC/ 11/ June 16, 2014 Know Your Client (KYC) Process to be followed by
2014 requirements for Foreign DDPs to share the relevant
Portfolio Investors (FPIs) KYC documents of FPIs
with
the banks and record of
transfer of documents
10. CIR/ MIRSD/ 1/ March 12, 2014 Anti-Money Consequential
2014 Laundering/Countering the modifications and
Financing of Terrorism additions to Master
(AML/CFT) Circular CIR/ ISD/ AML/ 3/
Obligations of Securities 2010 dated December 31,
Market Intermediaries 2010 in respect of Risk
under the Prevention of Assessment, Reliance on
Money laundering third party for carrying out
Act, 2002 and Rules framed Client Due Diligence
there under (CDD), Record keeping
requirements, Records of
information reported to the
Director, Financial
Intelligence Unit - India
(FIU-IND), Appointment of
a Designated Director
11. CIR/ MIRSD/ 13/ December 26, Know Your Client Shifting of certain
2013 2013 requirements information in Section C of
Part I to Part II of the AOF,
information required to be
captured in the systems of
KRAs
12. CIR/ MIRSD/ 09/ October 8, 2013 Know Your Client Acceptance of e-KYC
2013 Requirements service launched by UIDAI
as a valid process for
KYC verification
13. CIR/ MIRSD/ 07 / September 12, Know Your Client Partial modification to the
2013 2013 Requirements for Eligible provisions of circular No
Foreign Investors CIR/MIRSD/ 11 /2012
dated September 5, 2012,
Classification of Eligible
foreign investors investing
under Portfolio Investment
Scheme ('PIS') route as
Category I, II and III
14. CIR /MIRSD/ 4 March 28, 2013 Amendment to SEBI Modification of circulars
/2013 {(Know Your Client) dated December 23, 2011
26
Registration Agency} and April 13, 2012, to the
Regulations, extent of requirement for
2011 and relevant circulars sending original KYC
documents of the clients to
the KRA
15. CIR/ MIRSD/ 2/ January 24, Guidelines on Identification Client Due Diligence to
2013 2013 of Beneficial Ownership identify and verify the
identity of persons who
beneficially own or control
the securities account for
clients other than
individuals or trusts and
client which is a trust.
Exemption in case of listed
companies, Applicability for
foreign investors and
Implementation
16. CIR/ MIRSD/ 01 January 04, Rationalization process for Verification the PAN of
/2013 2013 obtaining PAN by Investors clients online at the Income
Tax website
17. CIR/ MIRSD/ 11/ September 5, Know Your Client Clarifications for Foreign
2012 2012 Requirements Investors viz. FIIs, Sub
Accounts and QFIs w.r.t.
implementation of SEBI
circulars no. CIR /MIRSD/
16/ 2011 dated August 22,
2011 and MIRSD/ SE/ Cir-
21/ 2011 dated October 5,
2011 on know your client
norms
18. CIR/ MIRSD/ 09 / August 13, 2012 Aadhaar Letter as Proof of Admissibility of Aadhaar
2012 Address for Know Your letter issued by UIDAI as
Client (KYC) norms. Proof of Address in addition
to its presently being
recognized as Proof of
Identity
19. MIRSD/ Cir-5 / 2012 April 13, 2012 Uploading of the existing Process to avoid
clients’ KYC details in the duplication of KYC,
KYC Registration guidelines for uploading
Agency (KRA) system by the KYC data of the
the intermediaries existing clients, Schedule
for implementation
20. MIRSD/ Cir- 26 / December 23, Guidelines in pursuance of Guidelines for
2011 2011 the SEBI KYC Registration Intermediaries, Guidelines
Agency (KRA)
27
Regulations, 2011 and for for KRAs, Guidelines w.r.t
In-Person Verification (IPV) In-Person Verification (IPV)
21. MIRSD/ Cir-23/ December 2, The Securities and Centralization of the KYC
2011 2011 Exchange Board of India records to avoid duplication
(KYC Registration Agency) of KYC process
Regulations, 2011.
22. CIR/ MIRSD/ 22/ October 25, ‘In-person’ verification Clarification w.r.t ultimate
2011 2011 (IPV) of clients by responsibility for ‘in-person’
subsidiaries of stock verification
exchanges, acting as stock
brokers
23. MIRSD/ SE/ Cir-21/ October 5, 2011 Uniform Know Your Client Clarification w.r.t different
2011 (KYC) Requirements for KYC forms used by Market
the Securities Markets Intermediaries, Guidelines
for KYC form capturing the
basic details about the
client and additional details
specific to the area of
activity of the intermediary
being obtained
24. CIR/ MIRSD/ 16/ August Simplification and Client account opening
2011 22, 2011 Rationalization of Trading Process, Client Account
Account Opening Process Opening Form, Rights &
Obligations of stock broker,
sub-broker and client for
trading on exchanges
Uniform Risk Disclosure
Documents, Guidance Note
detailing Do’s and Don’ts for
trading
25. CIR/ ISD/ AML/ 3/ December 31, Master Circular on Anti - Money Laundering
2010 2010 AML/CFT (AML) Standards/
Combating the Financing of
Terrorism (CFT) /
Obligations of Securities
Market Intermediaries
under the Prevention of
Money Laundering Act,
2002 and Rules framed
there under
26. CIR/ MRD/ DP / 37/ December Acceptance of third party Capturing of address other
2010 14, 2010 address as correspondence than that of the BO as the
address correspondence address.
