SEBI’S NEW GUIDLINES (Syllabus: GS Paper 3 – Economy)

Context: The Securities Exchange Board of India (SEBI) has issued a set of amendments to strengthen anti-money laundering(AML) standards and combat finance terrorism (CFT).

• These guidelines are based on rules established under the Prevention of Money Laundering Act of 2002.

Money Laundering

• UN convention on money laundering (Vienna convention) defines money laundering as the conversion or transfer of property, knowing that such property is derived from any offense(s), for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such offense(s) to evade the legal consequences of his actions.
• In simple terms: It is a process of converting illegally earned money into legitimate money.

Key Amendments

• Financial groups must establish group-wide programs to address money laundering, with further actions required if the host country's AML/CFT standards do not align with the home country's standards.
• In trust cases, reporting entities must ensure trustees disclose their status when initiating an account-based relationship.
• These amendments seek to bolster AML/CFT effectiveness and improve the process of identifying beneficial ownership.

Securities and Exchange Board of India (SEBI)

• Establishment: As a statutory body in the year 1992.
• Headquarters: Mumbai, Maharashtra
• Ministry: Ministry of Finance
• Aim: To protect the interests of investors in securities and to promote the development of, and regulate the securities market.