Sebi probes brokers under money laundering, terror financing rules

Mumbai: As many as 35 stock brokers have been probed by capital market regulator Sebi for possible lapses in controls related to money laundering and terror financing, and further action may be taken soon in these cases.

The inspections by the Securities and Exchange Board of India follow actions taken by stock exchanges and depositories against more than 300 market entities for violations and discrepancies related to Anti-Money Laundering and Combating Financing of Terrorism (AML and CFT) regulations in the 2011-12 fiscal.

The brokers have been probed for their compliance to Know Your Client rules, their due diligence procedures and their compliance to various AML and CFT related regulations, while actions have been taken by exchanges and depositories after similar inspections of various market entities.

The brokers have been probed for their compliance to Know Your Client rules, their due diligence procedures and their compliance to various AML and CFT related regulations

In its latest annual report for 2011-12, Sebi said that it conducted "35 specific purpose inspections of stock brokers to check their KYC process, the extent of due-diligence and compliance level with current regulatory and statutory framework in this regard.

"Action with regard to these cases is in progress." The regulator said money laundering has been globally recognised as one of the largest threats posed to the financial system of a country, while "fight against terrorist financing is another such emerging threat with grave consequences for both the political and economic standing of a jurisdiction".

It added: "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 AML and CFT."

Sebi said it is also in touch with the global bodies and other Indian regulators in its attempt to keep regulatory framework for AML robust in the country's securities markets As part of efforts to keep the Indian capital market free of money laundering and terrorist financing activities, leading bourses (NSE and BSE) as also depositories (CDSL and NSDL) have taken action against a total of 322 members for violations or discrepancies related to AML/CFT regulations.

Of these, 45 entities have been fined a total of Rs 2.5 lakh, while directions were issued to other entities without levying any monetary penalty, Sebi said.

Individually, the BSE observed discrepancies regarding AML framework against 110 members and took actions such as imposing a monetary penalty and issuing advice to them, while NSE found violations by 68 members. Further, NSE and BSE imposed a fine of Rs 1.75 lakh and Rs 62,000 respectively.

In case of depositories, National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL) have taken action against 102 and 42 members respectively. Besides, NSDL charged a penalty of Rs 11,850, while CDSL did not impose any monetary penalty and only issued advice to the members.

That apart, stock exchanges and depositories conducted trainings and seminars for their members to sensitise them with the significance of AML and CFT framework and the need to

ensure continuous compliance with it.


Updated Date: Dec 20, 2014 19:49 PM

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