Training session 01/02/2013Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation) Mr. Rajesh Agarwal, Principal Officer Sykes & Ray Equities (I) Ltd.

Overview What is Money laundering? Requirements under the Act SREIL policy Relevance to your routine Questions and Answers 01/02/2013Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

What is money laundering? Administered under the Prevention of Money Laundering Act, 2002 and rules there under. Regulated by many bodies like Enforcement Directorate, Financial Intelligence Unit, RBI, SEBI and exchanges. 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Definition Money Laundering Directly or indirectly Attempts or assists knowingly or party to any activity Connected with proceeds of crime Projecting it as untainted property 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Proceeds of crime Property or value of such property derived or obtained Directly or indirectly Property is a result of crime related to a scheduled offence 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Scheduled Offence Against the country Terrorism, conspiracy, etc Relating to Drugs Possessing or dealing with Poppy straw, opium, cannabis Under the Indian Penal Code Murder, Kidnapping, Extortion, counterfeit notes and securities, etc 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Scheduled Offence Under the Arms Act Acquire, possess or use prohibited weapons Wildlife Protection Immoral Trafficking Prevention of Corruption Act Public servant taking bribe, or taking bribe to influence public servant 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Requirements under the Act Every Broker/ Depository Participant/ Sub-Broker shall (a) maintain a record of all transactions, the nature and value of which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions take place within a month; (b) furnish information of transactions referred to in clause (a) to the Director within such time as may be prescribed; (i.e. every month) (c)verify and maintain the records of the identity of all its clients, in such manner as may be prescribed: (i.e. KYC) 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Requirements under the Act Has to maintain the record of: All cash transactions of the value of more than Rs 10 lacs or its equivalent in foreign currency. All series of cash transactions integrally connected to each other which have been valued below Rs 10 lakhs or its equivalent in foreign currency where such series of transactions take place within one calendar month. All suspicious transactions whether or not made in cash and including, inter-alia, credits or debits into from any non monetary account such as demat account, security account maintained by the registered intermediary 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

SREILs policy As required by the Act and SEBI, SREIL has adopted a policy to effectively implement these provisions The objectives are: To protect the company from being used for Money Laundering To follow thorough KYC practices To take appropriate action and report any irregularity To comply with the applicable laws 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Money Laundering process Placement The proceeds of crime are injected into the system Large amounts of money are divided and distributed in a series of accounts Layering The money is spun in different accounts to different ownerships and jurisdiction to confuse investigators Integration The proceeds enter a legitimate business and the financial economy as untainted property 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Suspicious Transactions Funds derived from illegal activities Conducted to disguise such funds No apparent purpose Not the sort of transaction the customer would enter into No reasonable explanation considering the background and purpose 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Examples Large transactions or patterns Clients with links to criminals False ID documents or not face to face Multiple accounts Sudden activity in dormant accounts Use of different accounts alternately Activity inconsistent with financial Background. Client of special category Value of transactions away from market prices Value just below threshold amount Off market transactions 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Customer Due Diligence Policy for acceptance of clients Client identification procedure Suspicious transaction identification and reporting 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Acceptance of clients In-person verification Obtain complete information as laid down by SEBI KYC guidelines Clients of special category Not to accept clients who Have criminal background Submit fictitious documents Do not submit mandatory documents 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Client identification procedure PAN card- the most reliable Other documents such as election card, Passport, PSU issued cards Address proof such as election/ telephone bill, bank pass book Other documents as are relevant to individuals, firms, companies, trusts, NRIs 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Risk profiling Category A- Low Risk Category B- Medium Risk Category C- High Risk 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Recent Additional Requirements SEBI Wide its circular No. CIR/MIRSD/2/2013 dated January 24, 2013 laid down additional Guidelines on Identification of Beneficial Ownership For clients other than individuals : The intermediary shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons. 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Recent Additional Requirements For clients other than individuals or trusts: The identity of the natural person, who, whether acting alone or together, or through one or more juridical person, exercises control through ownership or who ultimately has a controlling ownership interest. Controlling ownership interest means ownership of/entitlement to: i. More than 25% of shares or capital or profits of the juridical person, where the juridical person is a company; ii. More than 15% of the capital or profits of the juridical person, where the juridical person is a partnership; or iii. More than 15% of the property or capital or profits of the juridical person, where the juridical person is an unincorporated association or body of individuals. 01/02/2013Sykes & Ray Equities (I) Ltd.

Recent Additional Requirements For client which is a trust: Where the client is a trust, the intermediary shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the identity of the settler of the trust, the trustee, the protector, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership. 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)

Any Questions? 01/02/2013Sykes & Ray Equities (I) Ltd.Sykes & Ray Equities (I) Ltd. (Strictly For Private Circulation)