POLICY
ON
ANTIMONEYLAUNDERINGONSTOCKBROKING
FOR
CREATIONOFCLIENTAWARENESS
1. Background
1.1. Pursuant to the recommendations made by the Financial Action Task Force on anti‐money
launderingstandards,SEBIhadissuedtheGuidelinesonAntiMoneyLaunderingStandardsvidetheirnotification No.ISD/CIR/RR/AML/1/06 dated 18th January 2006 and vide letterNo.ISD/CIR/RR/AML/2/06 dated 20th March 2006 had issued the obligations of the intermediariesregisteredunderSection12ofSEBIAct,1992.AspertheseSEBIguidelines,allintermediarieshavebeenadvisedtoensurethatproperpolicyframeworksareputinplaceaspertheGuidelinesonAnti
MoneyLaunderingStandardsnotifiedbySEBI.
2. WhatisMoneyLaundering?
2.1 MoneyLaunderingcanbedefinedasengaginginfinancialtransactionsthatinvolveincomederived
from criminal activity, transactions designed to conceal the true origin of criminally derived
proceedsandappearstohavebeenreceivedthroughlegitimatesources/origins.
2.2 Thisisdoneinthreephases-PlacementPhase,LayeringPhaseIntegrationPhase.
3. PreventionofMoneyLaunderingAct,2002
3.1. PreventionofMoneyLaunderingAct,2002(PMLA2002)formsthecoreofthelegalframeworkput
inplacebyIndiatocombatmoneylaundering.PMLA2002andtheRulesnotifiedthereundercame
intoforcewitheffectfromJuly1,2005.
3.2. The PMLA 2002 and Rules notified there under impose an obligation on intermediaries (including
stockbrokersandsub‐brokers)toverifyidentityofclients,maintainrecordsandfurnishinformation
totheFinancialIntelligenceUnit(FIU)‐INDIA
4. FinancialIntelligenceUnit(FIU)-INDIA
4.1. TheGovernmentofIndiasetupFinancialIntelligenceUnit‐India(FIU‐IND)onNovember18,2004as
an independent body to report directly to the Economic Intelligence Council (EIC) headed by the
FinanceMinister.
4.2. FIU‐IND has been established as the central national agency responsible for receiving, processing,
analyzing and disseminating information relating to suspect financial transactions. FIU‐IND is alsoresponsible for coordinating and stretching efforts of national and international intelligence and
enforcementagenciesinpursuingtheglobaleffortsagainstmoneylaunderingandrelatedcrimes.
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5. PolicyofBrokingLimited
5.1. Pelfhasresolvedthatitwould,asaninternalpolicy,takeadequate
measures to prevent money laundering and shall put in place a frame‐work to report cash and
suspicioustransactionstoFIUaspertheguidelinesofPMLARules,2002
6. ImplementationofthisPolicy
6.1. StockBrokingwillbethePrincipalOfficerwho
willberesponsiblefor
complianceoftheprovisionsofthePMLAandAMLGuidelines
act as a central reference point and play an active role in identification assessment of
potentiallysuspicioustransactions
Ensure that KSBL discharges its legal obligation to report suspicious transactions to the
concernedauthorities.
6.2. ThemainaspectofthispolicyistheCustomerDueDiligenceProcesswhichmeans:
Obtaining sufficient information about to the client in order to identify who is the actual
beneficialownerofthesecuritiesoronwhosebehalftransactionisconducted.
Verify the customer's identity using reliable, independent source document, data or
information.
Conducton‐goingduediligenceandscrutinyoftheaccount/clienttoensurethatthetransactionconducted are consistent with the client's background/financial status, its activities and risk
profile.
6.3. TheCustomerDueDiligenceProcessincludesthreespecificparameters:
PolicyforAcceptanceofClientsClientIdentificationProcedure
SuspiciousTransactionsidentificationreporting
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7. CustomerAcceptancePolicy
7.1.
Eachclientshouldbemetinperson:Acceptclientwhomweareabletomeetpersonally.Eithertheclientshouldvisittheoffice/branchorconcernedofficialmayvisittheclientathisresidence/officeaddress to get the necessary documents filled in and signed. Preferably accept clients who livewithinthejurisdictionofthebranch.Asfaraspossible,ensurethatthenewclientisintroducedby
anexistingclient.
