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380 market members violated anti-money laundering rules in FY15

Discrepancies related to Anti-Money Laundering and Combating Financing of Terrorism (AML and CFT) regulations were observed against brokers and depository participants by two exchanges -- BSE and NSE -- as also depositories -- CSDL and NSDL.

By: | Mumbai | Published: December 20, 2015 12:05 PM
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36 inspections were conducted by the market regulator on depository participants, while 30 inspections were carried out with respect to mutual funds to verify their compliance with AML/ CFT and KYC norms. (Reuters photo)

As many as 380 market entities, most of them stock brokers, faced action for failing to prevent possible money laundering and terror financing activities during the last fiscal.

Discrepancies related to Anti-Money Laundering and Combating Financing of Terrorism (AML and CFT) regulations were observed against brokers and depository participants by two exchanges — BSE and NSE — as also depositories — CSDL and NSDL, as per market regulator Sebi’s latest annual report.

A total of 380 members faced actions last fiscal for discrepancies related to AML/CFT rules as against 375 such entities in 2013-14.

Of the total market intermediaries, the BSE took action against 166 trading members, NSE dealt with 27 entities, while MSEI took steps against nine members after observing violations of anti-money laundering norms.

Besides, CDSL and NSDL took action against 169 and nine market members respectively for possible violations to anti-money laundering norms.

The actions taken by the exchanges and depositories were by way of warnings, advice and imposition of penalties.

While warnings and advice were issued to a majority of the market entities, as many as 32 were slapped with penalties for violating AMT and CFT norms, while warnings and advice were issued to a majority.

Meanwhile, the Securities and Exchange Board of India (Sebi), had carried out 59 special purpose inspections against stock brokers to check their compliance with the AML/CFT and Know-Your-Client (KYC) norms, during 2014-15.

Similarly, 36 inspections were conducted by the market regulator on depository participants, while 30 inspections were carried out with respect to mutual funds to verify their compliance with AML/ CFT and KYC norms.

Money laundering is considered one of the serious issues facing the financial systems around the world.

“Combined with the financing of terrorist activities, the issue of money laundering has been at the heart of regulations worldwide to ensure transparent, fair and smooth financial markets,” Sebi said in the report.

The regulator also noted that intermediaries were permitted to depend on third parties for carrying out due diligence of their clients.

“Policy measures coupled with a robust surveillance mechanism ensured smooth functioning of the financial markets,” the regulator said.

Additionally, the market regulator said the system of internal audits of stock brokers by outside professionals, inspections by stock exchanges and by Sebi has improved compliance levels of stock brokers.

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