1. BACKGROUND

The Prevention of Money Laundering Act, 2002 came into effect from 1st July 2005. Necessary Notifications / Rules under the said Act were published in the Gazette of India on 1st July 2005 by the Department of Revenue, Ministry of Finance, and Government of India.

As per PMLA every reporting entity (which includes intermediaries registered under section 12 of the SEBI Act, i.e. a stock-broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, asset management company, depository participant, merchant banker, portfolio manager, investment adviser and any other intermediary associated with the securities market and registered under Section 12 of the SEBI Act and stock exchanges), shall have to adhere to the client account opening procedures, maintenance records and reporting of such transactions as prescribed by the PMLA and rules notified there under.

SEBI vide circular dated 18th January 2006 required Market intermediaries to lay down policy framework for anti-money laundering measures to be followed. FLATTRADE being a Stock Broker needs to adhere to the same.

SEBI has issued a Master circular dated 19th December 2008, which consolidates all the requirements/obligations issued with regard to AML/CFT until December 15, 2008. SEBI has also issued a Master Circular dated 3rd February 2023 with Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT)/ Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002 and Rules framed there under.

2. OBJECTIVE

The objective of the Prevention of Money Laundering Act (PMLA) policy is to prevent and combat money laundering and the financing of terrorism. To combat drug trafficking, terrorism and other organized and serious crimes have 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.

The policy aims to establish a legal framework and regulatory mechanism to prevent the generation of black money and the illegal transfer of funds to promote transparency and accountability in financial transactions that covers:

Communication of policies relating to prevention of ML and TF to all Management and relevant staff
Client acceptance policy and due diligence measures Maintenance of records
Compliance with relevant statutory and regulatory requirements
Co-operation with the relevant law enforcement authorities, including the timely disclosure of information

3. REGULATORY REQUIREMENT

3.1 PRINCIPAL OFFICER

To ensure proper discharge of legal obligations to report suspicious transactions to the authorities, an officer of the company will be designated as "Principal Officer".

For the purpose of monitoring the transaction and reporting the same to the FIU-IND, Ms. D Meenambal is appointed as the principal officer and the same has been reported to the FIU-IND.

Designated Principal Officer: Ms. D Meenambal Email id: [email protected] Tel No: 9942376399

The Principal Officer will be responsible for

Compliance of the provisions of the PMLA and AML guidelines
Act as a central reference point and play and active role in identification & assessment of potential suspicious transaction and shall have access to and be able to report to senior management at the next reporting level or the Board of Directors
Ensure that FLATTRADE discharges its legal obligation to report suspicious transactions to concerned authorities.

3.2 DESIGNATED DIRECTOR

The Company shall nominate the Whole-time Director & CEO who oversees the operations of the Company including implementation of Prevention of Money Laundering Rules, as the Designated Director of the Company under the Prevention of Money Laundering Act, 2002 and Rules framed there under who shall be responsible for ensuring overall compliance with the obligations imposed under chapter IV of the Acts and Rules.

For the purpose of ensuring appropriate systems and processes are in place to prevent money laundering and terrorist financing, Mr. K Narayanamoorthy is appointed as the Designated Director and the same has been reported to the FIU-IND. Designated Director: Mr. K Narayanamoorthy Email id: [email protected] Tel No: 9282107540

4. ANTI-MONEY LAUNDERING PROCEDURES

The main aspect of this policy is the Client Due Diligence that includes the following four specific parameters:

Policy for acceptance of clients
Procedure for identifying the clients
Risk Management
Monitoring of Transactions

5. CLIENT DUE DILIGENCE (CDD)

The CDD measures comprise the following:

Obtaining sufficient information about to the client in order to identify who is the actual beneficial owner of the securities or on whose behalf transaction is conducted
Verify the customer's identity using reliable independent source document, data or information
Identify beneficial ownership and control, i.e. determine which individual(s) ultimately own(s) or control(s) the client and/or the person on whose behalf a transaction is being conducted
Verify the identity of the beneficial owner of the client and/or the person on whose behalf a transaction is being conducted, collaborating the information provided in relation to above point
Understand the ownership and control structure of the client
Conduct on-going due diligence and scrutiny of the account/client to ensure that the transaction conducted are consistent with the clients' background/financial status, its activities and risk profile.