Accepts client on whom we are able to apply appropriate KYC procedures: Obtain completeinformationfromtheclient.Itshouldbeensuredthattheinitialformstakenbytheclientarefilledin completely. All photocopies submitted by the client are checked against original documentswithout any exception. Ensure that the 'Know Your Client' guidelines are followed without anyexception. All supporting documents as specified by Securities and Exchange Board of India (SEBI)
andExchangesareobtainedandverified
Donotacceptclientswithidentitymatchingpersonsknowntohavecriminalbackground:Checkwhethertheclient'sidentifymatcheswithanypersonhavingknowncriminalbackgroundorisnotbanned in any other manner, whether in terms of criminal or civil proceedings by any
enforcement/regulatoryagencyworldwide
BecarefulwhileacceptingClientsofSpecialcategory:Weshouldbecarefulwhileacceptingclients ofspecialcategorylikeNRIs,HNIs,Trust,Charities,NGOs,PoliticallyExposedPersons(PEP),personsof foreign origin, companies having closed share holding/ownership, companies dealing in foreigncurrency,shellcompanies,overseasentities,clientsinhighriskcountries,nonfacetofaceclients,clientswithdubiousbackground.Current/FormerHeadofState,Current/Formerseniorhighprofile politician,Companiesofferingforeignexchange,etc.)orclientsfromhigh‐riskcountries(likeLibya,Pakistan, Afghanistan, etc.) or clients belonging to countries where corruption/fraud level is high(like Nigeria, Burma,etc). Scrutinize minutely the records / documents pertaining to clients
belongingtoaforesaidcategory
Donotacceptclientregistrationformswhicharesuspectedtobefictitious:Ensurethatnoaccount
isbeingopenedinafictitious/benaminameoronananonymousbasis.
Donotcompromiseonsubmissionofmandatoryinformation/documents:Client'saccountshouldbeopenedonlyonreceiptofmandatoryinformationalongwithauthenticsupportingdocumentsasper the regulatory guidelines. Do not open the accounts where the client refuses to provideinformation/documents and we should have sufficient reason to reject the client towards this
reluctance.
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7.2. CustomerIdentificationProcedure(FORNEWCLIENTS)
Objective: To have a mechanism in place to establish identity of the client along with firm proof of
addresstopreventopeningofanyaccountwhichisfictitious/benami/anonymousinnature.
7.2.1. Documentswhichcanbereliedupon:
PANCard:PANcardismandatoryandismostreliabledocumentasonlyonecardisissuedtoan
individualandwecanindependentlycheckitsgenuinenessthroughITwebsite.
IDENTITY Proof: PAN Card itself can serve as proof of identity. However, in case PAN cardcarries an old photograph of the holder, which does not match current facial features of theclient,weshouldtakeotheridentityproofinformofVoter'sIdentitycard,Passport,RationCard
oranyGovernment/PSU/Bankissuedphotoidentitycard.
ADDRESS Proof: For valid address proof we can rely on Voter's Identity Card, Passport, Bank
Statement,RationcardandlatestElectricity/telephonebillinthenameoftheclient.
7.2.2. Documentstobeobtainedaspartofcustomeridentificationprocedurefornewclients:
a. Incaseofindividuals,onecopyofthefollowingdocumentshavetobeobtained:
AsPANismandatory,verifyitsgenuinenesswithITwebsiteandcrossverifythePANcard
copywiththeoriginal.[Pleaseput"verifiedwithoriginal"stampasproofofverification]
Other proofs for identity are Voter's Identity card, Passport, Ration Card or anyGovernment/PSU/Bank issued photo identity card or any other document prescribed by
theregulatoryauthorities.
AddressproofintheformofVoter'sIdentityCard,Passport,BankStatement,Rationcardand latest Electricity/telephone bill in the name of the client or any other document
prescribedbytheregulatoryauthorities.
b. Incaseofcorporates,onecertifiedcopyofthefollowingdocumentsmustbeobtained:
CopyoftheRegistration/IncorporationCertificate
CopyoftheMemorandumArticlesoftheAssociationCopyofthePANcardandtheDirectorIndexNo.(DIN)
CopyofthelatestauditedAnnualStatementsofthecorporateclient
LatestNetworthCertificate
LatestIncomeTaxreturnfiled.
BoardResolutionforappointmentoftheAuthorizedPersonwhowilloperatetheaccount.
ProofofaddressandidentityofAuthorizedPerson
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c. Incaseofpartnershipfirmonecertifiedcopyofthefollowingmustbeobtained:
Registrationcertificate
PartnershipDeed
PANcardofpartners
Authorizationletterforthepersonauthorizedtoopenandoperatetheaccount
Proofofidentityandaddressoftheauthorizedperson.
Annualstatement/returnsofthepartnershipfirm
d. IncaseofaTrust,onecertifiedcopyofthefollowingmustbeobtained:
Registrationcertificate
TrustDeed
PANcard
Authorizationletterfortheentityauthorizedtoactontheirbehalf
OfficiallyvaliddocumentslikePANcard,votersID,passport,etcofperson(s)authorizedto
transactonbehalfoftheTrust.
e. Incaseofunincorporatedassociationorabodyofindividuals,onecertifiedcopyofthefollowing
mustbeobtained:
Resolutionofthemanagingbodyofsuchassociationorbodyofindividuals
PoAinfavourofpersonauthorizedtotransact
OfficiallyvaliddocumentslikePANcard,votersID,passport,etcoftheperson(s)authorized
totransact
AnydocumentrequiredbyKarvytoestablishthelegalexistenceofsuchanassociationor
bodyofindividuals.
f.
