SEBI Update - Amendment to the Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the Prevention of Money-laundering Act, 2002 and Rules framed there under

SEBI vide circular has issued an Amendment to the Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the Prevention of Money-laundering Act, 2002 and Rules framed there under.

The key changes brought about by these amendments and their implications:

Enhanced AML/CFT Measures in Host Countries One of the noteworthy additions to the regulations is the requirement for financial groups to apply additional measures when the host country does not allow proper AML/CFT implementation consistent with home country requirements. These additional measures are aimed at managing Money Laundering (ML) and Terrorist Financing (TF) risks more effectively. It’s crucial for these financial groups to inform the Securities and Exchange Board of India (SEBI) about these measures, ensuring transparency and accountability in cross-border financial activities.

Group-Wide AML/CFT Programs To reinforce AML/CFT efforts, financial groups are now mandated to establish group-wide programs to deal with ML/TF. These programs must be applicable to all branches and majority-owned subsidiaries. Key components include information sharing for Customer Due Diligence (CDD) and risk management purposes, both at the group level and among branches and subsidiaries. Adequate safeguards to prevent tipping-off are also emphasized, ensuring the confidentiality and integrity of shared information.

Trust Disclosure In cases involving trusts, reporting entities must now ensure that trustees disclose their status at the commencement of an account-based relationship. This additional transparency and disclosure requirement aims to prevent any misuse of trusts in the context of money laundering or terrorist financing.

Beneficial Ownership Identification The amendments provide clear guidelines on identifying beneficial owners of various entities. These include companies, partnership firms, unincorporated associations or bodies of individuals, trusts, and entities listed on Indian stock exchanges or in specific jurisdictions. The criteria for identifying beneficial owners include ownership percentages, control, and senior managing officials.

Periodic Updates Registered intermediaries are now responsible for periodically updating client and beneficial owner information collected through Customer Due Diligence (CDD). This ensures that the information remai