AML–CFT Policy – Anti-Money Laundering & Counter-Terrorist Financing Standards

Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Policy

1. Introduction

AUM Securities Private Limited ("the Company") is committed to upholding the highest standards of integrity and transparency in all its operations. In adherence to the provisions of the Prevention of Money Laundering Act, 2002 (PMLA), the guidelines issued by the Securities and Exchange Board of India (SEBI), and other applicable regulatory requirements, the Company has formulated this policy to effectively prevent and mitigate the risks associated with money laundering and terrorist financing.

This PMLA Policy sets forth specific parameters for the classification of clients into the category of Clients of Special Category (CSC), which includes, but is not limited to, Politically Exposed Persons (PEPs), Non-Resident Indians (NRIs), High Net-Worth Individuals (HNIs), and clients with a known dubious reputation. The policy further incorporates the additional requirements and obligations prescribed by SEBI with respect to Clients of Special Category.

Additionally, this policy outlines the procedures prescribed under SEBI and PMLA guidelines for the freezing of funds, financial assets, or economic resources of individuals or entities identified as posing a threat under applicable sanctions or enforcement actions.

2. Objectives

To establish a robust framework for detecting and preventing money laundering and terrorist financing activities.

To ensure compliance with all applicable laws, regulations, and guidelines issued by SEBI and other regulatory authorities.

To safeguard the Company's reputation and protect its stakeholders from the risks associated with money laundering and terrorist financing.

3. Scope

This policy applies to all employees, directors, and associated persons of the Company, including those engaged in:

Securities trading

Investment advisory services

Portfolio management

Research and analysis

Compliance and audit functions

4. Key Provisions

4.1 Customer Due Diligence (CDD)

The Company shall implement a risk-based approach to Customer Due Diligence (CDD), including:

Obtaining and verifying the identity of clients using reliable, independent source documents.

Identifying and verifying the beneficial ownership of clients.

Understanding the nature and purpose of the business relationship

Conducting ongoing monitoring of the business relationship.

Periodically updating client information to ensure accuracy and completeness.

4.2 Record Keeping

The Company shall maintain records of:

Client identification and verification documents.

Transaction records.

Correspondence and other relevant documents.

These records shall be retained for a minimum period of five years after the end of the business relationship or the date of the transaction, whichever is later.

4.3 Reporting of Suspicious Transactions

The Company shall promptly report any suspicious transactions to the Financial Intelligence Unit – India (FIU-IND) as per the prescribed procedures.

4.4 Training and Awareness

The Company shall provide regular training to its employees on:

AML and CFT regulations and obligations

Identification and reporting of suspicious activities.

Internal policies and procedures related to AML and CFT.

These records shall be retained for a minimum period of five years after the end of the business relationship or the date of the transaction, whichever is later.

4.5 Compliance Officer

The Company shall appoint a designated Compliance Officer responsible for:

Overseeing the implementation of this policy.

Liaising with regulatory authorities.

Ensuring compliance with AML and CFT obligations.

4.6 Surveillance and Monitoring

The Company shall establish systems for:

Monitoring client transactions to detect unusual or suspicious activities.

Implementing internal controls to prevent and detect fraud or market abuse.

Conducting periodic audits to assess the effectiveness of AML and CFT measures

4.7 Client Acceptance and Risk Assessment

The Depository Participant (DP) has implemented a system to screen clients at the time of on boarding and to conduct periodic searches of its client database against the sanctions lists of designated individuals, as published by the UNSC, UAPA, WMD Act, FIU-IND, FATF, and other relevant authorities, from time to time.

The DP adopts client acceptance policies that are aligned with the assessed risk of money laundering and terrorist financing.

The DP undertakes client due diligence measures that are commensurate with the level of risk associated with the client, the nature of the business relationship, or the specific transaction.

4.8 Group-Wide Policies

If applicable, the Company shall:

Implement group-wide policies and procedures for dealing with money laundering and terrorist financing.

Ensure that these policies are communicated to all relevant staff and are regularly reviewed for effectiveness.

5. Clients of Special Category

In alignment with the guidelines established by the Securities and Exchange Board of India (SEBI) under the Prevention of Money Laundering Act (PMLA) framework, we define the parameters for categorizing clients into "Clients of Special Category (CSC)" as follows:

5.1 Politically Exposed Persons (PEPs)

Definition: Individuals who are or have been entrusted with prominent public functions, either domestically or internationally.

Heads of State or Government

High-Ranking Judiciary or Military Officials

Senior Executives of State-Owned Corporations

Senior Functionaries of Political Parties

Note: Family members and close associates of PEPs are also classified within this category.

