SEBI amends master circular on AML/CFT

SEBI vide circular CIR/ISD/AML/2/2010 dated June 14, 2010 has amended the master circular on Anti Money Laundering (“AML”) Standards/Combating Financing of Terrorism (“CFT”). The major changes are as follows:

1. The scope of Customer Due Diligence (“CDD”) done by Registered Intermediaries (“RIs”) has been increased to include the periodic updation of all documents, data or information of all clients and beneficial owners (“CDD Data”) collected under the CDD process. However SEBI has not prescribed the frequency for such updation of the CDD Data or any triggers which would require the updation of the CDD Data.

2. It has been clarified that the internal audit function in RIs should be independent, adequately resourced and commensurate with the size of business and operations, organization structure, number of clients and other such factors.

3. RIs should revisit their CDD process (customer acceptance policies and other customer profiling policies) when there are suspicions of money laundering or financing of terrorism (“ML/FT”).

4. Usually RIs adopt simplified customer due diligence process for lower risk categories of customers. However SEBI has now clarified that low risk provisions should not apply when there are suspicions of ML/FT or when other factors give rise to a belief that the customer does not in fact pose a low risk.

5. RIs should independently access and consider publicly available information other than the Financial Action Task Force statements while dealing with clients in high risk countries.

6. SEBI has enhanced the CDD measures to determine whether a client/ potential client/customer is a politically exposed person.

7. As per the current regulations RIs should maintain the records of the identity of clients for a period of 10 years from the date of cessation of transactions between the client and RI. It has been clarified that the “date of cessation of transactions” would mean the “date of termination of an account or business relationship”.

8. SEBI has clarified that the prohibition against the ‘tipping off’ of the filing of Suspicious Transactions Reports (“STR”) by any officers of the RIs to the clients would extend not only to the filing of the STR and/or related information but even before, during and after the submission of an STR.

A copy of the circular is available here.