5.1 – POLICY FOR ACCEPTANCE OF CLIENTS

The Customer Acceptance norms specified here in below shall be applicable to all clients of FLATTRADE. All persons sourcing clients on behalf of FLATTRADE shall be required to adhere to the requirements specified herein below that are aimed to identify the type of clients.

In normal circumstances, all prospective clients are accepted as client by the company except the clients as per the Debarred Clients.

1. In-person Verification: In-person verification (IPV) shall be mandatory for all clients. Accounts shall be opened only for those persons whose in-person verification has been done as per the SEBI/Stock Exchange/Depository or other regulations in this regard.

KYC Procedures: Accept only clients in respect of whom complete KYC procedures have been completed. Clients shall not be opened in case of client fails to submit any required documents as per Customer Identification Policy below:

Documents shall be accepted as per the checklists given from time to time
All details in the form shall be filled in by the clients without fail
There shall be no compromise on submission of mandatory information – Accounts should not be opened if the client refuses to provide information / documents.

2. Debarred Clients: Before opening of clients accounts, check should be done to verify whether the client's name matches with names in any of the checklist.

SEBI Debarred list
UNSC, FATF
Client being defaulter and have cases filed against him from NSE, BSE & MCX
Such other list that may be specified by the Regulators/Compliance Department from time to time
Accounts should not be opened of client with known criminal background.

3. Clients of Special Category (CSC): We have maintained the internal management system which reflects the various categories of the clients who have registered and trading with the company. The client category segregation is automated in the system and system will allocate the category as follows:

Non-resident clients
High-networth clients
Trusts, Charities, NGOs and Organizations receiving donations
Companies having close family share holdings or beneficial ownership
Politically exposed persons
Companies offering foreign exchange offerings
Clients in high risk countries
Non face to face clients
Clients with dubious reputation as per public information available

4. Designated Individuals / Entities: An updated list of individuals and entities which are subject to various sanction measures such as freezing of assets, denial of financial services etc., as approved by the Security Council Committee established pursuant to various United Nations Security Council Resolutions.

FLATTRADE ensures that accounts are not opened in the name of anyone whose name appears in the said list. FLATTRADE shall continuously scan all existing accounts to ensure that no account is held by or linked to any of the entities or individuals included in the list. Full details of accounts bearing resemblance with any of the individuals/entities in the list shall be immediately be intimated to SEBI and FIU-IND.

5. Additional Segment Activation: For all clients applying for trading rights in the futures and options segments, further details / documents substantiating ownership of Assets would be required. Illustrative list is as follows:

Bank account statement for last 6 months
Copy of ITR acknowledgment
In case of salary income – salary slip, copy of Form 16
Net-worth Certificate
Self declaration with relevant supporting documents
Copy of demat account holding statement

6. E-KYC Authentication: No account shall be opened for the client whose E-KYC Authentication or Yes/No Authentication for the Aadhaar number issued by the Unique Identification Authority of India fails.

7. Treatment of Accounts of Clients of Special Category:

1. NRI: While opening NRI account utmost care should be exercised. While opening an NRI Repatriable or NRI Non Repatriable inter alia, the following documents should be collected from the clients:

NRE Account – Notarized and Self attested copies of

Pan Card
Passport / OCI / PIO
Visa / Residence Permit Proof
Proof of Foreign Address such as Latest Bank Statement/Passport with address / Driver's License / Utility Bill etc.
PIS & NRE Savings Bank details

NRO Cash & Derivatives Account – Notarized and Self attested copies of

Pan Card
Passport / OCI / PIO
Visa / Residence Permit Proof
Proof of Foreign Address such as Latest Bank Statement/Passport with address / Driver's License / Utility Bill etc.
Cancelled cheque leaf or latest statement of any of client's NRO Savings bank account

2. High Networth Clients: High networth clients could be classified as such if at the account opening stage or during the course of the relationship.

