Sebi revises anti-money laundering norms

Modifies earlier circular issued in December 2010

The Securities and Exchange Board of India (Sebi) has tweaked its anti-money laundering/countering the financing of terrorism norms, reducing the time intermediaries have to maintain client records and allowing them to depend on third parties for carrying out due diligence of its clients.

According to a circular issued on Wednesday, the changes were made following amendments made to the Prevention of Money Laundering Act and the Prevention of Money Laundering Rules.

In the circular, stock exchanges have been asked to monitor compliance of the new norms through half-yearly audits and inspections, and inform Sebi. The regulator has reportedly been increasing its vigilance of money laundering activity in the light of the general elections. “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,” said the circular.

The regulator has also eased the period for which intermediaries have to maintain client records, reducing it from ten years to five.

The regulator has also asked the companies to designate an additional official in the form of a 'designated director' in addition to the requirement for a principal officer, which is already in place. This director will be given the responsibility to ensure overall compliance.

“Registered intermediaries are directed to review their…policies and procedures and make changes to the same accordingly,” said the circular.

The compliance of the circular is to be monitored by board of directors in all intermediaries except mutual funds. The boards of asset management companies and trustees are to monitor compliance in the case of mutual funds.