27. CIR/ MRD/ DMS/ August 31, Guidelines on the Execution Clarifications on the
13/ 2010 2010 of Power of Attorney by the Execution of the POA by
Client in favour of Stock the client
Broker/ DP
28
28. CIR/ MRD/ DMS/ April 23, Guidelines on the Execution Guidelines on the
13/ 2010 2010 of Power of Attorney by the Execution of Power of
Client in favour of Stock Attorney by the Client
Broker/ DP
29. CIR/ ISD/ AML/ 2/ June 14, Additional Requirements for Additional Requirements on
2010 2010 AML/ CFT retention of documents,
monitoring, tipping off,
updation of records and
other clarifications.
30. CIR/ ISD/ AML/ 1/ February 12, Master Circular –AML/ CFT Framework for AML/ CFT
2010 2010 including procedures for
CDD, client identification,
record keeping & retention,
monitoring and reporting of
STRs
31. SEBI/ MIRSD/ Cir January 18, Mandatory Requirement of In-person verification done
No.02/ 2010 2010 in-person verification of for opening beneficial
clients. owner’s account by a DP
will hold good for opening
trading account for a stock
broker and vice versa, if the
DP and the stock broker is
the same entity or if one of
them is the holding or
subsidiary.
32. ISD/ AML/ CIR-2/ October 23, Directives on CFT under Procedure to be followed
2009 2009 Unlawful Activities for the freezing of assets of
(Prevention) Act, 1967 individual or entities
engaged in terrorism
33. ISD/ AML/ CIR-1/ September Additional AML/ CFT Additional AML/ CFT
2009 01, 2009 obligations of requirements and
Intermediaries under PMLA, clarifications thereon
2002 and rules framed
34. ISD/ AML/ CIR- December Master Circular on AML/ Framework for AML/ CFT
1/ 2008 19, 2008 CFT directives including procedures for
CDD, client identification,
record keeping & retention,
monitoring and reporting of
suspicious transactions.
35. MIRSD/ DPSIII/ July 2, In-Person verification of Responsibility of stock
130466/ 2008 2008 clients by stock-brokers brokers to ensure in -
person verification by its
own staff.
36. MRD/ DoP/ Cir-20/ June 30, Mandatory Requirement of Exception for certain
2008 2008 PAN classes of persons from
PAN being the sole
identification number for all
participants trading in the
securities market.
29
37. F.No.47/ 2006/ ISD/ April 4, In-person verification of In-person verification to be
SR/ 122539 2008 BO’s when opening demat carried out by staff of
accounts depository participant.
38. MRD/ DoP/ Cir- 20/ April 3, Exemption from mandatory Exemption for investors
2008 2008 requirement of PAN. residing in the State of
Sikkim from PAN being the
sole identification number
for trading in the securities
market.
39. F.No.47- 2006 /ISD/ February In-Person verification of Clarification on various
SR/ 118153/ 2008 22, 2008 clients by depositories topics relating to ‘in person’
verification of BOs at the
time of opening demat
accounts
40. MRD/ DoP/ Dep/ September KYC Norms for Proof of Identity (POI) and
Cir- 12/ 2007 7, 2007 Depositories Proof of Address (POA) for
opening a Beneficiary
Owner (BO) Account for
non - body corporates
41. MRD/ DoP/ Cir-05/ April 27, PAN to be the sole Mandatory requirement of
2007 2007 identification number for all PAN for participants
transactions in the transacting in the securities
securities market market.
42. ISD /CIR/ RR/ AML/ March 20, PMLA Obligations Of Procedure for maintaining
2/ 06 2006 intermediaries in terms of and preserving records,
Rules notified there under reporting requirements and
formats of reporting cash
transactions and suspicious
transactions
43. ISD/ CIR/ RR/ AML/ January 18, Directives on AML Framework for AML and
1/ 2006 Standards CFT including policies and
06 procedures, Client Due
Diligence requirements,
record keeping, retention,
monitoring and reporting
44. SEBI/ MIRSD/ DPS August 26, Uniform Documentary Uniform KYC documentary
- 1/ Cir-31/ 2004 2004 Requirements for trading requirements for trading on
different segments and
exchanges
45. MRD/ DoP/ Dep/ August 24, Proof of Identity (POI) and Broadening the list of
Cir- 29/ 2004 2004 Proof of Address (POA) for documents that may be
opening a Beneficiary accepted as Proof of
Owner Identity (POI) and/or Proof
of Address (POA) for the
purpose of opening a BO
Account
46. SEBI/ MRD/ SE /Cir- August 27, Mode of payment and Prohibition on acceptance/
33/ 2003/ 27/ 08 2003 delivery giving of cash by brokers
30
and on third party transfer
of securities
47. SMDRP/ Policy/ Cir- August 4, KYC Norms for Documentary requirements
36/ 2000 2000 Depositories for opening a beneficiary
account.
48. SMD/ POLICY/ April 11, Client Registration Form Formats of client
CIRCULARS /5-97 1997 Registration Form and
broker clients agreements
49. SMD-1/ 23341 Nov. 18, Regulation of transaction Mandatory requirement to
1993 between clients and obtain details of clients by
members brokers.
31