Money Laundering is defined as hiding/disguising the source or ownership of illegally obtained/gained fund/money to make them appear arising out of legitimate source or hiding money to avoid paying taxes thereby converting black money into white money. The Prevention of Money Laundering Act, 2002 has come into effect from 1st July, 2005. As per the provisions of the Act, every banking company, financial institution, a co-operative bank, a housing finance institution and a non-banking financial company and intermediary (which includes a stock broker, sub-broker, share transfer agent, banker to the issue, underwriter, registrar to the issue, investment adviser and any other intermediary associated with the stock market has to maintain a record of all the transactions, the nature and value of the transactions which has been prescribed in the Rules under the PMLA.

Recognising and combating money laundering: "Know Your Customer". The types of transactions which may be used by a money launderer are almost unlimited, making it difficult to define a suspicious transaction. It is however, reasonable to question a transaction which may be inconsistent with an investors know, legitimate business or personal activities or with the normal business for that type of investor. Hence, the first key to recognition is to Know your customer.

The objective of the KYC guidelines is to prevent brokers from being used, intentionally or unintentionally, by criminal elements for money laundering activities. KYC procedures enable brokers to know/understand their customers and their financial dealings better which in turn help them manage their risks prudently. The revised KYC policy of the broker incorporates the following four elements:

• Customer Acceptance Policy (CAP)
• Customer Identification Procedures (CIP)
• Monitoring of Transactions; and
• Risk Management

A customer for the purpose of KYC Policy is defined as:

1. A person or entity that maintains an account and/or has a business relationship with the broker.
2. One on whose behalf the account is maintained (i.e., the beneficial owner)
3. Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors, etc as permitted under the law
4. Any person or entity connected with a financial transaction which can pose significant reputational or other risks to the broker, say, a wire transfer or issue of high value demand draft as a single transaction.

A. Customer Acceptance Policy (CAP)

a) The following Customer Acceptance Policy indicating the criteria for acceptance of customers shall be followed in by the broker. The dealers shall accept customer strictly in accordance with the said policy:

• No account shall be opened in anonymous or fictitious/benami name(s)
• Parameters of risk perception shall be clearly defined in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status etc., to enable categorization of customers into low, medium and high risk called Level I, Level II and Level III respectively; Customers requiring veryhigh level of monitoring e.g., Politically Exposed Persons (PEPs) may be categorized as Level IV.
• The dealers shall collect documents and other information from the customer depending on perceived risk and keeping in mind the requirements of AML Act, 2002 and guidelines issued by RBI from time to time.
• The dealers shall close an existing account or shall not open a new account where it is unable to apply appropriate customer due diligence measures i.e., branch is unable to verify the identity and/or obtain documents required as per the risk categorization due to non cooperation of the customer or non reliability of data/information furnished to the branch. The dealers shall, however, ensure that these measures do not lead to the harassment of the customer. However, in case the account is required to be closed on this ground, the dealers shall do so only after permission of senior official of their concerned offices is obtained. Further, the customer should be given a prior notice of at least 20 days wherein reasons for closure of his account should also be mentioned.
• The dealers shall make necessary checks before opening a new account so as to ensure that the identity of the customer does not match with any person with known criminal background or with banned entities such as individual terrorists or terrorist organizations,etc. RBI has been circulating lists of terrorist entities notified by the Government of India so that brokers exercise caution against any transaction detected with such entities. The dealers shall invariably consult such lists to ensure that prospective person/s or organizations desirous to establish relationship with the broker are not in any way involved in any unlawful activity and that they do not appear in such lists.

b) The dealers shall prepare a profile for each new customer based on risk categorization. The broker has devised a revised Composite Account Opening Form for recording and maintaining the profile of each new customer. Revised form is separate for Individuals, Partnership Firms, Corporate and other legal entities, etc. The nature and extent of due diligence shall depend on the risk perceived by the dealer. The dealers should continue to follow strictly the instructions issued by the broker regarding secrecy of customer information. The dealers should bear in mind that the adoption of customer acceptance policy and its implementation does not become too restrictive and should not result in denial of brokering services to general public, especially to those, who are financially or socially disadvantaged.

c) The risk to the customer shall be assigned on the following basis:

Low Risk (Level I):

Individuals (other than High Net Worth) and entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conform to the known profile may be categorized as low risk. The illustrative examples of low risk customers could be salaried employees whose salary structures are well defined, people belonging to lower economic strata of the society whose accounts show small balances and low turnover, Government Departments and Government owned companies, regulators and statutory bodies etc. In such cases, only the basic requirements of verifying the identity and location of the customer shall be met.

