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Margins collected may be in the form of

• Demand Draft
• Cheques or Securities deposited by the client

Margins and Scripts allowed for trading

• For F&O the exchange charges SPAN margin and Exposure Margin. Margin report for F&O contains both these margins as levied by the exchange

Scrips allowed for Trading

• rading in NSE is allowed only in EQ – Rolling Settlement
• Trading in BSE is allowed only in A, B1 and B2 categories
• Trading in the BE (NSE) and Z, T, TS (BSE) category will be allowed only from the HO after checking the margins available in the clients account. No Purchases/sales will be allowed in case the clients say that cheque will be issued in the evening etc. Margin Report is mailed to all the branches in the evening giving the exact status of the client in terms of the margin payable by the client
• In case the client fails to transfer the shares then his shares shall be auctioned and the clients account shall be debited for the same

Monitoring of Debit Balances

• Have a very stringent debit monitoring system in which the periodicity of the monitoring is on daily basis
• All our clients have been advised to get the accounts tallied on regular basis with us. Currently Express balance confirmation is not obtained from the client. We however have a clause at the end of the accounts statements advising the client to notify any discrepancies and send a signed copy of the account statement back to us for our records after verification of the balances in the statement
• For recovery of old debts, the client’s relationship Manager is required to contact the client and to ensure recovery of old debts. In case he is unable to do so, it is escalated to the Branch Manager, Regional Manager and finally all to the India head. If still the amount remains unrecoverable it is then sent to the legal department to explore legal options of the recovery
• Our member client agreement provides a provision to charge a delay payment charge in of delay in any payments by the client
• The clients having any outstanding balances are not provided any limits/exposures to trade till the time outstanding balances are cleared

Policy for Internal Shortages

• We have a very transparent policy for internal shortages, wherein the entire process for internal shortages is completed within the settlement period of 5 working days as in the case of normal settlement
• The securities are purchased from the trading terminal of the exchange at the prevailing prices on the third day of the transaction (T+3) in the clients account, who has failed to meet his Pay-in obligation on T+2 and purchase consideration is debited in the clients account client. After the payout is received from the Exchange on T+5, pay-out is delivered to the client who did not receive the securities in payout on T+2
• If we are not able to purchase the shares from market due to upper freeze on scrip reason, then seller is debited at the freeze rate and the respective buyer is credited an equivalent amount
• If we are not able to purchase the securities from the market due to any corporate action in the security then the seller is debited at flat 20% over the closing price of T+2 and the respective buyer is credited by equivalent amount

General Provisions

• This Policy represents the basic standards of Anti-Money Laundering and Combating Terrorism Financing (hereinafter collectively referred to as AML) procedures within the Moneypalm Brokers Private Limited
• All relevant employees must be thoroughly familiar with and make use of the material contained in this Policy
• Sufficient copies of this Policy will be distributed to all Group Companies so that it will be readily available to all relevant employees. This Policy will be kept updated by the Group AML Center. When necessary, updated versions will be introduced and distributed to all Companies

Introduction

• The Guidelines as outlined below provides a general background on the subject of money laundering and terrorist financing summarizes the main provisions of the applicable anti-money laundering and anti-terrorist financing legislation in India and provides guidance on the practical implications of the Act. The Guidelines also sets out the steps that a registered intermediary and any of its representatives, should implement to discourage and identify any money laundering or terrorist financing activities. The relevance and usefulness of these Guidelines will be kept under review and it may be necessary to issue amendments from time to time. The overriding principle is that the organization should be able to satisfy them, that the measures taken by them are adequate, appropriate and follow the spirit of these measures and the requirements as enshrined in the Prevention of Money Laundering Act, 2002. (PMLA)

What is Need for Money Laundering?

• Every year, huge amounts of funds are generated from illegal activities. These funds are mostly in the form of cash
• The criminals who generate these funds need to bring them into the legitimate financial system

Prevention Of Money Laundering Policy

• The purpose of this policy is to set out the prevention of money laundering commitments and obligations for Moneypalm Brokers Private Limited (hereinafter referred to as ‘Company’)
• This policy is based on the provision of the “Prevention of Money Laundering Act, 2002 and circular issued by SEBI and exchanges thereof”
• This internal policy sets out and establishes governing principles, broad guidelines and standards to be adopted by the Companies in order to protect the Companies from being used by any person to launder money

Policy objectives

• To protect the Company from being used for money laundering
• To follow thorough “Know Your Customer” (KYC) policies and procedures in the day-to-day business
• To take appropriate action, once suspicious activities is detected, and make report to designated authorities in accordance with applicable law / laid down procedures
• To comply with applicable laws as well as norms adopted internationally with reference to Money Laundering