5.2 Non-Resident Indians (NRIs)

Definition: Indian citizens residing outside India for employment, business, or other purposes.

Key Parameters:

Clients holding NRI status in accordance with the Foreign Exchange Management Act (FEMA)

Accounts operated on either a non-repatriable or repatriable basis

Investments made through Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts

5.3 High Net Worth Individuals (HNIs)

Definition: Clients engaging in significantly high financial transactions or investments.

SEBI's Criteria (as per KYC Norms):

Individuals with an annual income of ₹50 lakhs or more

Net worth of ₹5 crores or more, including family members

Investments in the securities market amounting to ₹10 lakhs or more per transaction (or as specified by SEBI/AMFI).

5.4 Clients with Dubious Reputation

Definition: Individuals or entities suspected of involvement in illegal activities.

Indicators Include:

Clients with a criminal background (as evidenced by publicly available information)

Entities that are sanctioned (including those on the UN, OFAC, or SEBI blacklist)

Unusual transaction patterns, such as frequent large cash transactions inconsistent with known income

Links to shell companies or concerns regarding fake identities

Negative media coverage associating them with financial frauds

Additional SEBI Requirements for CSCs

Enhanced Due Diligence (EDD):

Additional KYC documentation is required.

Approval from senior management is mandatory for onboarding.

Ongoing monitoring of transactions is essential.

Lower Risk Threshold:

Increased scrutiny is warranted for PEPs and clients with dubious reputations.

Regular updates of KYC records must be maintained.

6. Procedure for Freezing of Funds, Financial Assets, or Economic Resources

As per SEBI and Prevention of Money Laundering Act (PMLA), 2002

Under the regulatory framework laid down by the Securities and Exchange Board of India (SEBI) and the Prevention of Money Laundering Act, 2002 (PMLA), intermediaries such as stock brokers, mutual funds, and depository participants are obligated to freeze funds, financial assets, or economic resources in cases involving suspected money laundering, terrorist financing, or violation of sanctions. The procedure to be followed in such instances is detailed below:

6.1 Identification of Suspicious Activity

Freezing actions may be triggered by any of the following:

Filing of a Suspicious Transaction Report (STR)

Receipt of directives from the Financial Intelligence Unit - India (FIU-IND)

Orders issued by SEBI or the Enforcement Directorate (ED)

Client name appearing in sanctions lists (e.g., UNSC, OFAC, SEBI blacklist)

Detection of dubious or atypical transactions that are inconsistent with the client's known profile

6.2 Immediate Freezing Action

Upon identification of a trigger event, the intermediary shall:

Immediately block all transactions (buy/sell/withdrawals) in the client’s account

Freeze all demat holdings, mutual fund units, and other linked financial assets

Suspend all pay-out obligations, including dividends, redemptions, and interest payments

Notify SEBI and/or FIU-IND within 24 hours, if the freezing is initiated based on internal detection

6.3 Reporting to Authorities

A comprehensive report must be submitted to the appropriate authorities, including:

SEBI – for market-related regulatory violations

FIU-IND – for reporting under PMLA compliance

Enforcement Directorate (ED) – if the matter pertains to PMLA investigations

The report shall include the following details:

Client information (e.g., PAN, KYC details, account numbers)

Basis for freezing (suspicion or order reference)

Description and valuation of assets frozen

6.4 Compliance with Regulatory Orders

Where the freeze is implemented pursuant to an official directive, the intermediary must:

Continue the freeze until further written instructions are received

Refrain from partial or full release of assets without appropriate regulatory approval

Provide transaction history or additional documentation as requested by the authorities

6.5 Unfreezing Process

Unfreezing of assets shall be undertaken only under the following conditions:

Issuance of a release order by SEBI, FIU-IND, or ED

Court direction mandating the unfreezing after investigation

Submission of a valid clarification or documentary evidence by the client, if the freeze was internally initiated based on suspicion

All unfreezing actions must be documented , including the basis and authority for the action.

6.6 Record-Keeping Requirements

Intermediaries are required to maintain detailed records in accordance with PMLA requirements:

Retention period: Minimum of 5 years from the date of the freeze/unfreeze action

Maintain logs including:

Date and time of freeze

Reference to triggering authority or internal observation

Date of unfreeze and associated approvals

7. Review and Audit

The Company shall conduct periodic reviews and audits of its AML and CFT framework to ensure its effectiveness and compliance with applicable laws and regulations.

8. Enforcement

Any employee found violating this policy shall be subject to disciplinary action, which may include termination of employment, legal action, and reporting to regulatory authorities..