Anti-Money Laundering (AML)/KYC Policy

Manu Chhabra (under the brand name of Absolute Finserve)

Table of Contents

1. Introduction

2. Scope

3. Objective

4. What is Money Laundering

5. KYC / AML philosophy

6. Know your customer

7. Client Identification Procedure

8. Customer Acceptance policy

9. Client Due Diligence

10. Monitoring of transactions

11. Combating financing of terrorism

12. Maintenance of records of transactions

13. Customer Identification Procedure

14. Reporting to Financial Intelligence Unit-India

15. Suspicious Transaction Reports (STR)

16. Principal Officer

1. Introduction

    

    

   This Know Your Customer (KYC) and Anti-Money Laundering (AML) Policy (the Policy) has been prepared in accordance Prevention of Money Laundering Act, 2002 (PMLA Act). This Policy also takes into account the provisions of the PMLA Act and other Rules laid down by SEBI, FMC and FIU.

    

   As per PMLA, every banking company, financial institution (which includes chit fund company, 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 an issue, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary associated with securities market and registered under section 12 of the Securities and Exchange Board of India Act, 1992) shall have to maintain a record of all the transactions; the nature and value of which has been prescribed in the Rules notified under the PMLA. For the purpose of PMLA, transactions include:

   1. All cash transactions of the value of more than Rs. 10 lakhs or its equivalent in foreign currency.

   2. All series of cash transactions integrally connected to each other which have been valued below Rs 10 lakhs or its equivalent in foreign currency, such series of transactions within one calendar month.

   3. All suspicious transactions whether or not made in cash and including, inter-alia, credits or debits into from any non-monetary account such as Demat account, security account maintained by the registered intermediary.

   For the purpose of suspicious transactions reporting, apart from ‘transactions integrally connected’, ‘transactions remotely connected or related’ need to be considered. “Suspicious transactions” means a transaction whether or not made incash which to a person acting in good faith –

   1. gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or

   2. appears to be made in circumstances of unusual or unjustified complexity or

   3. appears to have no economic rationale or bonafide purpose.

    

   This Policy only supplements the existing SEBI / FIU guidelines relating to KYC/AML and any subsequent guidelines from the date of the Policy on KYC/AML will be implemented immediately, with subsequent ratification by the Board. Extant regulations will at any point in time override this Policy.

2. Scope

   The Policy covers the existing clients of Manu Chhabra (under the brand name Absolute Finserve) including the proposed clients and their transactions or proposed transactions carried out through Manu Chhabra (under the brand name Absolute Finserve).

    

3. Objectives

   The objective of this policy is broadly to:

   1. issue a statement of policies and procedures, on a group basis for dealing with money laundering and terrorist financing reflecting the current statutory and regulatory requirements;

   2. ensure that the content of these Guidelines are understood by all staff members;

   3. regularly review the policies and procedures on prevention of money laundering and terrorist financing to ensure their effectiveness;

   4. adopt customer acceptance policies and procedures which are sensitive to the risk of money laundering and terrorist financing;

   5. To have a proper Customer Due Diligence (CDD) process before registering clients.

   6. undertake customer due diligence (“CDD”) measures to an extent that is sensitive to the risk of money laundering and terrorist financing depending on the type of customer, business relationship or transaction;

       

4. What is Money Laundering

   Money laundering is the criminal practice of putting ill-gotten gains or dirty money through a series of transactions, so that the funds are cleaned to look like proceeds from legal activities. It is driven by criminal activities and conceals the true source, ownership, or use of funds.

    

   In simple terms money laundering is most often described as the “turning of dirty or black money into clean or white money”. If undertaken successfully, money laundering allows criminals to legitimize "dirty" money by mingling it with “clean” money, ultimately providing a legitimate cover for the source of their income.

    

   Section 3 of the PMLA Act defines money laundering in following words:

   Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering”.