3. Trust, Charity and NGOs: Both public as well private, registered as well as unregistered trust will have to be classified in the Special Category. Any Charitable or Non governmental organization or a Non profit organization will also be classified here in.

4. Close family shareholdings or Beneficial Ownership: In case of close family share holdings the objective is to understand whether the beneficiaries of two or more accounts, which may also be opened at different times are same, then both need to be marked under this special category.

5. Politically Exposed Persons: In case of PEPs, the account should be opened only after consent of the senior management and all the required documents are collected and client should be marked as PEP in records. Where a client has been accepted and the client or beneficial owner is subsequently found to be, or subsequently becomes a PEP, registered intermediaries shall obtain senior management approval to continue the business relationship.

8. Clients in High Risk Country: No accounts shall be opened if received from a client who was residing in a high risk jurisdiction and may have investment proceeds which may have also originated from these countries. The list may be obtained from the Financial Action Task Force (FATF) statements that identify countries that do not insufficiently apply the FATF Recommendations, published by the FATF on its website.

The parameters of risk perception in terms of the nature of business activity, location of clients, mode of payments, volume or turnover, social and financial status etc shall be considered to enable categorization of customers into low, medium and high risk. In case of high risk clients, compliance has to approve the same for onboarding of such clients.

5.2 – CLIENT IDENTIFICATION PROCEDURE

The following Client Identification Norms shall be adhered to in respect of all new clients to establish the identity of the client along with proof of address to prevent opening of account which is fictitious/benami/anonymous in nature.

SEBI / Stock Exchanges / The Depositories and other regulatory authorities under which FLATTRADE is governed from time to time specify various KYC norms / guidelines that have to be adhered to in order to be able to identity customers. Such norms and guidelines should be followed scrupulously at the time of customer acceptance.

Basic KYC Norms to be followed for verification / scrutiny

The photograph in the PAN card and in any other address proof which contains a photograph must match
As per SEBI, Depository, Exchange guidelines, all Address and Identification proofs should be verified with the originals by any of the employee of FLATTRADE
In Person verification of Applicant made compulsory as per Exchange and Depository norms should be done by FLATTRADE as specified by the Regulators from time to time.
Proof should be collected for both permanent address and correspondence and the same should be verified with originals
Verify whether any of the existing client or new client falls within UN sanction list and / or is debarred by SEBI from dealing in securities. In this case, if any of the existing client falls in either of the categories, the said client would be suspended from trading immediately and the matter would be reported to the concerned Regulatory Authority if required. In case of new applicant falling within the category, such account should not be opened. Clients name in the regulatory orders issued by the exchanges on a day to day basis should be barred from trading with immediate effect.
In case of non-resident clients, remittance only from authorized banking channels will be accepted
Clients should not be activated to trade in derivatives segment unless the clients submit the valid proof of financial information

5.3 RELIANCE ON THIRD PARTY FOR CARRYING OUT CDD

FLATTRADE may rely on a third party for the purpose of

Identification and verification of the identity of the client
Determination of whether the client is acting on behalf of a beneficial owner, identification of the beneficial owner and verification of the identity of the beneficial owner. Such third party shall be regulated, supervised or monitored for and have measures in place for compliance with CDD and record-keeping requirements in line with the obligations under the PML Act.

Such reliance shall be subject to the conditions that are specified in Rule 9(2) of the PML Rules and shall be in accordance with the regulations and circulars / guidelines issued by SEBI from time to time.

5.4 RISK MANAGEMENT

Risk Based Approach shall be applied for mitigation and management of the risk. Clients are categorized based on the client's background, type of business relationship or transaction, etc. Corporate and other entities other than the individual clients accounts also scrutinized before opening the trading account in the system.

