Anti Money Laundering & Combating Financing of Terrorism Policy
(Adopted by the Board on 01.04.2010)

In terms of the AML Standards and CFT Obligations of Securities Market Intermediaries under Prevention of Money Laundering Act, 2002 (PMLA) and Rules framed there under, the company is obligated to adopt a policy covering AML/CFT obligations and ensure compliance with the requirements notified by SEBI and the Stock Exchange and other Regulators in that respect from time to time.

SEBI, through Stock Exchange has issued a detailed guideline to all market intermediaries which provide a general background on the subjects of money laundering and terrorist financing summarizes the main provisions of the applicable anti money laundering and anti terrorist financing legislation in India and provide guidance on practical implications of the relevant Acts. These guidelines also sets out the steps that a SEBI registered intermediary or any of its representatives, should implement to discourage and identify any money laundering or terrorist financing activities.

Under the above circumstances, the Board of the company has framed the following policy keeping in view the PMLA, the related SEBI Guidelines. The said policy has been framed keeping in mind the specific nature of company y’s business, organizational structure, type of customers and transactions etc when implementing the suggested measures and procedures to ensure that they are effectively applied.

DETAILED POLICY AND GUIDELINES

1. 0 Written Anti Money Laundering Procedures

A written procedure to implement the anti money laundering provisions as envisaged under the PMLA is being adopted. Such procedure shall include inter alia, the following three specific parameters which are related to the overall “Client Due Diligence Process”

Policy for acceptance of clients
Procedure for identifying the clients
Transaction Monitoring and Reporting especially Suspicious Transactions Reporting (STR).

2.0 Customer Due Diligence Measures

 2.1 The customer due diligence (“CDD”) measures shall comprise the following and the Company shall:

1. Obtain sufficient information in order to identify persons who beneficially own or control 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 should 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.
   
   
2. Verify the customer’s identity using reliable, independent source documents, data or information;
   
   
3. Identify beneficial ownership and control, i.e. determine which  individual(s) ultimately own(s) or control(s) the customer and/or the person on whose behalf a transaction is being conducted;
   
   
4. Verify the identity of the beneficial owner of the customer and/or the person on whose behalf a transaction is being conducted, corroborating the information provided in relation to (c);
   
   
5. 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 customer, its business and risk profile, taking into account, where necessary, the customer’s source of funds.  

2.2 Policy for Acceptance of Clients- The company shall develop customer acceptance policies and procedures that aim to identify the types of customers that are likely to pose a higher than average risk of money laundering or terrorist financing. All customers will only be permitted to trade through the company provided the prescribed KYC form and details/information are duly filled signed and provided to the Company. The following additional safeguards needs 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 should 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 KYC profile. The risk profiling of the clients of the company shall be carried out periodically.

c) Documentation requirement and other information to be collected in respect of different classes of clients depending on perceived risk and having regard to the requirement to the Prevention of Money Laundering Act 2002, guidelines issued by RBI and SEBI from time to time.

d)   Ensure that an account is not opened where the intermediary is unable to apply appropriate clients due diligence measures / KYC policies.  This may be applicable in cases where it is not possible to ascertain the identity of the client, information provided to the intermediary is suspected to be non genuine, perceived non co-operation of the client in providing full and complete information. The company shall not continue to do business with such a person and file a suspicious activity report. It should also evaluate whether there is suspicious trading in determining whether to freeze or close the account. The company shall ensure caution that it does not return securities of money that may be from suspicious trades.  However, the company may from time to time consult the relevant authorities in determining what action it should take when it suspects suspicious trading.

e)    The circumstances under which the client is permitted to act on behalf of another person / entity should be clearly laid down and accordingly a bona-fide power of attorney holder shall only be permitted to act so. The POA should specify in what manner the account should 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 should be clearly laid down in the POA). Adequate verification of a person’s authority to act on behalf the customer shall also be carried out if required.

f)  Necessary checks and balance shall 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. The company shall depend upon the relevant information disseminated by the stock exchange in the public domain through their web site or such other information which is available to it. Also, 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 Security Council Committee established pursuant to various United Nations' Security Council Resolutions (UNSCRs) can be accessed in the United Nations website at http://www.un.org/sc/committees/1267/consolist.shtml. The Company, before opening any new account, will ensure that the name/s of the proposed customer does not appear in the list. Further, the company 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 or any other person as directed by the Regulator/(s).

g)  The company shall also verify identity while carrying out any international money transfer operations on behalf of any client.