IncaseofanNRIaccount‐Repatriable/non‐repatriable,thefollowingdocumentsarerequired:
CopyofthePISpermissionissuedbythebank
Copyofthepassport
CopyofPANcard
ProofofoverseasaddressandIndianaddress
Copyofthebankstatement
Copyofthedematstatement
Iftheaccountishandledthroughamandateholder,copyofthevalidPoA/mandate
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8. RiskProfilingoftheClient
8.1. Weshouldaccepttheclientsbasedontherisktheyarelikelytopose.Theaimistoidentifyclients
whoarelikelytoposeahigherthanaverageriskofmoneylaunderingorterroristfinancing.Forthis purpose, we need to classify the clients as Low risk, medium risk and high risk clients. Byclassifyingtheclients,wewillbeinabetterpositiontoapplyappropriatecustomerduediligenceprocess.Thatis,forhighriskclientwehavetoapplyhigherdegreeofduediligence.Thefactorsof risk perception depend on client's location, nature of business activity, turnover, nature of
transaction,mannerofpaymentetc.
8.2. In order to achieve this objective, all clients of the branch should be classified in the following
category:
CategoryA-LowRisk
CategoryB-MediumRisk
CategoryC-Highrisk
8.2.1. CategoryAclientsarethoseposelowornilrisk.Theyaregoodcorporates/HNIswhohave
a respectable social and financial standing. These are the clients who make payment on
timeandtakedeliveryofshares.
8.2.2. CategoryBclientsarethosewhoareintra‐dayclientsorspeculativeclients.Thesearethe
clientswhomaintainrunningaccountwithKSBL.
8.2.3. CategoryCclientsarethosewhohavedefaultedinthepast,havesuspiciousbackground,
donothaveanyfinancialstatus,etc.
8.3. WehavetobecarefulwhilemonitoringthetransactionsofBandCcategoryclients.
8.4. Apart from this we need to exercise extra caution while monitoring the transactions of
NRI/NRE/PIOandforeignclients,especiallywhenthepaymentisbeingmadeinforeigncurrency.
8.5. Any change in the risk profile of the client/mandate holder, has to be ascertained by the
concernedbranchofficials,andreportedtotheBusinessHeadimmediately.
9. SuspiciousTransactions
Allarerequestedtoanalyzeandfurnishdetailsofsuspicioustransactions,whetherornotmadeincash.
Itshouldbeensuredthatthereisnounduedelayinanalysisandarrivingataconclusion.
9.1. What is a Suspicious Transaction: Suspicious transaction means a transaction whether or not
madeincash,whichtoapersonactingingoodfaith‐
Givesrisetoareasonablegroundofsuspicionthatitmayinvolvetheproceedsofcrime;or
Appearstobemadeincircumstanceofunusualorunjustifiedcomplexity;or
Appearstohavenoeconomicrationaleorbonafidepurpose
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ReasonsforSuspicious:
Identityofclient
• Falseidentificationdocuments
• Identificationdocumentswhichcouldnotbeverifiedwithinreasonabletime
• Non‐facetofaceclient
• Clientsinhigh‐riskjurisdiction
• Doubtovertherealbeneficiaryoftheaccount
• Accountsopenedwithnamesveryclosetootherestablishedbusinessentities
• Receiptbackofwell‐comekitundeliveredattheaddressgivenbytheclient
SuspiciousBackground
• Suspiciousbackgroundorlinkswithcriminals
MultipleAccounts
• Large number of accounts having a common parameters such as common partners /
directors / promoters / address/ email address / telephone numbers introducer or
authorizedsignatory
• Unexplainedtransfersbetweensuchmultipleaccounts.
ActivityInAccounts
• Unusualactivitycomparedtopasttransactions• Useofdifferentaccountsbyclientalternatively
• Suddenactivityindormantaccounts
• Activityinconsistentwithwhatwouldbeexpectedfromdeclaredbusinesss
• Accountusedforcirculartrading
NatureOfTransactions
• Unusualorunjustifiedcomplexity
• Noeconomicrationaleorbonafiedpurpose
• Sourceoffundsaredoubtful
• Appearstobecaseofinsidertrading
• Purchases made on own account transferred to a third party through an off market
transactionsthroughDPaccount
• Transactionsreflectlikelymarketmanipulations
• Suspiciousoffmarkettransactions
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ValueOfTransactions
•Value just under the reporting threshold amount in an apparent attempt to avoid
reporting
•Largesumsbeingtransferredfromoverseasformakingpayments
•Inconsistentwiththeclientsapparentfinancialstanding
•Inconsistencyinthepaymentpatternbyclient
•Block deal which is not at market price or prices appear to be artificially
inflated/deflated
9.2. WhattoReport
Thenatureofthetransactions
Theamountofthetransactionandthecurrencyinwhichitwasdenominated
Thedateonwhichthetransactionwasconducted:and
Thepartiestothetransaction.
Thereasonofsuspicion.
10. DesignatedPrincipalOfficer
In case any further information /clarification is required in this regard, the 'Principal Officer' may be
contacted.
Shailesh Gupta
F-7, East of Kailash,
New Delhi-110065
46601111
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