Prevention of Money Laundering Act, 2002 (PMLA)

1. Background

The Prevention of Money Laundering Act, 2002 (PMLA) became effective on July 1, 2005. It mandates reporting entities like stockbrokers, depository participants, and others in the securities market to follow client onboarding procedures, maintain records, and report suspicious transactions.
Navia adheres to SEBI guidelines for implementing AML measures, as detailed in the SEBI Master Circular dated February 3, 2023.


2. Objective

The objective of this policy is to prevent money laundering and combat terrorist financing by:

  • Promoting transparency and accountability in financial transactions.
  • Ensuring client acceptance and due diligence.
  • Maintaining records and complying with statutory regulations.
  • Cooperating with law enforcement authorities for timely disclosures.
  • Monitoring suspicious transactions and maintaining a robust internal audit system.

3. Regulatory Compliance


3.1 Principal Officer

Navia appoints a Principal Officer responsible for:

  • Ensuring compliance with PMLA and AML guidelines.
  • Identifying and reporting suspicious transactions.
  • Acting as a central reference point for AML matters.


Principal Officer: Mr. J Rajesh Kumar
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3.2 Designated Director

The Designated Director ensures overall compliance with the obligations under the PMLA.

Designated Director: Mr. S K Hozefa
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4. AML Procedures

Key Aspects:

  • Client Acceptance Policy: Guidelines for onboarding clients.
  • Client Identification: Verifying client identities and beneficial ownership.
  • Risk Management: Categorizing clients based on risk levels.
  • Monitoring Transactions: Regular scrutiny of client accounts.


5. Client Due Diligence (CDD)


5.1 Client Acceptance Policy

  • In-person Verification (IPV): Mandatory for all clients.
  • KYC Compliance: Clients must provide complete KYC documents; accounts will not be opened without mandatory information.
  • Debarred Clients: Accounts will not be opened for individuals on SEBI's debarred list, UN sanction lists, or with known criminal backgrounds.


5.2 Client Identification Procedure

  • Collect valid identification and address proofs.
  • Verify against SEBI and UN sanction lists.
  • Reject accounts for clients with false information or non-compliance.


5.3 Relying on Third Parties

Navia may rely on third parties for client verification, ensuring they meet compliance standards.


5.4 Risk Categorization

Clients are categorized into HighMedium, and Low Risk based on their profiles:

  • High Risk: Politically Exposed Persons (PEPs), clients refusing to disclose financial details, etc.
  • Medium Risk: Clients with unusual trading patterns.
  • Low Risk: Clients meeting all standard criteria.


5.5 Monitoring Transactions

Navia conducts ongoing transaction scrutiny to ensure alignment with clients’ declared profiles and risk levels.


6. Suspicious Transaction Monitoring & Reporting

The Surveillance Department monitors client transactions and flags suspicious activities. Alerts are reported to the Principal Officer, who files Suspicious Transaction Reports (STRs) with the Financial Intelligence Unit-India (FIU-IND).

Examples of suspicious activities include:

  • Unusual trading in illiquid securities.
  • Transactions inconsistent with client profiles.
  • Sudden activity in dormant accounts.


7. Record Management


7.1 Information to Maintain

Navia maintains records of:

  • Nature, amount, and date of transactions.
  • Parties involved and supporting documentation.


7.2 Record Retention

Records are preserved for five years from:

  • The transaction date.
  • Account closure or end of client relationship.


8. Freezing Funds & Assets

Navia complies with Section 51A of the Unlawful Activities (Prevention) Act, 1967, and ensures:

  • Accounts are not opened for individuals/entities on sanction lists.
  • Immediate reporting of any matches with designated individuals/entities to relevant authorities.

9. Investor Education & Employee Training

  • Clients are educated about KYC and AML requirements.
  • Employees undergo training to understand AML guidelines, focusing on frontline, back-office, compliance, and risk management roles.


10. Policy Review

The Principal Officer and Designated Director review the policy periodically, incorporating regulatory updates. Reviews occur semi-annually or as needed.


11. Amendments

Navia may amend this policy at any time. Continued use of services implies acknowledgment and acceptance of changes.

 

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