2.3  Risk Based Approach - It is generally recognized that certain customers may be of a higher or lower risk category depending on circumstances such as the customer’s background, type of business relationship or transaction etc. As such, the company should apply each of the customer due diligence measures on a risk sensitive basis. The basic principle enshrined in this approach is that the company should adopt an enhanced customer due diligence process for higher risk categories of customers. Conversely, a simplified customer due diligence process may be adopted for lower risk categories of customers. In line with the risk-based approach, the type and amount of identification information and documents that registered intermediaries should obtain necessarily depend on the risk category of a particular customer

2.4  Classification of Clients as Special Category (CSC) - The company shall adopt a policy of distinction between a normal and a CSC client based on its independent judgement and information available with it. An illustrative list of entities which shall be classified as CSC is as follows:

1. Non resident clients
2. High net-worth clients
3. Trust, Charities, NGOs and organizations receiving donations
4. Companies having close family shareholdings or beneficial ownership
5. Politically exposed persons (PEP). Politically exposed persons 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. and also the accounts of the family members or close relatives of PEPs
6. Companies offering foreign exchange offerings
7. Clients in high risk countries (where existence / effectiveness of money laundering controls is suspect or which do not or insufficiently apply FATF standards, 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
8. Non face to face clients
9. Clients with dubious reputation as per public information available etc.

2.5 Client Identification Procedure

1. The ‘Know your Client’ (KYC) policy as laid down by SEBI and the Stock Exchanges and amended from time to time shall be the primary method through which the client identification needs to be established. The KYC documents 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.
   
   
2. The KYC /client identification procedures have been specified and strengthened by SEBI from time to time and the same shall be followed in strict compliance
   
3. In order to further strengthen the KYC norms and identify every participant in the securities market with their respective PAN thereby ensuring sound audit trail of all the transactions, PAN has been made sole identification number for all participants transacting in the securities market, irrespective of the amount of transaction vide SEBI Circular reference MRD/DoP/Cir-05/2007 dated April 27, 2007, subject to certain exemptions granted under circular reference MRD/DoP/MF/Cir-08/208 dated April 03, 2008 and MRD/DoP/Cir-20/2008 dated June 30, 2008. 
   
   
4. The company shall put in place necessary procedures to determine whether their existing/potential customer is a politically exposed person (PEP). Such procedures would include seeking additional information from clients, accessing publicly available information etc.
   
   
5. The company shall obtain sign off from a director for establishing business relationships with Politically Exposed Persons.
   
   
6. The company shall take reasonable measures to verify source of funds of clients identified as PEP.
   
   
7. The client shall be identified by the company by using reliable sources including documents / information.  The company shall obtain adequate information as per specified KYC norms to satisfactorily establish the identity of each new client and the purpose of the intended nature of the relationship. 
   
   
8. The information should be adequate enough to satisfy competent authorities (regulatory / enforcement authorities) in future that due diligence was observed by the intermediary in compliance with the specified KYC Guidelines. Each original documents shall be seen prior to acceptance of a copy.
   
   
9. Failure by prospective client to provide satisfactory evidence of identity should be noted and reported to the higher authority within the intermediary if required. Also in such cases the trading account shall not be opened.
   
   
10. SEBI has prescribed the minimum requirements relating to KYC for certain class of the registered intermediaries from time to time as stated earlier in this para. 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, the company  shall frame their own internal guidelines based on their experience in dealing with their clients and legal requirements as per the established practices. Further, the company shall also maintain continuous familiarity and follow-up where it notices inconsistencies in the information provided.  The underlying objective should be to follow the requirements enshrined in the PML Act, 2002 SEBI Act, 1992 and Regulations, directives and circulars issued thereunder so that the company is aware of the clients on whose behalf it is dealing.
    
11. It may be noted that while risk based approach may be adopted at the time of establishing business relationship with a client, no exemption from obtaining the minimum information/documents from clients as provided in the PMLA Rules is available to brokers in respect of any class of investors with regard to the verification of the records of the identity of clients.
    

3. Record Keeping

The company shall ensure compliance with the record keeping requirements contained in the SEBI Act, 1992, Rules and Regulations made there-under, PML Act, 2002 as well as other relevant legislation, Rules, Regulations, Exchange Bye-laws and Circulars.

3.1       The company 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 behavior.

3.2      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, the company shall retain the following information for the accounts of their customers 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:

• the origin of the funds;
• the form in which the funds were offered or withdrawn, e.g. cash, cheques, etc.;
• the identity of the person undertaking the transaction;
• the destination of the funds;
• the form of instruction and authority.