RISK ASSESSMENT - Based on the client profiles, the category is allotted to the client. Based on the client profile, if the client is politically exposed person (PEP) or Relative of PEP, the necessary checks and balances are carried out prior to registration as client and necessary approvals will be obtained from the TOP MANAGEMENT of the company prior to open an account with the company to these persons. We identify the beneficial owner in a PEP client upon client's declaration and take supporting document to ascertain the identity of such beneficial owner. Further, the existing client turned to the PEP, or relative of PEP, if any identified the necessary approvals will be obtained from the TOP MANAGEMENT to continue as client of the company.

High Risk Clients

High Risk Clients
Clients who are refusing to provide their financial details / source of income.
Clients against whom any action has been taken by SEBI/Stock Exchanges or any other regulatory authority in the past
Individual clients whose employer is a politician, Income tax/custom department or any other sensitive government department.
Clients residing in sensitive areas. For example, Naxalite region, areas where dealing in narcotic drugs, immoral traffic, corruption etc is highly prevalent.

Medium Risk Clients

Client whose account is operated by POA holder other than FLATTRADE.
Client's who have given trading authorization in some other person's name (excluding Authorized person)
Clients whose trading pattern is not in line with their declared Income.

Low Risk Clients: All clients not dealing with the above criteria are low risk clients.

5.5 MONITORING OF TRANSACTIONS

At regular interval, ongoing due diligence and scrutiny shall be conducted i.e. perform ongoing scrutiny of the transactions and account throughout the course of the business relationship to ensure that the transactions being conducted are consistent with the Organization's knowledge of the client, its business and risk profile taking into account.

FLATTRADE shall apply higher levels of due diligence when an account is operated by a Power of attorney or where an account is opened by an intermediary in fiduciary capacity.

KYC documents will be taken for both the mandate holder / intermediary in fiduciary capacity and the account holder.

6. SUSPICIOUS TRANSACTION MONITORING AND REPORTING

The surveillance department of FLATTRADE handles this part of the anti-money laundering policy, and surveillance is the one which gives or cuts the exposure or the limit for the purchase or sale of securities. The margin exposure is decided on the credit balances available in the client account and also as per the risk parameters set in the system.

The surveillance department monitors each and every transaction of the clients. If any heavy bulk or suspicious transaction is done by the client, then the same is reported to the Principal Officer of the company.

Suspicious transactions include exchange generated alerts in addition to in-house offline alerts.

An indicative list of suspicious activities:

Clients whose identity verification seems difficult or clients appears not to co-operate
Clients in high-risk jurisdictions or clients introduced by banks or affiliates or other clients based in high risk jurisdictions
Substantial increase in activity without any apparent cause
Large numbers of accounts having common parameters such as common partners / directors / promoters / address / email address / telephone numbers / introducers or authorized signatories
Sudden activity in dormant accounts
Unusual and large cash deposits made by an individual or business exceeding client's declared income
Large deals at prices away from the market.
Transfer of investment proceeds to apparently unrelated third parties
Off Market transactions in the DP account of clients
High trading activity in the relatively illiquid scrips
Major trading activity in the Z and T to T category scrips
Options trading / trading in illiquid scrips wherein client has booked unusual profit or loss which does not commensurate with the changes in the prices of underlying security in the cash segment
High exposures taken by the client as compared to income levels informed by clients
Synchronized cross and self trades – scrutinize synchronized, Self/Cross Trade Report provided by exchange
Clients whose turnover is disproportionate with the annual income/Net worth provided in the KYC
High value transactions in a new or dormant account
Client offered false or forged identification of documents
Adverse media report about criminal activities of clients
Adverse media report about TF or Terrorist activities of Client
Client provides inconsistent information
Client could not explain source of funds
Transaction has no economic rationale
Transaction inconsistent with Client profile
Alert raised by Business Associates
Alert raised by other institution, subsidiaries or business associates including cross-border referral
Frequent changes in KYC submitted by clients
Multiple clients logged in via similar IP address
Client accounts opened with same demographic details i.e bank, address, email id, mobile number, pan

The Suspicious Transaction (STR) shall be furnished within 7 days of arriving at a conclusion that any transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature. The Principal Officer shall record his / her reasons for treating any transaction or a series or transactions as suspicious.

