Mumbai, Mar 13 (KNN) The Securities and Exchange Board of India (SEBI) has tightened norms to prevent money laundering through the capital market and has asked stock exchanges including the BSE-SME platform to monitor compliance of the new norms through half-yearly audits and inspections, and inform SEBI.

The market regulator has asked capital market entities to conduct a detailed risk assessment of their clients, including those linked to countries facing international sanctions.

“Registered intermediaries shall carry out risk assessment 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. The risk assessment shall also take into account any country-specific information that is circulated by the government and SEBI from time to time,” the regulator said in a circular yesterday.

“The risk assessment shall be documented, updated regularly and made available to competent authorities and self-regulating bodies, as and when required,” it added.
The market intermediates, as per SEBI, can use a third party to carry out due diligence and determine the identity of clients and beneficiaries of the funds.

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.

Stock exchanges have been asked to monitor the compliance of various entities through half yearly audits and inspections. SEBI needed to be informed periodically, it said.
Market intermediaries have been asked to appoint designated directors to ensure compliance with the new norms. In case of lapses, these directors could face penal action from the SEBI.

In case of mutual funds, compliance of the circular would be monitored by the boards of asset management companies and the trustees and in case of other intermediaries, by their board of directors, SEBI said. (KNN/SD)