5. AML philosophy of Manu Chhabra (under the brand name Absolute Finserve)

    

    

   The AML philosophy of the Company is to prevent Manu Chhabra (under the brand name Absolute Finserve) from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. The objective of this policy is also to enable “Manu Chhabra (under the brand name Absolute Finserve)” to know / understand its customers and their financial dealings better which in turn will help the company to manage its risks prudently.

    

6. “Know Your Customer”

   One of the best methods of preventing and deterring money laundering is a sound knowledge of a customer’s business and pattern of financial transactions. The adoption of procedures by which financial institutions “know their customer” is not only a principle of good business but is also an essential tool to avoid involvement in money laundering. “Manu Chhabra (under the brand name Absolute Finserve)” shall adopt appropriate KYC procedures and internal controls measures to:

   1. Assess the money laundering risk posed by customers’ expected use of Company’s products and services;

       

   2. Protect the Company from the risks of doing business with any individual or entity whose identity cannot be determined or who refuses to provide information, or who have provided information that contains significant inconsistencies which cannot be resolved after due investigation.

       

   3. Determine and document the true identity of the customers who establish relationships, open accounts or conduct significant business transactions and obtain basic background information on customers.

1. Client Identification Procedure

    

    

   1. Client identification procedure means verifying the identity of the customer by using reliable, independent source documents, data or information. Company needs to obtain sufficient information necessary to establish, to its satisfaction, the identity of each new customer, whether regular or occasional, and the purpose of the intended nature of relationship. The Company must also be able to satisfy the regulators that due diligence was observed based on the risk profile of the customer in compliance with the extant guidelines in place.

   2. The Company shall have in place a comprehensive Customer Identification Procedure which details the various documents that the Company can take as Identity, Address proof for various types of customers. This Customer Identification Proceduredocument shall be updated with approvals from Compliance, and Business groups, with subsequent ratification by the Board of Directors.

1. Customer Acceptance Policy

    

    

   1. No account shall be opened in anonymous or fictitious / benami name(s). PAN shall be mandatory for each account. Each client shall have one account only.

       

   2. The parameters of risk perception 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. shall be captured at the account opening stage to enable categorization of customers into low, medium high and very high risk. The Company has indicative categories of customers which would fall into low, medium, high and Very high risk categories.

       

2. CUSTOMER DUE DILIGENCE (CDD)

    

    

   The client / customer due diligence (CDD) measures comprise thefollowing:

    

    

   Client Information & Identity:

   Before registering a client, obtain antecedent information. Verify independently information submitted by client but not limited to his identity, registered office address, correspondence address, contact details, occupation, Promoters /Directors, source of income, experience in securities market, PAN no. SEBI Registration No. etc. Obtain as many as information. Generally Institutional clients are recognized at global level. We need to verify clients identity and origin using services of NDML, CKYC registry, internet services or any other reliable, independent source documents, data or information. After verifying information, registration form along with other supporting documents should be approved by the Compliance offi cer designated for verification.

   Beneficial Ownership and control:

    

   After completing the registration process, the client account should be verified by an independent employee to check the actual beneficial ownership and control of the particular account. We need to obtain the details with respect to Shareholders, Promoters from the client and it has to be verified independently. In this process we should found out who is authorized to operatethe client's account and who is ultimately controlling the account. Also verify the sources of funds for funding the transaction. We also have to take care at the time of settlement regarding the nature of transaction, movement / source of transaction, etc.

   Periodically ask for client's financial details to determine the genuineness of transaction

    

   The “Beneficial Owner” is the natural person or persons who ultimately own, control or influence a client and / or persons on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over alegal person or arrangement.

    

   Ongoing due diligence and scrutiny:

   Periodically we need to conduct due diligence and scrutiny of client's transactions and accounts to ensure

   that transactions are being conducted in knowledge, to and out the risk profile, source of funds, etc. At regular interval, ongoing due diligence and scrutiny need to be conduct i.e. perform ongoing scrutiny of the transactions and account throughout the course of the business relationship to ensure that the transactions being conducted are consistent with the Organization’s knowledge of the client, its business and risk pro le, taking into account, where necessary, the customer's source of funds.

