The general assembly of United States adopted the political declaration and global
program of action in 1990 in its worldwide drive against money laundering and also
enjoined upon member states to adopt legislation and program against laundering
on a national level. India enacted the Prevention of Money Laundering Act, 2002.
(Hereinafter referred to as ‘Act’). The Prevention of Money Laundering Act, 2002
has come into effect from 1st July, 2005. Necessary Notifications / Rules under
the said Act have been published in the Gazette of India on 1st July, 2005 by the
Department of Revenue, Ministry of Finance, and Government of India.
Securities and Exchange Board of India (hereinafter referred to as SEBI) vide its
Circular Ref No.: ISD/CIR/RR/AML/1/06 dated January 18, 2006 laid down broad guidelines
on Anti Money Laundering Standards. As per the Circular, all the intermediaries
registered with SEBI under Section 12 of the SEBI Act were advised to ensure that
a proper policy framework on anti-money laundering measures was put in place. This
was essentially in conformity with the Prevention of Money Laundering Act, 2002
and the Rules framed there under by SEBI.
In the light of Circulars issued by National Stock Exchange of India Ltd (hereinafter
referred to as “NSE”) and Circulars issued by Bombay Stock Exchange Ltd. (hereinafter
referred to as “BSE”), in continuation to the new circular of Securities and Exchange
Board of India (hereinafter referred to as “SEBI”) SEBI Circular No. ISD/AML/CIR-1/2009
dated September 01, 2009 has issued additional requirements to be fulfilled and
clarifications with regard to existing requirements mentioned in the Master Circular
on Anti Money Laundering (AML) issued vide SEBI circular no. ISD/AML/CIR-1/2008
dated December 19, 2008.
Money Laundering in India
With the growing financial sector, India is vulnerable to money laundering activities.
Some common sources of illegal proceeds in India are narcotics trafficking, illegal
trade in gems, smuggling, corruption and income tax evasion. Large portions of illegal
proceeds are laundered through the alternative remittance system called “hawala”.
Under this system, individuals transfer funds from once country to another or from
one state to another, often without the actual movement of currency.
Prevention of Money Laundering Act, 2002
To combat money-laundering activities, the Government of India enacted the Prevention
of Money Laundering Act, 2002 (hereinafter referred to as the “Act”) on January
17, 2003 Prevention of Money Laundering Act, 2002
The basic objective of the Act is three fold, viz :
To prevent, combat and control money laundering.
To confiscate and seize the property
obtained from the laundered money.
To deal with any other issue connected with money laundering in India.
Our Prevention Of Money Laundering Policy
The purpose of this policy is to set out
the prevention of money laundering commitments and obligations for Leader Care Finance
(hereinafter referred to as ‘Company’).
This policy is based on the provision of the “Prevention of Money Laundering Act,
2002 and circular issued by SEBI and exchanges thereof”.
This internal policy sets out and establishes governing principles, broad guidelines
and standards to be adopted by the Companies in order to protect the Companies from
being used by any person to launder money.
Policy objectives :
To protect the Company from being used for money laundering
To follow thorough “Know
Your Customer” (KYC) policies and procedures in the day-to-day business.
To take appropriate action,
once suspicious activities is detected, and make report to designated authorities
in accordance with applicable law / laid down procedures.
To comply with applicable laws as well as norms
adopted internationally with reference to Money Laundering.
Integration- Placing the laundered proceeds back into the economy in such a way
that they re-enter the financial system as apparently legitimate funds. Integration
means the reinvestment of those funds in an apparently legitimate business so that
no suspicion of its origin remains and to give the appearance of legitimizing the
Section 3 of the Prevention of Money Laundering Act, 2002 defines the offences or
laundering. In terms, of this section whosoever directly or indirectly attempts
to indulge or knowingly assists or knowingly is a party or is actually involved
in any process or activity connected with the proceeds of crime and projecting it
as untainted property shall be guilty of an offence of money laundering.
The term proceeds of crime have been defined under Section 2(u)of the Act viz :
“Any property derived or obtained, directly or indirectly, by any person as a result
of criminal activity relating to a scheduled offence or the value of any such property.”
The said section broadly states that if a person is involved in the process of projecting
proceeds of crime as untainted property then he shall be guilty of money laundering,
for indulging in the said process of the following three elements / activities shall
play a very important role.
Possession or ownership of the proceeds of crime or property acquired from proceeds
of crime, which is being reflected as untainted property. Transactions relating
to proceeds of crime like converting its form. Concealment of the original transaction
and/or creating ghost transactions from concealing actual transactions. E.g. Possessing
Benami Property, Unexplained cash credits, unexplained expenditure, bogus or fictitious
accounts, unexplained investments.
The Prevention of Money Laundering Policy applies to Leader Care Finance. In terms
of rules framed under the Act, inter aila, every intermediary shall
Maintain a record of all transactions, the
nature and value of which may be prescribed, whether such transactions comprise
of single transaction or a series of transactions integrally connected to each other,
and where such series of transactions take place within a month.