Finances Terrorism

Money laundering provides terrorists with funds to carry out their activities

Undermines rule of law and governance

Rule of Law is a recondition for economic development – Clear and certain rules applicable for all

Affects macro economy

Money launderers put money into unproductive assets to avoid detection

Affects the integrity of the financial system

Financial system advancing criminal purposes undermines the function and integrity of the financial system

Reduces Revenue and Control

Money laundering diminishes government tax revenue and weakens government control over the economy

Steps in which money is laundered

• Money can be obtained illegally from various criminal activities like drug trafficking, terrorism, organized crime and fraud. As criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities and provide a legitimate cover for their source of income they usually follow three stages
• To follow thorough “Know Your Customer” (KYC) policies and procedures in the day-to-day business
  Placement

  • Placement This is where the criminal proceeds are first-injected into the system. It is also the stage where those who are educated, briefed and alert to the process of money laundering, have the best chance of detecting what is happening and are thus best able to thwart and disrupt the process at the outset. At this stage, very often larger amounts of money are divided and distributed into smaller amounts to avoid suspicion and then paid into a series of bank accounts, arose to purchase securities, or life policies or other assets, sometimes many kinds of assets, all to achieve the prime purpose of being able to inject the tainted money or value into the legitimate mainstream financial/business system. E.g.: A criminal having huge crime proceeds in form of cash, can deposit this cash in bank accounts maintained with difference banks, in the name of his relatives, friends and associates, in small amounts.
  Layering
  • After the injection has taken place and the tainted money or value has entered and become mixed up in the main mass of money or value in the financial system, it is spun around different accounts, different names, different ownerships, plus different instruments and investments. All these movements are designed to disguise the origins of the money or value and thus confuse those who might be attempting to trace the money or value back to the root, criminal source. Facilitated by the birth of electronic funds transfer technology the fast movement of funds through multiple jurisdictions often with different laws, creates major problems for investigators of identification, access and ultimately achieving successful prosecutions.
  Integration
  • Placing the laundered proceeds back into the economy in such a way that they re-enter the financial system as apparently legitimate funds. Integration means the reinvestment of those funds in an apparently legitimate business so that no suspicion of its origin remains and to give the appearance of legitimizing the proceeds.
• Section 3 of the Prevention of Money Laundering Act, 2002 defines the offences or laundering. In terms, of this section whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of an offence of money laundering.
• The term proceeds of crime have been defined under Section 2(u) of the Act viz
  • Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property
  • The said section broadly states that if a person is involved in the process of projecting proceeds of crime as untainted property then he shall be guilty of money laundering, for indulging in the said process of the following three elements / activities shall play a very important role
  • Possession or ownership of the proceeds of crime or property acquired from proceeds of crime, which is being reflected as untainted property
  • Transactions relating to proceeds of crime like converting its form
  • Concealment of the original transaction and/or creating ghost transactions from concealing actual transactions .E.g. Possessing Benami Property, Unexplained cash credits, unexplained expenditure, bogus or fictitious accounts, unexplained investments
  • Implementation of the above requirements for our activities The Prevention of Money Laundering act, 2002 has come into effect from 1 July 2005. As per the provisions of the Act, every banking company, financial institution and intermediary (which includes a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary associated with securities market and registered under section 12 of the Securities and Exchange Board of India Act, 1992) shall have to
    • Maintain a record of prescribed transactions
    • Furnish information of prescribed transactions to the specified authority
    • Verify and maintain records of identity of clients
    • Preserve the records for a period of ten years from the date of cessation of transactions with clients
    • The Following points needs to be taken cognizance of in order to adhere to the Anti- Money laundering policy framed under the Prevention of Money Laundering Act, 2002
  • Customer due Diligence Process
    • Obtain sufficient information to identify persons who beneficially own or control securities accounts. Wherever it is apparent that the securities acquired or maintained through an account are beneficially owned by a party other than the client, that party should be identified using client identification and verification procedures
    • Verify the customer’s identify using reliable, independent source Documents, data or information
    • Identify beneficial ownership and control
    • Verify the identify of the beneficial owner of the customer
    • Conduct on-going due diligence and scrutiny to ensure that the transactions being conducted are consistent with our knowledge of the customer, his business/risk profile, taking into account where necessary, the customer’s source of funds
  • For existing clients processes could include
    • Review of KYC details of all the existing active clients in context to the PMLA 2002 requirements
    • Classification of clients into high, medium or low risk categories based On KYC details, trading activity etc for closer monitoring of high risk Categories etc
    • Obtaining of annual financial statements from all clients, particularly. Those in high risk categories
    • In case of non individual’s additional information about the directors, Partners, dominant promoters, major shareholders to be obtained
• Customer Acceptance Policy

  Ensure that the existing guidelines regarding Customer/business acceptance is strictly followed. Existing /past relationship with the client should be verified and ensured that the client is not on the negative list/defaulters list.