    

3. Monitoring of Transactions

    

    

   1. Ongoing monitoring is an essential element of effective KYC procedures. The Company can effectively control and reduce their risk only if they have an understanding of the normal and reasonable activity of the customer so that they have the means of identifying transactions that fall outside the regular pattern of activity.

   2. The Company shall have in place a comprehensive transaction monitoring process from a KYC/AML perspective. The Company shall put in place strong transaction alerts which will provide proactive signals on suspicioustransactions and possible money laundering. An indicative list of such alerts is provided with this policy. Manu Chhabra (under the brand name of Absolute Finserve), AML monitoring team shall endeavor to update the list based on current understanding of the market scenario and trading patterns followed by clients. In addition to the alerts from internal sources, the AML monitoring team shall also monitor the alerts provided by the exchanges as per their circular NSE/INVG/22908 dated March 7, 2013.

       

   3. An indicative list of suspicious activities

      Whether a particular transaction is suspicious or not will depend upon the background details of the client, details of the transactions and other facts and circumstances. Followings are the circumstance, which may be in the nature of suspicious transactions: -

      1. Clients whose identity verification seems difficult or clients appears not to cooperate;

      2. Asset management services for clients where the source of the funds is not clear or not in keeping with clients apparent standing /business activity;

      3. Clients in high-risk jurisdictions or clients introduced by banks or affiliates or other clients based in high risk jurisdictions;

      4. Substantial increases in business volume without apparent cause;

      5. Unusually large cash deposits made by an individual or business;

      6. Clients transferring large sums of money to or from overseas locations with instructions for payment in cash;

      7. Transfer of investment proceeds to apparently unrelated third parties;

      8. Off market transactions in the DP account of the clients;

      9. High trading activity in the relatively illiquid scrips;

      10. Major trading activity in the Z and T to T category scrips;

      11. Options trading / trading in illiquid scrips wherein client has booked unusual

          profit or loss which does not commensurate with the changes in the prices of underlying security in the cash segment.

      12. High exposures taken by client as compared to income levels informed by clients.

      13. Unusual transactions by “High risk status” and businesses undertaken by shell corporations offshore banks /financial services, businesses reported to be in the nature of export-import of small items.

          It would be ensured that record of transaction is preserved and maintained in terms of section 12 of the PMLA 2002 and / or rules made thereunder and that transaction of suspicious nature or any other transaction notified under section 12 of the act is reported to the appropriate law authority.

          Further the accounts or financial assets shall be frozen for any particular client in case so required by any regulatory authority upon receiving a notice for the same.

           

4. Combating Financing of Terrorism (CFT)

    

    

   The Company shall have a heightened awareness in the system to check for transactions which give rise to a reasonable ground of suspicion that these may involve financing of the activities relating to terrorism.

    

5. Maintenance of records of transactions / Information to be preserved / Maintenance and preservation of records / Cash and Suspicious transactions reporting to Financial Intelligence Unit-India (FIU-IND)

    

   1. Government of India, Ministry of Finance, Department of Revenue, vide its notification dated July 1, 2005 in the Gazette of India, has notified the Rules under the PMLA Act . In terms of the Rules, the provisions of PMLA Act, 2002 came into effect from July 1, 2005. Section 12 of the PMLA, 2002 casts certain obligations on financial institutions in regard to preservation and reporting of customer account information.

       

   2. Maintenance of records of transactions

      The Company shall have a system of maintaining proper record of all transactions including records of all transactions prescribed under Rule 3 of the Rules, as mentioned below:

      1. all cash transactions of the value of more than Rupees Ten Lakh or its equivalent in foreign currency;

      2. all series of cash transactions integrally connected to each other which have been valued below Rupees Ten Lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and the aggregate value of such transactions exceeds Rupees Ten Lakh;

      3. all transactions involving receipts by non-profit organisations of value more than rupees ten lakh, or its equivalent in foreign currency;

   3. Information to be preserved

      The Company shall maintain the following information in respect of transactions referred to in Rule 3 of the Rules including all necessary information specified by the regulator to permit reconstruction of individual transactions in respect of transactions referred to in Rule 3 of the Rules:

      • the nature of the transactions;

      • the amount of the transaction and the currency in which it was denominated;

      • the date on which the transaction was conducted; and

      • the parties to the transaction.

