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Checks are in place to prevent illicit fund flows: Jayant Sinha

PTI 28 Nov 2014, 21:03:02 PM IST

New Delhi: To prevent illicit money flows into capital markets, authorities have put in place advanced risk management mechanism and other systems, the government said today.

Besides, market regulator SEBI has warned stock exchanges regarding probable inflow of funds from terror groups.

"SEBI maintains constant vigil in the market, and in case of any abnormality, takes appropriate action against the concerned entities," Minister of State for Finance Jayant Sinha said in a written reply to the Lok Sabha.

In response to a query on whether SEBI has warned bourses regarding probable inflow of terror funds into the market, Sinha replied in the affirmative.

The systems instituted include advanced risk management mechanisms comprising continuous monitoring and surveillance, various limits on positions, margin requirements circuit filters etc.

The systems and practices are reviewed continuously and modified to meet emerging trends.

In addition, SEBI registered intermediaries are required to follow stringent Know Your Client (KYC) norms on an ongoing basis and are also required to file suspicious transaction reports to Financial Intelligence Unit (FIU) in case of suspicious activities of their clients, he added.

SEBI circulates all stock brokers, depository participants and mutual funds the updated list of individuals and entities who are subject to various sanction measures, such as freezing of assets/accounts, denial of financial services as provided by the United Nations from time to time.

"Sebi has mandated that intermediaries comply before opening any new client account, the stock broker shall ensure that the name/s of the proposed customer does not appear in the updated list," Sinha said and added that intermediaries should "continually scan all existing accounts to ensure that no account is held by or linked to any of the entities."

Moreover, the financing operations in the stock markets are through banking channels and the nature of the funds flowing into the stock market would be reflected in the accounts opened with the banks.

Banks and other financial intermediaries have to ensure compliance with enhanced customer disclosure norms as required under Prevention of Money Laundering Act and rules notified there under.

With regards to non-payment of dividend by companies, Sinha said that SEBI has penalised 10 companies in 2012-13, 20 companies in 2013-14 and 61 companies in 2014-15 till October 31, 2014 for non-redressal of investor grievances including for non-payment of dividend.