  • A detailed search to be carried out to find that the Client is not in defaulters/negative list of regulators
  • In case of corporate client, the antecedents of the company (change of name and Registered office in particular) and of all promoters and directors is to be traced
  • An opinion report must be obtained from the bankers/institutions financing the client
  • In case of individuals they are to be classified into different categories of risk depending the volume of transactions, trading turnover, manner of payment etc. High Net worth Individuals, Trusts, Charities, NGO, companies with close family shareholding, Politically Exposed Persons, non face to face customers, clients with dubious reputation, clients in high risk countries, etc constitute High Risk Category. In case of High Risk Category, due care and caution should be exercised at the acceptance stage itself. The profile of Clients has to be updated regularly
  • An assessment should be made of the financial worthiness of the client by obtaining appropriate declarations at KYC stage. This information should be subsequently used for monitoring whether the transactions of the clients are within the declared means and if the values of the transactions are increasing the client should be asked to disclose the increasing sources
  • A thorough assessment should be carried out to ascertain whether the client is dealing with us on his own behalf or some one else is the beneficial owner. This will be particularly relevant in broking and Demat accounts. (For example while Mr. A may be our client as per the documents, Mr. B may be giving instructions all the time). If there are doubts, before acceptance of the clients, thorough due diligence should be carried out to establish the genuineness of the claims of the clients. Secrecy laws shall not be allowed as a reason to disclose true identity of the beneficiary/transacting party
  • No account should be opened in a fictitious name/benami name or on an Anonymous basis
  • No client should be accepted where it is not possible to ascertain the identity of the client, or the information provided is suspected to be non-genuine, or if there is perceived non- cooperation of the client in providing full and complete information
  • In the case of Clients who want to act through agent under Power of Attorney, a notorised power of attorney should be obtained. Original of the POA should be verified. Care should be taken to ensure the genuineness of the client
  • While accepting FIIs/sub accounts as clients, reports in market/public knowledge regarding their investment behavior (for e.g. whether they allow their investment vehicle to be used by others; whether they issue underlying participatory notes) should also be considered
  • Know Your Client forms prescribed by SEBI/stock exchanges / Depositories, duly signed by the client should be obtained before acceptance of the clients
  • Before opening the accounts, there should have to be a personal interaction with the client except in the case of NRIs where the power of attorney holder is the Authorised Dealer Bank
  • Before opening the accounts in case of companies any one of the following viz main promoter/ Managing Director/ whole time director / key management person and in the case of partnership any one of the active partners should be met in person
  • Caution is to be exercised when identifying companies which appear to be ‘shell companies’ or ‘front companies’. Shell/front companies are legal entities which have no business substance in their own right but through which financial transactions may be conducted
  • In case of clients acting through Power of Attorneys the Principal and agent should come in person for the first time, except where the client is a NRI and the designated branch of the Authorised Dealer Bank is holding the power of attorney. Photos of both to be brained along with signatures on the photos
  • The KYC Form, Member Constituent Agreement and the Risk Disclosure Document must compulsorily be signed by the Client himself and not by the POA holder except in case of NRI clients if the POA holder is the designated branch of the authorized dealer
  • Original of un-expired Photo identity of individual/promoter/director to be verified by company official for identifying the client. Signature of the persons should be obtained on the photos. Photocopy of the proof should be taken by company official who should also certify thereon about having verified with the unexpired original
  • In case of individuals Proof of Identify (as prescribed by SEBI) should be established by way of any of the following documents; (un-expired original document shall be verified)
    • MAPIN Card
    • PAN Card
    • Passport
    • Voter ID
    • Driving license
    Photo Identify card issued by Employer registered under MAPIN
  • Proof of address: Any of the following address proof to be obtained (unexpired Original should be verified)
    • Passport
    • Voter ID
    • Driving license
    • Bank pass book
    • Latest Rent agreement
    • Ration card
    • Latest Flat maintenance Bill
    • Latest Telephone bill
    • Latest Electricity Bill
    • Certificate issued by employer registered under MAPIN
    • Insurance policy
    Photo copy of the proof should be taken by company official who should also certify thereon about having verified with the unexpired original. In the case of joint account, the above procedure should be carried out for all the persons who hold the joint account.
  • Where the client is a company, certified copies of the following documents shall be obtained
    • Certificate of Incorporation
    • Memorandum and Articles of Association
    • Copies of the balance sheet for the last 2 financial years (Copies of annual balance sheet to be submitted every year)