While determining suspicious transactions, FLATTRADE shall be guided by definition of suspicious transaction contained in the Rules as amended from time to time. FLATTRADE ensures that there is no tipping off to the customer at any level.

Suspicious transaction reporting is to Financial Intelligence Unit-India (FIU-IND)

Financial Intelligence Unit – India 6th Floor, Tower-2, Jeevan Bharati Building, Connaught Place, New Delhi-110001, INDIA Website: https://fiuindia.gov.in/

7. RECORD MANAGEMENT

7.1 Information to be maintained

FLATTRADE shall maintain and preserve the following information in respect of transactions referred to in Rule 3 of the Rules including all necessary information specified by the regulator to permit reconstruction of individual transactions:

the nature of the transactions
the amount of the transaction and the currency in which it is denominated;
the date on which the transaction was conducted; and
the parties to the transaction.

7.2 Record Keeping

FLATTRADE shall ensure compliance with the record keeping requirement as mentioned in the SEBI Act, 1992, Rules and Regulations made there under, PMLA as well as other relevant legislation, Rules, Regulations, Exchange Byelaws and Circulars.

In cases of any suspicion of laundered money or terrorist property, FLATTRADE shall retain the following information for the accounts of its clients in order to maintain a satisfactory audit trail:

the beneficial owner of the account;
the volume of the funds flowing through the account; and
for selected transactions:

the origin of the funds
the form in which the funds were offered or withdrawn, e.g. cheques, demand drafts etc.
the identity of the person undertaking the transaction;
the destination of the funds;
the form of instruction and authority.

7.3 Retention of Records

FLATTRADE shall maintain and preserve records for a period of eight years from the date of transaction between FLATTRADE and the client, all necessary records of transactions both domestic and international which will permit reconstruction of individual transactions so as to provide if necessary evidence for prosecution of persons involved in criminal activity.

FLATTRADE shall maintain and preserve the record of documents evidencing the identity of clients and beneficial owners as well as accounts file and business correspondence for a period of 5 years after the business relationship between a client and FLATTRADE has ended or the account has been closed whichever is later.

FLATTRADE shall maintain and preserve the records of information related to transactions whether attempted or executed which are reported to the Director, FIU-IND as required under Rules 7 & 8 of the PML Rules for a period of 8 years from the date of transaction between the client and FLATTRADE or until it is confirmed that the case has been closed.

8. PROCEDURE FOR FREEZING OF FUNDS, FINANCIAL ASSETS OR ECONOMIC RESOURCES OR RELATED SERVICES

8.1 Section 51A of the Unlawful Activities (Prevention) Act, 1967 (UAPA), relating to the purpose of prevention of and for coping with terrorist activities was brought into effect through UAPA Amendment Act, 2008. In this regard, the Central Government has issued an Order dated Aug 27, 2009 detailing the procedure for the implementation of Section 51A of the UAPA.

8.2 Under the aforementioned Section, the Central Government of India has outlined a procedure through an Order dated Feb 02, 2021 for strict compliance. These guidelines have been further amended vide a Gazette Notification dated June 08, 2021.

8.3 SEBI communicates the list of designated individuals / terrorists in pursuance to Section 35(1) of UAPA 1967, declared by The Ministry of Home Affairs.

8.4 An updated list of individuals and entities which are subject to various sanction measures such as freezing of assets/accounts, denial of financial services etc., as approved by the Security Council Committee established pursuant to various United Nations' Security Council Resolutions (UNSCRs) can be accessed at: https://press.un.org/en/content/press-release.

