SEBI by way of its Circular dated June 16, 2023 (‘Circular’) has amended its Master Circular applicable to all registered intermediaries (‘RE’) in view of the amendments to the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 (‘PML Rules’) and to further enhance the effectiveness of the anti- money laundering (‘AML’) and combating the financing of terrorism (‘CFT’) framework.

The Circular has amended the definition of ‘group’ to align it with the definition set out under the PML Rules. Therefore, ‘group’ now includes a parent entity and all the entities in respect of which, for the reason of ownership or control, a consolidated financial statement for financial reporting purposes is required. The Circular also extends the obligation of implementation of policies and procedures by the REs on dealing with money laundering and terrorist financing, on a group basis.

For client due diligence purposes, an additional obligation is placed on REs to verify the identity of any person acting on behalf of a juridical person or individual or trust and ensure that such a person is authorized to do so. Additionally, in light of the recent amendment to PML Rules, the threshold for identification of beneficial ownership and control, for clients which are trusts and even for clients other than individuals and trusts, has been reduced to 10%.

The Circular also requires every RE to register the details of non-profit organization clients on the DARPAN portal and maintain such records for a period of 5 years while extending the norms applicable to ‘politically exposed persons’ to the accounts of their family members and close relatives.

The Circular also requires all stock-exchanges and REs to leverage the latest technology and tools to effectively implement name screening under the sanction requirements and also identify and assess AML / CFT risks which could arise from new products or new delivery mechanisms prior to their launch.