    • Copies of latest shareholding pattern, including list of all those holding more than 5% in the share capital of the company, duly certified by the company secretary/whole time director/MD (copy of updated shareholding pattern to be submitted every year)
    • Copy of resolution from the Board of Directors approving participation in equity derivatives/debt trading and naming authorized persons for dealing in securities and power of attorney granted to its managers, officers or employees to transact on its behalf, and
    • Photographs of whole time directors, individual promoters holding 5% or more, either directly or indirectly in the shareholding of the company and of persons authorized to deal in securities. Identification documents (identity and personal address) for the above as applicable to individuals in respect of managers, officers or employees holding an attorney to transact on its behalf
    Care should be taken if the persons mentioned in the Memorandum and Articles of Association as promoters/first directors are different from the current promoters/ directors. If the name/address of registered office has been changed, reasonable enquiries should be made. Proof of address of the registered office of the company, being one of the relevant documents as in the case of individuals should also be taken.
  • Where the client is a partnership firm, certified copies of the following documents
    • Registration certificate
    • Partnership deed and
    • Identification documents (identity and personal address) for the above as applicable to individuals in respect of partners, managers
    • Officers or employees holding an attorney to transact on its behalf
    • Proof address of the firm on the basis of relevant documents as applicable to individuals
  • In the case of broking transactions, care should be taken to ensure that the orders are placed by the client and not by others on behalf of the client. If the client proposes to authorize another person to place orders on his behalf, a properly executed irrevocable power of attorney should be obtained and the person who will be placing orders shall also be Identified using the above procedure. Ordinary Letters of authority shall not be accepted. Periodical statement of accounts should be sent to the client (and not power of attorney holder) at his address mentioning that if he does not respond within 30 days of date of receipt of the letter, the contents shall be taken as approved.
  • DP services (when commenced) should not be offered on a standalone basis (i.e. without broking relationship)
  • After opening broking / DP accounts, a letter of thanks should be sent by registered post/speed post, at the recorded address. Transactions should not be allowed if the mail comes undelivered. The undelivered envelope should be retained with the KYC papers for further inquiries, if necessary
• Monitoring of Transactions
  • Client accounts to be monitored at least once in a calendar quarter and any exceptions need to be reported to the management and compliance department. If any transaction appears to be suspicious, it is to be reported to the Compliance Department immediately
  • An illustrative list of circumstances which may be in the nature of suspicious transactions is given below
    • Clients whose identity verification seems difficult or clients appear not to cooperate
    • Substantial increase in activity without any apparent cause
    • Large number of accounts having common parameters such as common partners / directors / promoters / address / email address / telephone numbers / introducers or authorized signatories
    • Transactions with no apparent economic or business rationale
    • Sudden activity in dormant accounts
    • Source of funds are doubtful or inconsistency in payment pattern
    • Unusual and large cash deposits made by an individual or business
    • Transfer of investment proceeds to apparently unrelated third parties
    • Multiple transactions of value just below the threshold limit specified in PMLA so as to avoid possible reporting
    • Unusual transactions by CSCs and businesses undertaken by shell corporations, offshore banks /financial services, businesses reported to be in the nature of export-import of small items
    • Asset management services for clients where the source of the funds is not clear or not in keeping with clients apparent standing /business activity;
    • Clients in high-risk jurisdictions or clients introduced by banks or affiliates or other clients based in high risk jurisdictions
    • Clients transferring large sums of money to or from overseas locations with instructions for payment in cash
    • Purchases made on own account transferred to a third party through off market transactions through DP Accounts
    • Suspicious off market transactions
    • Large deals at prices away from the market
    • Accounts used as ‘pass through’. Where no transfer of ownership of securities or trading is occurring in the account and the account is being used only for funds transfers/layering purposes
    • Trading activity in accounts of high risk clients based on their profile, business pattern and industry segment
  • Care should also be taken if the clients make high value payments (Rs. 10 lakhs and above) from bank accounts not declared to company in the KYC forms, or when they make payments through Demand Drafts (and not through cheques drawn on their declared bank accounts) the details of such transactions should be noted in a separate register
  • Caution should exercise if there any high quantity/value off-market transactions in DP accounts. Caution should also be exercised if large credits in a broking account are advised to be transferred to any broking account with us
  • The Compliance department shall undertake random checks as to the nature of the transactions and if they are suspicious transactions
