SEBI steps up vigil against money laundering

The Securities and Exchange Board of India (SEBI), in its continuing efforts to prevent money laundering and terror funding through the capital markets, inspected more than 200 stockbrokers and sub-brokers during the financial year ended March, the capital markets regulator said.

This marks a significant jump from a total 81 brokers and sub-brokers on whom such inspections were carried out during financial year 2011-12 (FY12), SEBI says in its report to the government for 2012-13.

Without disclosing names of the entities that were inspected, SEBI said it investigated 162 stockbrokers and 39 sub-brokers during the financial year, up from 69 brokers and 12 sub-brokers during the previous year.

"The focus of the inspections included themes such as compliance of norms regarding money laundering, settlement of accounts of clients on a timely basis, segregation of clients and proprietary funds/securities, KYC (know your customer) norms, clearing operations, etc," SEBI said

The regulator also said it has been taking steps to prevent money laundering and terror financing through the securities markets. SEBI has made it mandatory for market intermediaries to identify and verify the beneficial owner of funds in order to further strengthen the existing framework and tackle the risk presented by the misuse of complex legal structures such as, companies, partnerships, trusts, and so on.

"Money laundering is globally recognised as one of the largest threats posed to the financial system of a country. The fight against terrorist financing is another such emerging threat with grave consequences for both the political and economic standing of a jurisdiction," the SEBI report said.

"Rapid developments and greater integration of the financial markets, together with improvements in technology and communication channels, continue to pose serious challenges to the authorities and institutions dealing with money laundering and combating financing of terrorism (AML and CFT)," the market regulator said.

The Prevention of Money Laundering Act, 2002 (PMLA) was amended in December 2012 to make the legislative and administrative framework of the country more effective and capable of handling new evolving threats in the areas of money laundering and financing of terror.

SEBI said it has included the AML/CFT risks as part of its inspection of market intermediaries, such as stock brokers, depository participants and mutual funds.

The regulator said that it carried out 40 special purpose inspections of stock brokers to check their compliance with the AML/CFT framework. Further, 35 inspections of stock brokers and six depository participants focusing on compliance with KYC norms were carried out in 2012-13.