3.3    The Company should ensure that all customer and transaction records and information are available on a timely basis to the competent investigating authorities. Where appropriate, they should consider retaining certain records, e.g. customer identification, account files, and business correspondence, for periods which may exceed that required under the SEBI Act, Rules and Regulations framed there-under PMLA 2002, other relevant legislations, Rules and Regulations or Exchange bye-laws or circulars.

3.4   The company shall put in place a system of maintaining proper record of transactions prescribed under Rule 3, notified under the Prevention of Money Laundering Act (PMLA), 2002 as mentioned below: 

(i)    all cash transactions of the value of more than rupees ten lakh or its equivalent in foreign currency;

(ii)   all series of cash transactions integrally connected to each other which have been valued below rupees ten lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and the aggregate value of such transactions exceeds rupees ten lakh;

(iii)   all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security has taken place;

(iv)   all suspicious transactions whether or not made in cash and by way of as mentioned in the Rules.

4. Information to be Maintained

The Company shall maintain and preserve the following information in respect of transaction referred to in Rule 3 of PMLA Rules:

1. The nature of the transactions
2. The amount of the transaction and the currency in which it is denominated
3. The date on which the transaction  was conducted and
4. The parties to the transaction

5. Retention of Records

1. The Company 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 PMLA Rules have to be maintained and preserved for a period of ten years from the date of cessation of the transactions between the client and intermediary.
   
   
2. The records of the identity of clients shall also be maintained and preserved for a period of ten years from the date of cessation of the transactions between the client and intermediary.
   
3. Thus the following document retention terms shall be observed:

(a) All necessary records on transactions, both domestic and international, should be maintained at least for the minimum period prescribed under the relevant Act (PMLA, 2002 as well SEBI Act, 1992) and other legislations, Regulations or exchange bye-laws or circulars.

 (b) Records on customer identification (e.g. copies or records of official identification documents like passports, identity cards, driving licenses or similar documents), account files and business correspondence should also be kept for the same period.

4. In situations where the records relate to on-going investigations or transactions which have been the subject of a suspicious transaction reporting, they should be retained until it is confirmed that the case has been closed.

6. Monitoring of Transactions- Regular monitoring of transactions is vital for ensuring effectiveness of the Anti Money Laundering procedures. This is possible only if the intermediary has an understanding of the normal activity of the client so that they can identify the deviant transactions / activities. It is therefore, decided that the company shall:

1. Pay special attention to all complex, unusually large transactions / patterns which appear to have no economic purpose.  An internal threshold limits may be specified for each class of client accounts and pay special attention to the transaction which exceeds these limits. 
   
   
2. The company should ensure a record of transaction is preserved and maintained in terms of section 12 of the PMLA 2002 and that transaction of suspicious nature or any other transaction notified under section 12 of the act is reported to the appropriate law authority.  Suspicious transactions should also be regularly reported to the higher authorities / head of the department. 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 should be made available to auditors and also to SEBI /Stock Exchanges/FIU-IND/Other relevant Authorities, during audit, inspection or as and when required. These records are required to be preserved for ten years as is required under PMLA 2002
   
   
3. Further the compliance cell of the company shall randomly examine a selection of transaction undertaken by clients to comment on their nature i.e. whether they are in the suspicious transactions or not.

 

7. Suspicious Transaction Monitoring & Reporting- The company shall take appropriate steps to enable suspicious transactions to be recognised and have appropriate procedures for reporting such transactions. While determining suspicious transactions, company shall be guided by definition of suspicious transaction contained in PML Rules as amended from time to time.

1. 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 appears 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 in high-risk jurisdictions or clients introduced by banks or affiliates or other clients based in high risk jurisdictions;

d)     Substantial increases in  business without apparent cause;

e)     Unusually large cash deposits made by an individual or business;

f)        Clients  transferring large sums of money to or from overseas locations with instructions for payment in cash;

g)     Transfer of investment proceeds to apparently unrelated third parties;

h)      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.

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2. Any suspicion transaction should be immediately notified to the Money  Laundering Control Officer or any other designated officer within the company. 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 should be ensured that there is continuity in dealing with the client as normal until told otherwise and the client should 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 customer identification data and other CDD information, transaction records and other relevant information.
   
   
3. It is likely that in some cases transactions are abandoned/aborted by customers on being asked to give some details or to provide documents. The company should report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction.
   
   
4. The company shall deploy enhanced due diligence procedures for clients of high risk countries. Countries where appropriate AML measures are absent, the company shall put in place appropriate counter measures which shall include enhanced scrutiny of transactions, reporting mechanism and enhanced due diligence mechanisms.