Furnish information of transactions referred to in Clause (a) to the Director withinsuch
time as may be prescribed. Verify and
maintain the records of the identity of all its Clients, in such a manner as may
be prescribed As per provision of section 2(n) of the Act, term “Intermediary” means:
“ 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 Securities and Exchange Board of India
Act, 1992 (15 of 1992).
Further in terms of rules made under the Act, all intermediaries shall maintain
a record of:
All cash transactions of the value of more
than rupees ten lakhs or its equivalent in foreign currency.
All series of cash transactions integrally connected to each other which have been
valued below rupees ten lakhs or its equivalent in foreign currency where such series
of transactions have taken place within a month
All cash transaction 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.
All suspicious transactions whether or not
mage in cash. Identity and current
address or addresses including permanent address or addresses of the Client, the
nature of business of the Client and his financial status; Provided that where it
is not possible to verify the identity of the Client at the time of opening an account
or executing any transaction, the banking company, financial institution and intermediary,
as the case may be, shall verify the identity of the Client within a reasonable
time after the account has been opened or the transaction has been executed.
Under these circumstances the Act, applies to Leader Care Finance.
Suspicious transactions involve funds derived from illegal activities or is intended
or conducted in order to hide or disguise funds or assets derived from illegal activities
(including, without limitation, the ownership, nature, source, location, or control
of such funds or assets) as part of a plan to violate or evade any law or regulation
or to avoid any transaction reporting requirement under the law; The transaction
has no business or apparent lawful purpose or is not the sort in which the particular
customer would normally be expected to engage, and the financial institution knows
of no reasonable explanation for the transaction after examining the available facts,
including the background and possible purpose of the transaction.
Criteria in relation to defining
It is difficult to define exactly what constitutes suspicious transactions and as
such given below is a list of circumstances where transactions may be considered
to be suspicious in nature. This list is only inclusive and not exhaustive. Whether
a particular transaction is actually suspicious or not will depend on the background,
details of the transactions and other facts and circumstances.
Complex /unusually large transactions/ patterns
which appear to have no economic purpose.
Client having suspicious background or links
with known criminals.
Clients whose identity verification seems
which could not be verified within reasonable time.
Non face to face Client.
Doubt over the real beneficiary
of the account.
Accounts opened with names
very close to other established business entities.
Client appears not to co-operate.
Use of different accounts by Client
Sudden activity in dormant accounts.
Large number of account
having a common account holder, authorized signatory with no rationale.
between multiple accounts with no rationale.
Asset management services for clients where the
sources of funds is not clear or not in keeping with the clients’ apparent
Substantial increase in business without apparent
cause (Unusual activity compared to past transactions).
Activity materially inconsistent with what would
be expected from declared business.
Inconsistency with clients apparent financial standing.
Any account used for circular trading.
Unusual transactions by Clients of Special
Category (CSCs) and business undertaken by shell corporations, offshore banks/financial
services, businesses reported to be in the nature of export-import of small items.
A transaction which gives rise to a reasonable ground
of suspicion that it may involve the proceeds of crime.
A transaction which appears to be a case of insider trading.
Transactions reflect likely market manipulations.
Suspicious off market transactions
Value of transaction just under the reporting threshold
amount in an apparent attempt to avoid reporting.
Inconsistency in the payment pattern by the client.
Trading activity in account of high risk clients based
on their profile, business pattern and industry segment.
Accounts based as ‘passed through’. Where no transfer
of ownership of securities or trading is occurred in the account and the account is being
used only for funds transfers / layering purposes.
Large deals at prices away from the market.
Suspicious off market transactions.
Purchases made in one client’s account and later
on transferred to a third party through off market transactions through DP Accounts.
Multiple transactions of value just below the threshold
limit specified in PMLA so as to avoid possible reporting.
Implementation of the above requirements for our activities, The Company is into the following activities:
We are following KYC norms before enlisting clients. We are also ensuring that all
trades are settled through the banking channels and that all shares are electronically
transferred to the beneficial owner through settlement systems of the exchanges.
However, in order to ensure monitoring of large transactions, a report on all the
Clients whose trade turnovers in Cash Market Segment are above Rs.10 lakh per month
are reported on monthly basis by Compliance Department to the Principal Officer
of the Company. The Compliance department would examine the patterns to determine
whether there is a prima facie evidence of money laundering activity and ask concerned
departments to call for any information that may be deemed necessary. The back office
would provide the data to the Compliance department on monthly basis by 1st of the
following month. The Compliance Department of the Company will prepare the report
on the same and submit to the Principal Officer of the Company under PMLA, 2002.
We manage funds of reputed individuals and corporates which are in turn invested
in Bonds, Mutual funds, equities & derivatives through proper banking channels.
There is no need for anti-money laundering policy.