Clients who provide all documents at the time of account opening without any delay

• Resident of India
• Provides income proof
• Providing two or more references
• Always provides securities and funds in time
• No delegation of authority for operation of account

Medium Risk (Level II):

Customers that are likely to pose a higher than average risk to the broker may be categorized as medium or high risk depending on customer's background, nature and location of activity, country of origin, sources of funds and his client profile etc; such as:

• Persons in business/industry or trading activity where the area of his residence or place of business has a scope or history of unlawful trading/business activity.
• Where the client profile of the person/s opening the account, according to the perception of the branch is uncertain and/or doubtful/dubious.
• Any client who cannot be comfortably placed in neither low risk nor high risk category

High Risk (Level III):

The dealers may apply enhanced due diligence measures based on the risk assessment, thereby requiring intensive 'due diligence' for higher risk customers, especially those for whom the sources of funds are not clear. The examples of customers requiring higher due diligence may include

• Non Resident Customers
• High Net worth individuals
• Trusts, charities, NGOs and organizations receiving donations
• Companies having close family shareholding or beneficial ownership
• Firms with 'sleeping partners'
• Politically Exposed Persons (PEPs) of foreign origin
• Non-face to face customers, and
• Those with dubious reputation as per public information available, etc.

The persons requiring very high level of monitoring may be categorized as Clients of Special Category (CSC):

Such clients include

• Non-resident client
• High net worth clients
• Politically exposed persons of foreign origin
• Companies having close family shareholdings or beneficial ownership
• Clients with dubious reputation as per public information available etc.
• Currrent/Former head of state,Current or former senior high profile politicians and connected persons.
• Trust, Charities, NGOs and organizations receiving donations
• Non face to face clients
• Clients with dubious reputation as per public information available etc.

Further client once categorized as low risk client can be later categorized as high risk or vice versa depending on the nature of transactions and client periodical report.

Customer Due Diligence: Measures

New Client Registration: Identify Customer Identity

• No account should be opened in benami name /fictitious name
• Verify the customer's identity using reliable, independent source documents, or information
• Customer should be physically present at the time of opening of the account
• Verify the identity of the beneficial owner of the customer/or the person on whose behalf a transaction is being conducted.
• Don’t open account to clients who does not cooperate to provide basic details.
• Don’t open accounts of clients who has ever been convicted of offence involving moral turpitude or any criminal offence or criminal background.
• Perform on going scrutiny of the transactions and account throughout the course of business relationship to ensure that the transactions are consistent with the registered intermediary's knowledge of the customer, its business and risk profile, taking into account, where necessary the customer's source of funds.

Customer Identification Procedure (CIP)

• Customer identification means identifying the person and verifying his/her identity by using reliable, independent source documents, data or information. The dealers need to obtain sufficient information necessary to establish, to their satisfaction, the identity of each new customer, whether regular or occasional, and the purpose of the intended nature of brokering relationship. Being satisfied means that the dealer is able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance of the extant guidelines in place. Besides risk perception, the nature of information/documents required would also depend on the type of customer (individual, corporate, etc). For customers that are natural persons, the dealers shall obtain sufficient identification data to verify the identity of the customer, his address/location, and also his recent photograph. For customers that are legal persons or entities, the dealers shall (i) verify the legal status of the legal person/entity through proper and relevant documents (ii) verify that any person purporting to act on behalf of the legal person/entity is so authorized and identify and verify the identity of that person (iii) understand the ownership and control structure of the customer and determine who are the natural persons who ultimately control the legal person. Customer Identification requirements in respect of a few typical cases, especially, legal persons requiring an extra element of caution are given in Annexure I for the guidance of dealers.
• If the dealer decides to accept such accounts in terms of the Customer Acceptance Policy, the dealer shall take reasonable measures to identify the beneficial owner(s) and verify his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s) is/are. An indicative list of the nature and type of documents/information that may be relied upon for customer identification is given in Annexure – II.

