NAVIA MARKETS LIMITED

POLICY ON KNOW YOUR CUSTOMER (KYC) STANDARDS, ANTI-MONEY LAUNDERING (AML), AND COMBATING FINANCING OF TERRORISM (CFT) MEASURES

Updated on July 5, 2024

BACKGROUND

Pursuant to the recommendations made by the Financial Action Task Force (formed to combat money laundering), the Government of India notified the Prevention of Money Laundering Act (PMLA) in 2002. SEBI issued Guidelines on Anti Money Laundering Standards via notification No. ISD/CIR/RR/AML/1/06 dated 18 January 2006 and subsequently clarified with letter No. ISD/CIR/RR/AML/2/06 dated 20 March 2006. These guidelines obligate intermediaries registered under Section 12 of the SEBI Act, 1992, to establish policy frameworks aimed at identifying and discouraging money laundering or terrorist financing activities.

The overriding principle is that intermediaries should satisfy themselves that the measures implemented are adequate, appropriate, and aligned with the Prevention of Money Laundering Act, 2002 (PMLA), and other regulatory notifications. The PMLA was further amended by a notification dated 6 March 2009, which expanded the scope of offenses treated as "scheduled offenses" under the Act.

Prevention of Money Laundering Act, 2002, forms the core of India's legal framework to combat money laundering. Effective from 1 July 2005, the PMLA and its rules require intermediaries such as stockbrokers and sub-brokers to verify client identities, maintain records, and furnish information to the Financial Intelligence Unit-India (FIU-IND).

The FIU-IND, established on 18 November 2004, is a central national agency tasked with receiving, processing, analyzing, and disseminating information related to suspect financial transactions. It also coordinates national and international intelligence efforts against money laundering and related crimes.

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OBJECTIVE

The objective of this policy is to prevent and combat money laundering and terrorism financing. To combat drug trafficking, terrorism, and other organized crimes, financial institutions are required to establish robust internal controls. These controls should aim to:

1. Communicate policies related to the prevention of money laundering and terrorism financing to management and staff.
2. Implement client acceptance policies and due diligence measures.
3. Maintain comprehensive records of transactions.
4. Ensure compliance with statutory and regulatory requirements.
5. Cooperate with relevant law enforcement authorities.
6. Assign an internal audit or compliance function to monitor adherence to AML/CFT policies, including testing systems to detect suspicious transactions.

The internal audit function shall be independent and adequately resourced based on the size of the business, organization structure, and client base.

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Regulatory Requirement

Principal Officer

To ensure compliance, J Rajesh Kumar has been appointed as the Principal Officer. Responsibilities include:

• Acting as the central reference point for suspicious transactions.
• Reporting to senior management and regulatory authorities.

Contact Details:
Email: [email protected]
Tel: 73169 13370

Designated Director

S K Hozefa, as the Designated Director, oversees compliance with Chapter IV of the PMLA and ensures adherence to internal policies.

Contact Details:
Email: [email protected]
Tel: 73169 13409

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ANTI-MONEY LAUNDERING PROCEDURES

Client Due Diligence (CDD)

CDD measures involve the following steps:

1. Obtaining sufficient information to identify the actual beneficial owner of securities or the person on whose behalf transactions are conducted.
2. Verifying customer identity using reliable documentation.
3. Understanding the ownership and control structure of the client.
4. Conducting ongoing scrutiny of client accounts and transactions to ensure consistency with the client’s background, financial status, and risk profile.
5. For non-individual clients, identifying beneficial owners through ownership information or by determining the controlling interest (e.g., over 10% shareholding for companies).

Navia will:

• Not open accounts for clients unwilling to complete the CDD process.
• File a Suspicious Transaction Report (STR) when CDD processes reveal a risk of tipping off the client about suspicious activity.

Policy for Acceptance of Clients

All clients must meet the following requirements:

1. In-Person Verification (IPV): Mandatory for all clients before account opening.
2. KYC Procedures: Ensure all required documentation is complete. Accounts will not be opened if mandatory documents are missing.
3. Screening Against Debarred Lists: Clients will be screened against SEBI, FATF, and UNSC debarred lists.
4. Categorization of Clients: High-risk categories include non-residents, politically exposed persons (PEPs), and clients in high-risk countries.
5. Additional Documentation: For clients trading in Futures and Options, additional documents (e.g., bank statements, ITR acknowledgments) are required.

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Transaction Surveillance

Navia’s surveillance department monitors all client transactions to identify suspicious patterns, such as:

• Sudden spikes in activity without explanation.
• Transactions inconsistent with declared income or client profiles.
• Unusual or high-value cash deposits.

Immediate reporting of suspicious activity to the Principal Officer.

 Risk Management

Navia adopts a Risk-Based Approach to categorize clients as Low, Medium, or High Risk based on their profiles and activities. Enhanced due diligence is applied to high-risk clients, including PEPs.

Suspicious Transaction Reporting (STR)

STRs must be submitted to FIU-IND within seven days of identifying a suspicious activity. All reports are treated confidentially to avoid tipping off clients.

Record Management

Navia ensures compliance with recordkeeping requirements under the PMLA, SEBI regulations, and other applicable laws. Key practices include:

1. Information Retention:
   1. Transaction details, client identities, and audit trails are maintained.
   2. Retain records for five years after account closure or business relationship termination.
2. Accessibility:
   1. Records are stored securely and are easily retrievable when required by authorities.

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Freezing of Funds and Economic Resources

In compliance with Section 51A of the Unlawful Activities (Prevention) Act (UAPA):

• Navia maintains updated lists of sanctioned individuals/entities.
• Accounts linked to terrorist financing or money laundering are immediately reported to SEBI, FIU-IND, and the Ministry of Home Affairs.

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Employee Training and Investor Education

1. Training Programs: Regular training sessions are conducted for staff to:
   1. Understand AML/CFT policies.
   2. Recognize suspicious activities.
2. Client Awareness: Clients are educated about the importance of AML/CFT measures and their role in ensuring compliance.

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Review and Amendments

The policy is reviewed bi-annually or as required by regulatory changes. Amendments are deemed effective from their issuance date. Navia’s management ensures all changes are communicated to relevant stakeholders.

Approval Date: July 5, 2024