Sebi Releases New Anti-Money Laundering Guidelines

The capital markets regulatory authority, the Securities Exchange Board of India (Sebi), published a set of modifications to combat financial and illegal crimes. The updated regulations are related to the laws established by the 2002 Prevention of Money Laundering Act. 

The Prevention of Money Laundering (Second Amendment) Rules, 2023, came into effect on September 4th this year. As a result of these revisions, the master circular’s specific contents may change. The second amendments include more security safeguards to stop unauthorised financial crimes. Financial groups will be required to take appropriate additional measures to manage the risks and notify the Sebi if the host country does not permit proper execution of anti-money laundering/financing of terrorism (CFT) in accordance with the home country standards.

The revised release states that financial organisations must implement group-wide  AML policies that apply to all branches and primarily controlled subsidiaries. It also mentioned keeping Sebi informed of information-sharing policies and processes, providing client account and financial data from branches as well as subsidiaries when required, and implementing sufficient safeguards for the privacy and use of information transferred.

The new guidelines also disclosed the company’s trustee status and beneficial owners. Whilst determining beneficial ownership is crucial to knowing if they are a sole proprietorship or corporation. Additionally, Sebi disclosed the criterion for beneficial ownership, stating:

Client is a company: The beneficial owner is an individual with a majority ownership interest or who controls in another manner, whether acting alone, jointly, or via multiple juridical persons. 

Client is a partnership firm: The beneficial owners are any natural persons, working alone or together, who own or have the right to more than 10% capital or revenue of the partnership or have other means of practising control over it.

Client is a body of individuals: An individual who, whether working alone or with others, possesses ownership of or access to more than 15% of the assets, capital, or earnings of such an association or group of people is the beneficial owner.

If the client is a trust: The beneficial owner will be identified along with the trust’s creator, trustee, beneficiaries who hold 10% or more of the trust, and any individual who has the final say in how the trust is run. 

For intermediaries working with foreign investors: To determine the client’s beneficial ownership, Sebi’s master circular of December 19, 2022, will be used as guidance. 

The Deputy General Manager Sapna Sinha issued a circular with the most recent updates.

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