Monitoring of Transactions

• Continuous monitoring is an essential ingredient of effective KYC procedures and the extent of monitoring should be according to the risk sensitivity of the account. Dealers shall pay special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. Transactions that involve large amount of cash inconsistent with the size of the balance maintained may indicate that the funds are being 'washed' through the account. High risk accounts shall be subjected to intensive monitoring.
• The Compliance Department shall ensure adherence to the KYC policies and procedures. Concurrent/Internal Auditors shall specifically check and verify the application of KYC procedures and comment on the lapses if any observed in this regard. The compliance in this regard shall be put up before the Meeting of the Board on quarterly intervals. All staff members shall be provided training on Anti Money Laundering. The focus of training shall be different for frontline staff, compliance staff and staff dealing with new customers.

Risk Management

• The broker's KYC policies and procedures covers management oversight, systems and controls, segregation of duties, training and other related matters. For ensuring effective implementation of the broker's KYC polices and procedures, the dealers shall explicitly allocate responsibilities within the branch. The Branch Dealer shall authorize the opening of all new accounts. The dealers shall prepare risk profiles of all their existing and new customers and apply Anti Money Laundering measures keeping in view the risks involved in a transaction, account or brokering/business relationship.
• Training encompassing applicable money laundering laws and recent trends in money laundering activity as well as the broker's policies and procedures to combat money laundering shall be provided to all the staff members of the broker periodically in phases.
• The Accounts Department shall be empowered to prescribe threshold limits for a particular group of accounts and the dealers shall pay particular attention to the transactions which exceed these limits. The threshold limits shall be reviewed annually and changes, if any, conveyed to dealers for monitoring.

• It is the duty of every client manager/client owner to satisfy himself about the soundness and investment objectives of client
• Porfolio/Investment size/order sizes are commensurate with annual income disclosed by client
• Maintain continuous familiarity and follow up with clients where any inconsistency in the information is provided.
• Verify sources of fund disclosed by client.
• Every client owner/manager should carry on independent grading of his/her client on periodical basis (12months or 18 months) and intimate compliance department of his finding if there is any adverse change in grading.

Back office members should immediately inform Operations head/Accounts head who in turn will inform Principal Officer about any transaction which is inconsistent with client regular trading or if funds and securities are coming from account other than the account specified by client or if they receive request to transfer fund or security to account other than the designated account. Never make client aware of your suspicion.

Implementation of KYC procedures requires dealers to demand certain information from the customers that may be of personal in nature or which have hitherto never been called for. This can sometimes lead to a lot of questioning by the customer as to the motive and purpose of collecting such information. Therefore, the front desk staff needs to handle such situations tactfully while dealing with customers and educate the customer of the objectives of the KYC programme. The dealers shall also be provided specific literature/pamphlets to educate customers in this regard.

Conducting investor awareness program periodically.

The KYC procedures shall invariably be applied to new technologies to such other product which may be introduced by the broker in future that might favor anonymity, and take measures, if needed to prevent their use in money laundering schemes.

Dealers should ensure that appropriate KYC procedures are duly applied before issuing the clientcode to the customers. It is also desirable that if at any point of time broker appoints/engages agents for marketing of products are also subjected to KYC measures.

While, the revised guidelines shall apply to all new customers/accounts, dealers shall apply these to the existing customers on the basis of materiality and risk. However, transactions in existing accounts shall be continuously monitored and any unusual pattern in the operation of the account should trigger a review of the Customer Due Diligence (CDD) measures. It has however to be ensured that all the existing accounts of companies, firm, trusts, charitable, religious organizations and other institutions are subjected to minimum KYC standards which would establish the identity of the natural/legal person and those of the 'beneficial owners'.

Principal Officer shall be responsible for reporting suspicious transactions to the authorities and in identification assessment of potentially suspicious transactions. In the absence of Principal Officer Head operations and Accounts shall be severally responsible for reporting and assessment.

To ensure compliance, monitoring and report compliance of Anti Money Laundering policy of the broker, Senior Executive heading the Compliance Department of the broker at Corporate Office shall act as Principal Officer. He shall be responsible to monitor and report transactions and share information on Anti Money Laundering as required under the law. The Principal Officer shall maintain close liaison with enforcement agencies, brokers and any other institutions that are involved in the fight against money laundering and combating financing of terrorism. The Principal Officer shall furnish a compliance certificate to the Board on quarterly basis certifying that Revised Anti Money laundering Policy is being strictly followed by all the dealers of the broker.

