Polls-related money laundering under Sebi scanner
26 Nov 2013 4:22 AM IST
Market Watchdog, the Securities and Exchange Board of India (Sebi) has enhanced surveillance for possible money laundering activities in capital markets to thwart any attempts by listed companies and intermediaries to launder investors' money or bring in foreign funds for polls.
The country will witness general elections next year, while the process of five assembly elections is already underway and would be completed by next month.
While robust surveillance and intelligence systems are already in place for detection and prevention of any kinds of money laundering activities in capital markets, a senior official said that regulators are being extra watchful because of elections being typically known as periods of increased illicit fund flows.
The foreign funds coming into the country through capital markets are also being monitored closely to check any possible laundering for political purposes, he added.
Incidentally, Sebi recently tightened its corporate disclosure norms requiring the listed companies and stock exchanges to be more vigilant
about companies informing their shareholders about any key business developments.
It is feared that companies may divert funds from their business for funding elections without the knowledge of investors, while scrupulous
entities may also use certain market intermediaries to generate funds illegally for polls.
While market intermediaries, including brokers, are not allowed to divert their clients' money without authorisation, the listed firms are also supposed to utilise the money collected from investors for their specified business purposes.
Besides, companies are also required to inform the investors for any utilisation of funds generated by running their respective businesses and any digression from these regulatory requirements would be dealt with appropriately.
Any business transaction that raises suspicion of investors being taken for a ride or funds being diverted to related entity would also be under scanner, the official said.
Through its regular inspections, Sebi is keeping a watch on compliance of norms regarding anti-money laundering, settlement of accounts of clients on timely basis, segregation of clients and proprietary funds/securities and KYC norms.
It is also mandatory for market intermediaries to identify and verify the beneficial owner of funds, as part of Sebi's efforts to tackle the risk presented by the misuse of complex legal structures, such as, companies, partnerships, trusts, etc, to facilitate money laundering or terror financing.
A greater use of technology and communication channels in financial markets has increased the risk of money
laundering activities, but the regulatory authorities have also adopted latest and modern surveillance tools to tackle these challenges, the official said. Sebi received a total of 37 'requests for information' in the last fiscal 2012-13 from overseas regulators seeking its assistance under the IOSCO MMoU or the respective bilateral MoUs. Sebi addressed and executed all these requests as per the provisions of the MMoU or the respective MoUs.
On the other hand, nine such requests were made by Sebi to respective regulatory bodies of other countries. The numbers of both inward and outward requests have gone up substantially in the current fiscal, the official added.
In the last three years, Sebi has received an average of thirty requests per annum and roughly 70-80 per cent of these requests have been answered within 15 days.
Some of the requests involved collection of information from other entities or authorities, such as bank records, and they took longer time of 45-90 days.
Besides, not a single case has been brought against Sebi before IOSCO's monitoring group for 'complaints on cooperation'.
The country will witness general elections next year, while the process of five assembly elections is already underway and would be completed by next month.
While robust surveillance and intelligence systems are already in place for detection and prevention of any kinds of money laundering activities in capital markets, a senior official said that regulators are being extra watchful because of elections being typically known as periods of increased illicit fund flows.
The foreign funds coming into the country through capital markets are also being monitored closely to check any possible laundering for political purposes, he added.
Incidentally, Sebi recently tightened its corporate disclosure norms requiring the listed companies and stock exchanges to be more vigilant
about companies informing their shareholders about any key business developments.
It is feared that companies may divert funds from their business for funding elections without the knowledge of investors, while scrupulous
entities may also use certain market intermediaries to generate funds illegally for polls.
While market intermediaries, including brokers, are not allowed to divert their clients' money without authorisation, the listed firms are also supposed to utilise the money collected from investors for their specified business purposes.
Besides, companies are also required to inform the investors for any utilisation of funds generated by running their respective businesses and any digression from these regulatory requirements would be dealt with appropriately.
Any business transaction that raises suspicion of investors being taken for a ride or funds being diverted to related entity would also be under scanner, the official said.
Through its regular inspections, Sebi is keeping a watch on compliance of norms regarding anti-money laundering, settlement of accounts of clients on timely basis, segregation of clients and proprietary funds/securities and KYC norms.
It is also mandatory for market intermediaries to identify and verify the beneficial owner of funds, as part of Sebi's efforts to tackle the risk presented by the misuse of complex legal structures, such as, companies, partnerships, trusts, etc, to facilitate money laundering or terror financing.
A greater use of technology and communication channels in financial markets has increased the risk of money
laundering activities, but the regulatory authorities have also adopted latest and modern surveillance tools to tackle these challenges, the official said. Sebi received a total of 37 'requests for information' in the last fiscal 2012-13 from overseas regulators seeking its assistance under the IOSCO MMoU or the respective bilateral MoUs. Sebi addressed and executed all these requests as per the provisions of the MMoU or the respective MoUs.
On the other hand, nine such requests were made by Sebi to respective regulatory bodies of other countries. The numbers of both inward and outward requests have gone up substantially in the current fiscal, the official added.
In the last three years, Sebi has received an average of thirty requests per annum and roughly 70-80 per cent of these requests have been answered within 15 days.
Some of the requests involved collection of information from other entities or authorities, such as bank records, and they took longer time of 45-90 days.
Besides, not a single case has been brought against Sebi before IOSCO's monitoring group for 'complaints on cooperation'.
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