       

   4. Maintenance and Preservation of records

      The Company shall maintain the records of all transactions including the records containing information in respect of transactions referred to in Rule 3 above. The Company shall take appropriate steps to evolve a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, The Company shall maintain for such number of years as would be required under the PMLA 2002 and rules made there under from the date of transaction between The Company and the client, all necessary records of transactions, both domestic or international, which will permit reconstruction of individual transactions (including the amounts and types of currency involved if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.

       

   5. The Company shall ensure that records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN, card, utility bills etc.) obtained while opening the account and during the course of business relationship, are properly preserved for such number of years as would be required under the PMLA 2002 and rules made thereunder after the business relationship is ended. The identification records and transaction data should be made available to the competent authorities upon request.

       

   6. Record generation, maintenance and retention –

       

       

      For the purpose of the record keeping provision, we should ensure compliance with the record keeping requirements contained in the SEBI Act, 1992, Rules and

      Regulations made there-under, PML Act, 2002 as well as other relevant legislation, Rules, Regulations, Exchange Bye-laws and Circulars.

       

      Records to be maintained as are sufficient to permit reconstruction of individual transactions (including the amounts and types of currencies involved, if any) so as to provide, if necessary, evidence for prosecution of criminal behavior.

       

      Should there be any suspected drug related or other laundered money or terrorist property, the competent investigating authorities would need to trace through the audit trail for reconstructing a financial profile of the suspect account. To enable this reconstruction, organisation should retain the following information for the accounts of their customers in order to maintain a satisfactory audit trail:

      1. the beneficial owner of the account;

          

      2. the volume of the funds flowing through the account; and

          

      3. for selected transactions:

          

         • the origin of the funds;

            

         • the form in which the funds were offered or withdrawn, e.g. cash, cheques, etc.;

            

         • the identity of the person undertaking the transaction;

            

         • the destination of the funds;

            

         • the form of instruction and authority.

            

           Organization should ensure that all client and transaction records and information are made available on a timely basis to the competent investigating authorities.

            

   7.  Retention of Records:

      The following document retention terms should be observed:

      1. All necessary records on transactions, both domestic and international, should be maintained at least for such number of years as would be required under the PMLA 2002 and rules made thereunder from the date of cessation of the transaction.

      2. Records on customer identification (e.g. copies or records of official identification documents like PAN card, passports, identity cards, driving licenses or Voter Identity Card or similar documents), account files and business correspondence should also be kept for such number of years as would be required under thePMLA 2002 and rules made thereunder from the date of cessation of the transaction.

      3. Records of the all trading details of the client needs to be stored for such number of years as would be required under the PMLA 2002 and rules made thereunder

      4. Records shall be maintained in hard & soft copies.

          

         In situations where the records relate to on-going investigations or transactions, which have been the subject of a suspicious transaction reporting, they should be retained until it is confirmed that the case has been closed.

          

6. Customer Identification Procedure For Account Opening

    

    

   Customer identification means identifying the customer and verifying his/ her identity by using reliable, independent source documents, data or information. Based on risk perception, type / entity of customer, segment of customer following features shall be verified with supporting documents obtained from the customers –

    

   1. Instructions/Check List For Filling KYC Form

       

       

      1. Copy of PAN card is mandatory for all clients, including Promoters/Partners/Karta/Trustees and whole time directors and persons authorized to deal in securities on behalf of company/firm/others.

