Sun, Aug 31, 2014

New Delhi: As many as 375 market entities, mostly brokers, faced action for lapses in their mechanism 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 -- CDSL and NSDL, as per market regulator Sebi's latest annual report.

A total of 375 members for discrepancies related to AML/ CFT rules, during the fiscal year 2013-14.

Of these, BSE took action against 258 trading members, while NSE dealt with 47 such entities after observing violations of anti-money laundering norms.

Besides, CDSL and NSDL took action against 34 and 36 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.

As many as 65 market entities were slapped with penalties for violating AMT and CFT norms, while warnings and advice were issued to many others.

Meanwhile, the Securities and Exchange Board of India (Sebi), had carried out 62 special purpose inspections against stock brokers to check their compliance with the AML/CFT and Know-Your-Client (KYC) norms, during 2013-14.

Similarly 53 inspections were conducted by the market regulator on depository participants, while 21 inspections were carried out with respect to mutual funds to verify their compliance with AML/ CFT and KYC norms.

According to Sebi, money laundering has been recognised globally as one of the largest threats posed to the financial system of a country, while "fight against terrorist financing is another such emerging threat with grave consequences for both the political and economic standing of a jurisdiction".

"Rapid developments and greater integration of the financial markets together with improvements in technology and communication channels continue to pose serious challenges to the authorities and institutions dealing with AML/CFT," the market regulator said in the report.

Other than inspection by Sebi, compliance with AML/ CFT norms is also verified by the stock exchange and depositories during their inspections of stock brokers and depository participants and also at the time of half yearly internal audits by independent professionals, the report said.

"Appropriate sanctions are applied where AML/CFT violations/ discrepancies are observed," it added.