This Policy has been framed by Alphaware Advisory Services Private Limited (“the Company”) in order to comply with the applicable Anti Money Laundering Standards and to take measures to prevent the Company from being used as a vehicle for Money Laundering and Terrorist Financing.

Money Laundering and Terrorist Financing

Money Laundering may be defined as cleansing of dirty money obtained from legitimate or illegitimate activities with the objective of hiding its source and rendering it in legally usable form. The process of money laundering involves creating a web of financial transactions so as to hide the origin of and true nature of these funds. The process of money laundering is also an illegal activity involving financial jugglery. In fact, the activity of money laundering is an activity separate from the activity from which the money sought to be laundered is obtained.

Although the process of money laundering has only come to the attention of the international community in recent years, the practice has long ago been present, dating back to the time of the pirates in European seas. But it was only in the 1920s that the term money laundering was used to refer to these kinds of activities.

According to historians, the term was first coined in the United States, referring to criminal gangs who used business establishments such as car washes and laundry shops to mask their illegal activities. Payments in laundry shops as well as vending machines in general are coins. The coins put into the machines are the only proof of how the business is going. Seeing that there will be no paper trail to point out the “additional” earnings that came from their illegal activities, crime groups intentionally add coins to the daily business income, making it appear that the coins were put there by paying customers. Some however, place the origin of the term money laundering to mean “the act of washing clean dirty money.”

But the true hazards of money laundering came into light when the world was shocked when United States of America was hit by terror on September 11, 2001 which brought down the twin towers of WTC in New York. It was then when the world started taking notice of the terrorist financing activities and the hazards of money laundering. Soon after the 9/11 attacks, the Government of United States enacted the USA Patriot Act on October 26, 2001 and the Government of United Kingdom adopted the FSA (Financial Services Authority) Regulations for adoption of stringent policies for combating the menace of money laundering.

Several other countries have already enacted legislations to detect and curb money laundering activities. Finally, the Government of India succeeded in enacting such legislation after four years of presenting the Anti-Money Laundering Bill in 1998, which later got enacted as the Prevention of Money Laundering Act in 2002, with the objective of preventing or controlling the basic crimes related to Indian Penal Code, narcotics, corruption, tax-evasion, etc.

Need for this Policy

In India, the Reserve Bank of India (“RBI”) issued the Know Your Customer (KYC) Guidelines — Anti Money Laundering Standards on November 29, 2004 keeping in mind the requirements of PML Act, 2002, which all the banks in India had to adopt by December 31, 2005 (compliance to AML standards). The Government has also setup a Financial Intelligence Unit-India (FIU-IND), in line with Financial Action Task Force (FATF) recommendations. FATF is an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. The FIU would receive the Suspicious Activity Reports from all Financial Institutions and would analyze them before passing them to the Enforcement Directorate for investigation and prosecution.

Securities and Exchange Board of India (SEBI) has issued guidelines on Know Your Customer (KYC) standards and AML (Anti-Money Laundering) Measures vide circulars dated January 18, 2006 and March 20, 2006. The circulars require all registered intermediaries, which are covered under Section 12 of SEBI Act, 1992 to prepare and put in place proper policy framework as per the guidelines on anti-money laundering measures. The guidelines issued with the circular are in the context of the recommendations made by the FATF on anti-money laundering standards. The policy framework incorporates salient aspects of the measures and obligations of registered intermediaries under the Prevention of Money Laundering Act, 2002 (PMLA) and Rules to Prevention of Money Laundering (Amendment) Act, 2005 (PMLA Rules) that have come into force on July 1, 2005.

The guideline provides a general background on the subjects of money laundering and terrorist financing and provides guidance on the practical implications of the Act. The Guidelines also sets out the steps that a registered intermediary and any of its representatives, should implement to discourage and identify any money laundering or terrorist financing activities.

The term “CATCH” is a shorthand way of helping you to remember the five main elements of the implementation of these rules, regulations and guidelines.

  1. Control your business by having anti money laundering systems in place
  2. Appoint Principal Officer
  3. Train your staff
  4. Confirm the identity of your customers
  5. Hold all records for at least 8 years