      2. If any proof of identity or address is in a foreign language, then translation into English is required.

          

      3. Name & address of the applicant mentioned on the KYC form, should match with the documentary proof submitted.

      4. If correspondence & permanent address are different, then proofs for both have to be submitted.

      5. Sole proprietor must make the application in his individual name & capacity.

      6. For non-residents and foreign nationals, (allowed to trade subject to RBI and FEMA guidelines), copy of passport/PIO Card/OCI Card and overseas address proof is mandatory.

      7. For foreign entities, CIN is optional; and in the absence of DIN no. for the directors, their passport copy should be given.

      8. In case of Merchant Navy NRI’s, Mariner’s declaration or certified copy of CDC (Continuous Discharge Certificate) is to be submitted.

      9. Politically Exposed Persons (PEP) are defined as individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., Heads of States or of Governments, senior politicians, senior Government/judicial/ military officers, senior executives of state owned corporations, important political party officials, etc.

   2. Proof of Identity (POI): -

      List of documents admissible as Proof of Identity:

      1. Unique Identification Number (UID) (Aadhaar)/ Passport/ Voter ID card/ Driving license.

      2. PAN card with photograph.

      3. Identity card/ document with applicant’s Photo, issued by any of the following: Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members; and Credit cards/Debit cards issued by Banks.

       

   3. Proof of Address (POA): -

      List of documents admissible as Proof of Address:

      (*Documents having an expiry date should be valid on the date of submission.)

      1. Passport/ Voters Identity Card/ Ration Card/ Registered Lease or Sale Agreement of Residence/ Driving License/ Flat Maintenance bill/ Insurance Copy.

      2. Utility bills like Telephone Bill (only land line), Electricity bill or Gas bill - Not more than 3 months old.

      3. Bank Account Statement/Passbook -- Not more than 3 months old.

      4. Self-declaration by High Court and Supreme Court judges, giving the new address in respect of their own accounts.

      5. Proof of address issued by any of the following: Bank Managers of Scheduled Commercial Banks/Scheduled Co-Operative Bank/Multinational Foreign Banks/Gazetted Officer/Notary public/Elected representatives to the Legislative Assembly/Parliament/Documents issued by any Govt. or Statutory Authority.

      6. Identity card/document with address, issued by any of the following: Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities and Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members.

      7. For FII/sub account, Power of Attorney given by FII/sub-account to the Custodians (which are duly notarized and/or apostiled or consularised) that gives the registered address should be taken.

      8. The proof of address in the name of the spouse may be accepted.

       

   4. Exemptions/clarifications to PAN

      1. In case of transactions undertaken on behalf of Central Government and/or State Government and by officials appointed by Courts e.g. Official liquidator, Court receiver etc.

      2. Investors residing in the state of Sikkim.

      3. UN entities/multilateral agencies exempt from paying taxes/filing tax returns in India.

      In case of institutional clients, namely, FIIs, MFs, VCFs, FVCIs, Scheduled Commercial Banks, Multilateral and Bilateral Development Financial Institutions, State Industrial Development Corporations, Insurance Companies registered with IRDA and Public Financial Institution as defined under section 4A of the Companies Act, 1956, Custodians shall verify the PAN card details with the original PAN card and provide duly certified copies of such verified PAN details to the intermediary.

       

      14.5. List of people authorized to attest the documents:

       

       

      Notary Public, Gazetted Officer, Manager of a Scheduled Commercial/ Co-operative Bank or Multinational Foreign Banks (Name, Designation & Seal should be affixed on the copy).

       

      In case of NRIs, authorized officials of overseas branches of Scheduled Commercial Banks registered in India, Notary Public, Court Magistrate, Judge, Indian Embassy

      /Consulate General in the country where the client resides are permitted to attest the documents

       

      In case of Non-Individuals, additional documents to be obtained from non-individuals, over & above the POI & POA, as mentioned below:

       

       

      Types of entity	Documentary requirements
      Corporate

      • Copy of the balance sheets for the last 2 financial years (to be submitted every year).

      • Copy of latest share holding pattern including list of all those holding control, either directly or indirectly, in the company in terms of SEBI takeover Regulations, duly certified by the company secretary/Whole time director/MD (to be submitted every year).

