Sebi plans mandatory anti-money laundering certification for principal officers of market intermediaries
ADVERTISEMENT
The Securities and Exchange Board of India (Sebi) has proposed making an anti-money laundering and countering the financing of terrorism (AML/CFT) certification mandatory for principal officers of all market intermediaries, seeking to strengthen compliance and improve their ability to identify and report suspicious transactions.
What are the proposals?
In a consultation paper, the markets regulator has proposed that principal officers obtain the National Institute of Securities Markets (NISM) certification on AML and CFT provisions in the securities market. The proposal is aimed at establishing a common minimum knowledge benchmark for senior officials responsible for overseeing compliance with anti-money laundering regulations.
The regulator has proposed that existing principal officers complete the certification within six months of the requirement coming into force. Newly appointed principal officers will also have to obtain the certification within six months of their appointment. They will be required to maintain its validity throughout their tenure.
Under the Prevention of Money Laundering Act (PMLA), 2002, and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, registered market intermediaries are required to appoint a principal officer at the management level to oversee AML/CFT compliance.
The principal officer is responsible for reporting suspicious transactions to the Financial Intelligence Unit-India (FIU-IND), recording the reasons for classifying transactions as suspicious, and facilitating their reporting to the authorities. The officer also plays a key role in identifying and assessing potentially suspicious transactions.
Sebi's existing AML/CFT framework, outlined in its June 6, 2024, master circular, requires intermediaries to ensure that personnel occupying key positions are suitably qualified and competent. It also mandates ongoing employee training on AML/CFT procedures and sensitisation of clients about regulatory requirements.
However, the circular does not prescribe a specific certification requirement for principal officers, potentially resulting in varying levels of AML/CFT expertise across intermediaries, the regulator said.
What areas will the certification cover?
The proposed certification will cover key areas such as PMLA provisions, SEBI's AML/CFT framework, customer due diligence, beneficial ownership, risk-based client classification, enhanced due diligence and identification of suspicious transactions. It will also cover reporting requirements to FIU-IND, confidentiality and anti-tipping-off obligations, targeted financial sanctions under the Unlawful Activities (Prevention) Act, and risks relating to proliferation financing.
Other areas include transaction monitoring systems, record maintenance, Financial Action Task Force (FATF) high-risk jurisdictions and emerging money laundering and terrorist financing risks arising from new products, technologies and delivery mechanisms.
Sebi currently mandates 28 different NISM certifications for various categories of employees and associated persons working with securities market intermediaries under the Sebi (Certification of Associated Persons in the Securities Markets) Regulations, 2007.