8.5 All orders under section 35(1) and 51A of UAPA relating to funds, financial assets or economic resources or related services, circulated by SEBI from time to time shall be taken note of FLATTRADE for Compliance.

8.6 FLATTRADE ensures that accounts are not opened in the name of anyone whose name appears in the said list. FLATTRADE will maintain updated designated lists in electronic form and run a check on the given parameters on a regular basis to verify whether individuals or entities listed in the order are holding any funds, financial assets or economic resources or related services held in the form of securities with us.

8.7 In the event, particulars of any of customers match the particulars of designated individuals/entities, FLATTRADE shall immediately not later than 24 hours from the time of finding out such client, inform all particulars of the funds, financial assets or economic resources or related services held in the form of securities, held by such clients on their books to the Central [designated] Nodal Officer for the UAPA, at Fax No. 011-23092551 and also conveyed over telephone No. 011-23092548. The particulars apart from being sent by post shall necessarily be conveyed on email id: [email protected].

8.8 FLATTRADE shall also send a copy of the communication mentioned above to the UAPA Nodal Officer of the State/UT where the account is held and to SEBI and FIU-IND, without delay. The communication shall be sent to SEBI through post and through email ([email protected]) to the UAPA nodal officer of SEBI, Deputy General Manager, Division of FATF, Market Intermediaries Regulation and Supervision Department, Securities and Exchange Board of India, SEBI Bhavan II, Plot No. C7, "G" Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051. The consolidated list of UAPA Nodal Officers is available at the website of Government of India, Ministry of Home Affairs.

9. INVESTOR EDUCATION / EMPLOYEES HIRING AND TRAINING

Implementation of KYC procedures requires FLATTRADE to demand certain information from Customer which may be of personal nature or which has hitherto never been called for. This sometimes leads to lot of questioning by the client as to the motive and purpose of collecting such information. The Team Leader / Relationship Manager shall explain to the Customers the regulatory requirements and benefits of adhering to the KYC guidelines and seek co-operation of the client.

Employee hiring is processed through three modes. First mode is reference through the existing employee's; second mode is through the Consultants and third mode of recruitment through search of job portals. All recruitments happen through minimum of two level of interviews one level through HR and second level is through the respective reporting manager. For manager and above positions, Top management also interview and finalize the candidate for the respective position and also does necessary checks based on the reference provided by the candidate and other modes completed before offering the candidates.

FLATTRADE has an ongoing employee training program for its staff in relation to AML & CFT procedures. We focus on Frontline staff, back office staff, compliance staff, risk management staff & staff dealing with new clients. Training is Crucial for all staff members in order to fully understand the rationale behind these directives, obligations and requirements; and to implement them consistently and be sensitized to the risks of the systems which may be misused by unscrupulous elements.

10. REVIEW OF THE POLICY

Principal Officer & Designated officer shall be the authority to review the policy updated with any amendment etc., as directed by SEBI / FIU-IND and all changes shall be deemed to be incorporated in this policy from their effective date. This AML policy is designed to achieve and monitor our Company's ongoing compliance with the requirements of the PMLA and implementing regulations under it. The policy is reviewed within half year or as and when any important circulars are issued by any regulatory authority.

11. AMENDMENT / MODIFICATION OF THE TERMS

FLATTRADE may at any time amend these Terms, by modifying or rescinding any of the existing provisions or conditions or by adding any amendment on the web site. FLATTRADE shall not be required to communicate any modification or rescission individually to the Client either through physical or electronic form, any separate notice of amendment or modification is deemed to be waived by the Client. The continued use of the services of the member after such notice will constitute acknowledgement and acceptance of such amendment.

Submitted for Approval on 14th Feb 2025

Prepared by E.Sivasankari

Reviewed by L.Sharon Babbi

Prevention of Money Laundering Act (PMLA) Policy