      • Photograph, POI, POA, PAN and DIN numbers of whole time directors/two directors in charge of day to day

      	operations.
      Partnership firm
      Trust
      HUF
      Unincorporated association or a body of individuals
      Banks/Institutional Investors
      Foreign Institutional Investors (FII)
      Army/ Government Bodies
      Registered Society

      • Photograph, POI, POA, PAN of individual promoters holding control - either directly or indirectly.

      • Copies of the Memorandum and Articles of Association and certificate of incorporation.

      • Copy of the Board Resolution for investment in securities market.

      • Authorised signatories listwith specimen signatures.

      • Copy of the balance sheets for the last 2financil years (to be submitted every year).

      • Certificate of registration (for registered partnership firms only).

      • Copy of partnership deed.

      • Authorised signatories list with specimen Signatures.

      • Photograph, POI, POA, PAN of Partners.

      • Copy of the balance sheets for the last 2 financial years (to be submitted every year).

      • Certificate of registration (for registered trustonly).

      • Copy of Trust deed.

      • List of trustees certified by managing trustees/CA.

      • Photograph, POI, POA, PAN of Trustees.

      • PAN of HUF

      • Deed of declaration of HUF/ List of coparceners.

      • Bank pass-book/bank statement in the name of HUF.

      • Photograph, POI, POA, PAN of Karta

      • Proof of Existence/Constitution document.

      • Resolution of the managing body & Power of Attorney granted to transact business on its behalf.

      • Authorized signatories list with specimen signatures.

      • Copy of the constitution/registration or annual report/balance sheet for the last 2 financial years.

      • Authorized signatories list with specimen signatures.

      • Copy of SEBI registration certificate

      • Authorized signatories list with specimen signatures.

      • Self-certification on letterhead

      • Authorized signatories list with specimen signatures.

      • Copy of Registration Certificate under Societies Registration Act.

      • List of Managing Committee members.

      • Committee resolution for persons authorized to act as authorised signatories with specimen signatures.

      • True copy of Society Rules and Bye Laws certified by the Chairman/Secretary.

7.  Reporting to Financial Intelligence Unit-India

   In terms of the Rules, the Company shall report information relating to cash and suspicious

   transactions to the Director, Financial Intelligence Unit-India (FIU-IND) in respect of transactions referred to in Rule 3 at the following address:

   Director, FIU-IND, Financial Intelligence Unit-India, 6th Floor, Hotel Samrat, Chanakyapuri , New Delhi -110021, Website - http://fiuindia.gov.in/

    

8.  Suspicious Transaction Reports (STR)

    

   The Suspicious Transaction Report (STR) shall be furnished within 7 days of arriving at a conclusion that any transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature

   The Principal Officer shall record his reasons for treating any transaction or a series of transactions as suspicious. It shall be ensured that there is no undue delay in arriving at such a conclusion once a suspicious transaction report is received from a branch or any other office. Such report shall be made available to the competent authorities on request.

    

   While determining suspicious transactions, The Company shall be guided by definition of suspicious transaction contained in the Rules as amended from time to time. An indicative list of suspicious activities contained is provided along with this policy. While ensuring that there is no tipping off to the customer at any level, The Company may put restrictions on operations in the accounts where an STR has been made.

    

9. Principal Officer

While determining Manu Chhabra (under the brand name Absolute Finserve) has Designated Mr. Manu Chhabra, as the Principal Officer for due compliance of anti-money laundering policies. He will be responsible for implementation of internal controls & procedures for identifying and reporting any suspicious transaction or activity to the FIU_IND.

Designated Director

The Principal Officer shall be appointed as the designated director of Manu Chhabra (under the brand name Absolute Finserve) and details thereof be intimated to FIU consequent to SEBI Circular CIR/MlRSD/112014 dated March 12, 2014.

Manu Chhabra

(SEBI RIA No. – INA200013992)