Markets regulator, Securities and Exchange Board of India (Sebi) issued fresh sets of norms aimed at countering money laundering and terror financing through the capital markets. The board has asked market entities to conduct detailed risk assessment of their clients, including those linked to countries facing international sanctions.
As per the new norms, all the market intermediaries also have to appoint designated directors to ensure compliance with new norms, who would face penal action for any lapses. Stock exchanges have also been asked to closely monitor the compliance of various entities through half-yearly internal audits and inspections and keep Sebi informed on these issues.
Coming just few days before the General Elections, the new norms aim to reduce money laundering which is at its peek during such event. Norms for record-keeping by market entities have been streamlined and would require client details to be maintained for five years after the business relationship has ended or the account is closed.
Sebi mandates that market entities deploy a "high risk" approach towards such clients, including individuals entrusted with prominent public functions, heads of governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations and important political party officials.
Sebi in its statement said that the registered intermediaries will have to "identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk with respect to its clients, countries or geographical areas, nature and volume of transactions, payment methods used by clients, etc."
In a circular issued on Wednesday, Sebi asked market intermediaries to "maintain and preserve" for five years records related to transactions, attempted or executed, that are reported to the FIU-IND (Financial Intelligence Unit - India). "
The market regulator also asked bourses and depositories to amend the bye-laws, rules and regulations in this regard to monitor compliance with these norms through half-yearly internal audits and inspections. In the case of mutual funds, Sebi said compliance would be monitored by the boards of the asset management companies and the trustees.