8. Reporting to Financial Intelligence Unit-India- In terms of the PMLA 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

The company shall report as per formats prescribed related formats and shall adhere to the following: 

1.  The cash transaction report (CTR) (wherever applicable) for each month should be submitted to FIU-IND by 15th of the succeeding month or as prescribed from time to time by the Regulator.
   
   
2. The Suspicious Transaction Report (STR) should be submitted within 7 days (or as prescribed from time to time by the Regulator) 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 should record his reasons for treating any transaction or a series of transactions as suspicious. It should be ensured that there is no undue delay in arriving at such a conclusion.
   
   
3. The Principal Officer of the company will be responsible for timely submission of CTR and STR  to  FIU-IND; Utmost confidentiality should be maintained in filing of CTR and STR to FIU-IND. The reports may be transmitted by speed/registered post/fax at the notified address. No nil reporting needs to be made to FIU-IND in case there are no cash/suspicious transactions to be reported.
   
   
4. The Company shall not put any restrictions on operations in the accounts where an STR has been made. The company and their directors, officers and employees (permanent and temporary) should be prohibited from disclosing (“tipping off”) the fact that a STR or related information is being reported or provided to the FIU-IND. Thus, it should be ensured that there is no tipping off to the client at any level.
   
   
5. The company shall file STR if it has reasonable grounds to believe that the transaction involves proceeds of crime irrespective of the amount of such transaction.

9. Designation of an Officer for Reporting Suspicious Transactions  - Mr Shashi Kant Ladia, Director is designated as Principal Officer who shall be responsible for monitoring and reporting of all transactions and sharing of information as required under the law. The principal officer shall report to the Board of Directors of the company for the purpose of AML/CFT guidelines and policy matters.

10. Employees’ Hiring/ Employees’ Training/Investor Education

1. Hiring of Employees-  The company shall have adequate screening procedures in place to ensure high standards when hiring employees. They should 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.
   
   
2. Employees’ Training- The company shall have an ongoing employee training programme so that the members of the staff are adequately trained in AML and CFT procedures. Training requirements should have specific focuses for frontline staff, back office staff, compliance staff, risk management staff and staff dealing with new customers. It is crucial that all those concerned fully understand the rationale behind these guidelines, obligations and requirements, implement them consistently and are sensitive to the risks of their systems being misused by unscrupulous elements.
   
   
3. Investors’ Education: Implementation of AML/CFT measures requires the company to demand certain information from investors which may be of personal nature or which 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 customer with regard to the motive and purpose of collecting such information. There is, therefore, a need for to sensitize their customers about these requirements as the ones emanating from AML and CFT framework. The company shall if required prepare specific literature/ pamphlets etc. so as to educate the customer of the objectives of the AML/CFT programme.

11. INACTIVE ACCOUNT  -

For in active a/c In case there is interual nf more than six months between last trade and fresh order, dealer immediately confirms the identity of the client and then only fresh order is placed

In case there is interval of nrore than 2 year between last trade and fresh order, dealer imrnediatEly confirrns the identity of the client and then only fresh order is placed.

We have handed over the list of inactive account to our dealers which we update periodically


12. BLOG-CHAT POLICY

Unauthenticated News Circulated through various modes of communication Policy Pursuant to SEBI’s Circular No. Cir/ISD/1/2011 dated 23/03/2011, addendum Circular No. Cir/ISD/2/2011 dated 24/03/2011 and NSE Circular No. NSE/INSP/2011/114 dated 24/03/2011.

In view of the above Circular of SEBI & Exchanges, we have adapted the following as our policy on Unauthenticated News Circulated 

1. Proper internal code of conduct and controls are there as separately mentioned in our policy on internal control.  
2. Employees/temporary staff/voluntary workers etc. employed/working in our Office shall not be encouraged or they shall not circulate rumors or unverified information obtained from client, industry, any trade or any other sources without verification.  
3. Access to Blogs/Chat forums/Messenger sites etc. are either restricted under supervision of some responsible employee of the company or access shall not be allowed. 
4. Logs for any usage of such Blogs/Chat forums/Messenger sites (called by any nomenclature) shall be treated as records and the same should be maintained as specified by the respective Regulations which govern our company. 

Employees are directed that any market related news received by them either in their official mail/personal mail/blog or in any other manner, should be forwarded only after the same has been seen and approved by the Compliance Officer of our company. If an employee fails to do so, he/she shall be deemed to have violated the various provisions contained in SEBI Act/Rules/Regulations etc. and shall be liable for actions. The compliance Officer shall also be held liable for breach of duty in this regard.