PhonePe Wealth Broking (PPWB)

Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) An Investor Awareness Initiative

This is an investor education initiative undertaken to make investors aware about the AML/CFT framework. As participants in the securities market, it would help you to familiarize yourselves with the contents of this communication. In the light of the basic information provided herein, we encourage you to read more on the topic of AML-CFT and strengthen your understanding on this subject.

1. Background:

   Pursuant to the recommendation made by the Financial Action Task Force Money on Anti Money Laundering standards, SEBI had issued the guidelines on Anti Money Laundering standards vide their notification no. ISD/CIR/RR/AML/1/6 dated 18th January 2006 and vide letter no. ISD/CIR/RR/AML/2/6 dated 20th March 2006 had issued the obligation of Intermediaries registered under section 12 of the Securities and Exchange Board of India Act, 1992. As per the SEBI guidelines, all Intermediaries have been advised to ensure that proper policy frameworks are put in place as per the guidelines on Anti Money Laundering standards notified by SEBI.

2. What is Anti Money Laundering?

   Money laundering is the processing of these criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to enjoy these profits without exposing their source.

   Illegal arms sales, smuggling, and the activities of organised crime, including for example drug trafficking and prostitution rings, can generate huge amounts of proceeds. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to “legitimize” the ill-gotten gains through money laundering.

   When a criminal activity generates substantial profits, the individual or group involved must find a way to control the funds without attracting attention to the underlying activity or the persons involved. Criminals do this by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract attention.

3. Terrorist Financing

   In order to combat drug trafficking, terrorism and other organized and serious crimes all emphasized the need for financial institutions, including securities market intermediaries, to establish internal procedures that effectively serve to prevent and impede money laundering and terrorist financing. Financial Terrorism means financial support for any form of terrorism or to those who encourage, plan or engage in terrorist activities.

4. The Prevention of Money Laundering Act, 2002 (PMLA) : Legal Framework

   The Prevention of Money Laundering Act, 2002 (PMLA) has been brought into force with effect from 1st July, 2005. Necessary Notifications / Rules under the said Act have been published in the Gazette of India on 1st July 2005 by the Department of Revenue, Ministry of Finance, and Government of India. The said Act is applicable to banks, financial institutions and all intermediaries associated with the securities market and are registered with SEBI under section 12 of SEBI Act, 1992 such as Depository Participants, Stock Brokers, Investment Advisers, Portfolio Managers and Merchant Bankers. PPWB falls under the category of ‘Intermediary’ and hence is required to follow the guidelines of SEBI on the matter. SEBI has issued detailed guidelines/ instructions to be adhered by all intermediaries as a part of the Anti-Money Laundering (AML) Program. Investors may refer SEBI master SEBI/ HO/ MIRSD/ DOP/ CIR/ P/ 2019/113 dated October 15, 2019 as amended from time to time, available on SEBI’s website. (http://www.sebi.gov.in).

5. Financial Intelligence Unit:

   Financial Intelligence Unit - India (FIU-IND) is the central, national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions to enforcement agencies and foreign FIUs.

6. Obligations of PPWB

   1. The purpose of implementing AML/CFT measures is to stop criminals and terrorists from abusing the financial system. A vigilant financial system enables the law enforcement to catch criminals and arrest crime by ensuring criminals are unable to effectively use or channelize the funds they make from illicit sources.
   2. PPWB is required to devise and implement various AML and CFT policies like KYC policy, Risk policy, customer identification and due-diligence policy. Proper KYC processes will help PPWB to know and understand its customers and their financial dealings better, which in turn would help PPWB manage its risks prudently, to protect the interests of its genuine customers and to ensure good governance.
   3. PPWB is required to have a proper screening procedure to ensure that illegitimate money does not enter the securities markets using false identities, false addresses and benami accounts. It is required to follow a risk-based approach, without compromising on due diligence at the time of client registration as well as on an ongoing basis during the lifetime of association with its clients.

7. Obligation of Investors:

   To ensure that clients have an uninterrupted access to the system, a healthy AML compliant ecosystem and a cordial and healthy business relationship, investors shall be required to provide details / information as may be required. Few of the illustrative details are stated below:

   • Investors shall be required to provide details / information as may be required from time to time.
   • Provide valid documents to prove Client identity and address
   • Provide Client accurate contact information including mobile number, e-mail ID etc.
   • Provide accurate information about Client occupation and its nature; for eg; if a client is carrying on a business, they should be informing us not only the name of their business but also the nature and product-line of their business.
   • Provide accurate information about Client financials. For eg; provide information regarding their annual income and net-worth etc.
   • Cooperate with us when we seek additional information or documents in connection with Client trades, holdings etc after understanding that these documents/information etc is sought by us only to comply with statutory/regulatory requirements.
   • Let us know the real rationale / purpose for certain transactions or trades undertaken by the Client when we make inquiries.
   • Immediately inform us as and when there is a change in the information that Client has provided us along with supporting documents wherever required
   • Update Client KYC information with us or co-operate with us when we remind them that a KYC updation is due from their end.

We solicit your active cooperation to provide any other additional information / documents. This will help us to comply with our regulatory obligations.