• Maintenance of Records
• Company is required to maintain and preserve the following information in respect of transactions (Cash & Suspicious) referred to in Rule 3
• The nature of the transactions
• The amount of the transaction and the currency in which it was denominated
• The date on which the transaction was conducted; and
• The parties to the transaction
• All records including customer identification, account files and business
• correspondence to be maintained in hard and soft form for a period of ten years
• In the case of transactions where any investigations by any authority has been commenced and in the case of transactions which have been the subject of suspicious transaction reporting all the records shall be maintained till the authority informs of closure of the case
• Principal Officer To designate the Compliance Officer as the Principal Officer who shall be responsible for implementation and compliance of this policy. His illustrative duties will be as follows
  • Monitoring the implementation of Anti Money Laundering Policy
  • Reporting of transactions and sharing of information as required under the law
  • Liaoning with law enforcement agencies
  • Ensuring submission of periodical reports to Top Management. The Monthly compliance report shall henceforth mention if any suspicious transactions are being looked into by the respective business groups and if any reporting is to be made to the authorities
  • Providing clarifications to staff members on the provisions of the Act, Rules, Guidelines and the policy of the company
• Reporting to Financial Intelligence Unit-India
  • In terms of the PMLA rules, Company is required to report information Relating to cash and suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND) at the following address: Director, FIU-IND, Financial Intelligence Unit-India, 6th Floor, Hotel Samrat, Chanakyapuri, New Delhi-110021.
  • Company should adhere to the following
    • The cash transaction report (CTR) (wherever applicable) for each month should be submitted to FIU-IND by 15th of the succeeding month
    • The Suspicious Transaction Report (STR) should be submitted within 7 days of arriving at a conclusion that any transaction, whether cash or noncash, or a series of transactions integrally connected are of suspicious nature
    • The Principal Officer should record his reasons for treating any transaction or a series of transactions as suspicious. It should be ensured that there is no undue delay in arriving at such a conclusion
    • All cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine or where any forgery of a valuable security or a document has taken place facilitating the transactions;”; to be reported not later than seven working days from the date of occurrence of such transaction
    • The Principal Officer will be responsible for timely submission of CTR and STR to FIU-IND
    • Utmost confidentiality should be maintained in filing of CTR and STR to FIU-IND
    • Not to put any restrictions on operations in the accounts where an STR has been made
• Staff Hiring, Awareness and Training
  • Company should have adequate screening procedures in place to ensure High standards when hiring employees. It should identify the key positions within their own organization structures having regard to the Risk of money laundering and terrorist financing and the size of their Business and ensure the employees taking up such key positions are Suitable and competent to perform their duties. The company must provide proper anti money laundering and anti-terrorist financing Training to their staff members
  • Staffs who deal directly with the public are the first point of contact with Potential money launderers. Their efforts are therefore vital to the reporting system for such transactions. Staff should keep abreast of the practices to identify suspicious transactions and on the procedure to be adopted when a transaction is deemed to be suspicious. In short, employees must familiarize themselves with their customers’ normal trading activities and usual market practices in order to recognize anomalous behavior. Suspicions concerning the source of assets or the nature of a transaction may not be ignored. It is the active responsibility of every person at the company to seek to ensure that the firm’s facilities are not being misused
  • Staff should also not disclose to the customer concerned nor to other third persons that their transaction is deemed suspicious or if information may be transmitted to the authorities
• Audit Testing of Anti Money Laundering Policy
  • The implementation of Anti Money Laundering Policy will be subject to periodic audit specifically with regard to testing its adequacy to meet the compliance requirements. The audit/testing will be conducted by company’s own personnel (not involved in framing or implementing the AML program) or it may be done by a qualified third party. The report of such an audit/testing will be placed before the senior management for making suitable modifications/improvements in the AML Policy
• To comply with circulars issued, amendments made to Rules, Regulations and Act pertaining to Anti-Money Laundering.
  • Organisation needs to comply with the amendments made to Rules, Regulation and Act, circulars issued by the relevant authorities from time to time

• Certificate from the issuing bank on its letterhead or on a plain paper with the seal of the issuing bank
• Certified copy of the requisition slip (portion which is retained by the bank) to issue the instrument
• Certified copy of the passbook/bank statement for the account debited to issue the instrument
• Authentication of the bank account-number debited and name of the account holder by the issuing bank on the reverse of the instrument