In addition to existing requirement of designation of a Principal Officer, The Company Shall designate a person as a Designated Director in terms of Rule 2 of the PL Rules. He shall be reporting entity to ensure overall compliance with the obligations imposed under chapter IV of the PMLA Act.

Every employee must undergo anti laundering training within a week of joining the firm. It is the duty of every departmental head to ensure that every new recruit and employee in his/her department have undergone aforesaid training. Further no candidate should be selected who has ever been convicted of offence under Money Laundering Act or any other civil or criminal Act.

We will develop ongoing employee training under the leadership of the principal officer our training will occur on at least an annual basis. It will be based on our company's size its customer base and its resources.

Our training will include at a minimum how to identify red flags and signs of money laundering that arise during the course of the employees duties. What to do once the risk is identified what employees role are in the company's compliance efforts and how to perform them. The company's record retention policy and the disciplinary consequences (including civil and criminal penalties) for non-compliance with the PMLA act.

We will develop training in our company or contract for it. Delivery of the training may include educational pamphlets, videos, internet systems in-person lectures and explanatory memos.

We will review our operations to see if certain employees, such as those in compliance margin and corporate security required specialized additional training our written procedures will be updated to reflect any such changes.

1. Regular monitoring of transactions is vital for ensuring effectiveness of the Anti Money Laundering procedures. This is possible only if we have an understanding of the normal activity of the client so that they can identity the deviant transactions/activities.
2. Any transaction of retail clients of value exceeding 10 lakhs should be reported to compliance department if its an irregular transaction, transaction is irregular (i) if the size of the order is not commensurate with client income level disclosed or if its more than his usual order size (ii) if the order is placed by dormant client i.e order placed by client after a period of 1 year from his/her last transaction.
3. Any transaction which does not make economic sense or is complex or unusually large should be immediately brought to the notice of respective head of department and compliance department.
4. Value of the transaction not in proportion with the Financial income declared by the client.
5. Any large acitivity in dormant account.
6. Further the compliance department should randomly examine a selection of transaction undertaken by clients to comment on their nature i.e whether they are in the suspicious transactions or not.
7. Any transaction/order which arises the suspicion of any employee should be diligently and immediately informed to compliance department.
8. All the persons who are debarred/warned by SEBI/Exchanges to access capital Market will be black listed clients or any client against whom firm has reported to authorities for alleged money laundering activities and the matter is still pending before or order is given against the client.
9. Alerts generated by monitoring the transactions will be forwarded to the Board and the board will decide it to report STR or not.

When establishing and maintaining a relationship or providing services, especially when dealing with a client infrequently all necessary steps must be taken to determine, to verify where necessary and to remain appraised of the identity, financial position and business objectives of the client. Client identification must be carried out before any dealing takes place and the firm's account opening form must be completed and processed for every new account.

The principal officer's accounts will be reviewed by the Board of Directors.

Continuous Due Diligence:

• It is the duty of every client manager/client owner to satisfy himself about the soundness and investment objectives of client.
• Porfolio/Investment size/order sizes are commensurate with annual income disclosed by client
• Maintain continuous familiarity and follow up with clients where any inconsistency in the information is provided.
• Verify sources of fund disclosed by client.
• Every client owner/manager should carry on independent grading of his/her client on periodical basis (12months or 18 months) and intimate compliance department of his finding if there is any adverse change in grading.

Back office members should immediately inform Operations head/Accounts head who in turn will inform Principal Officer about any transaction which is inconsistent with client regular trading or if funds and securities are coming from account other than the account specified by client or if they receive request to transfer fund or security to account other than the designated account. Never make client aware of your suspicion.

Employees will report any violations of the company's AML compliance program to the principal officer, unless the violations implicate the principal / compliance officer, in which case the employee shall report to the chairman of the board Mr/ Ms Such reports will be confidential and the employee will suffer no retaliation for making them.

We have approved this AML program as reasonably designed to achieve and monitor our company's ongoing compliance with the requirements of the PMLA and the implementing regulations under it.