FAQs on Anti-Money Laundering, Counter-Terrorist Financing and Know Your Customer Guidelines

FREQUENTLY ASKED QUESTIONS (FAQs) ON INTERNATIONAL FINANCIAL SERVICES CENTRES AUTHORITY (ANTI MONEY LAUNDERING, COUNTER-TERRORIST FINANCING AND KNOW YOUR CUSTOMER) GUIDELINES, 2022

These FAQs do not constitute legal advice but are intended to provide clarity on the concepts related to the IFSCA (AML, CTF and KYC) Guidelines, 2022 (“Guidelines”). Any queries about the Guidelines may be addressed to Division of AML/CFT at aml-cft-div@ifsca.gov.in. In case of any disparity between these FAQs and the provisions of relevant Acts/rules/regulations/ Guidelines, the later shall prevail.

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FREQUENTLY ASKED QUESTIONS

I. Applicability of the International Financial Services Centres Authority (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022:

1. The International Financial Services Centres Authority (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022 (‘Guidelines’) are applicable to which entities?

   As per clause 1.2 of Chapter-I of the Guidelines, it shall be applicable to every Regulated Entity (RE) which is licensed, recognized, registered by International Financial Services Centres Authority (IFSCA) and also to the Regulated Entities authorised by it, to the extent specified.

   The provisions of the Guidelines shall also apply to the Financial Group of the Regulated Entity, to such an extent as specified in Chapter-XII of the Guidelines.

II. Appointment of Designated Director and Principal Officer

2. Can the Designated Director and Principal Officer be the same person?

   The Designated Director and Principal Officer shall be different individuals.

3. Who can be designated as Designated Director?

   The Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2022 issued vide gazette notification dated 13th July 2022, stipulates that if the reporting entity is located in IFSC, Designated Director (DD) includes a person who is heading the reporting entity.

   The head of the regulated entity in IFSC can be designated as Designated Director.

4. Who can be designated as Principal Officer?

   Chapter-VIII, clause 8.2 (c) & (f) of the Guidelines, stipulates that any person having necessary seniority and authority within the Regulated Entity and distinct from the internal audit and business line functions of RE shall be designated as Principal Officer (PO).

5. Can a legal entity be designated as Designated Director or Principal Officer?

   The Designated Director or Principal Officer shall be a natural person; no legal entity or any other juridical person can be designated as Designated Director or Principal Officer by Regulated Entity.

6. Can a Principal Officer of a Fund Management Entity (FME) under the IFSCA (Fund Management) Regulations, 2021 (FM Regulations) be designated as Principal Officer in respect of Guidelines?

   The Principal Officer under the FM Regulations shall be responsible for the overall activities of the FME. To enable unbiased judgments and facilitate impartial advice to management, the Principal Officer under the Guidelines should be distinct from the internal audit and business line functions (refer clause 8.2 (f) of the Guidelines). Thus, the Principal Officer of an FME under the FM Regulations is not eligible to be designated as Principal Officer in respect of IFSCA (AML/CFT/KYC) Guidelines, 2022.

7. Can a Principal Officer of an FME under the FM Regulations be designated as Designated Director with respect to Guidelines?

   If the Principal Officer of an FME under the FM Regulations is the head of the Regulated Entity, in such case, by virtue of The Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2022 issued vide gazette notification dated 13th July 2022, such Principal Officer an FME under the FM Regulations can be designated as Designated Director.

8. Can a Designated Director and Principal Officer of parent entity located in onshore India be designated as Designated Director and Principal Officer of Regulated Entity in IFSC?

   The Head of the Regulated Entity in IFSC shall be Designated Director (DD) and as per clause 8.2 (f) of the Guidelines, the Principal Officer shall have the necessary seniority and authority within the Regulated Entity to effectively perform its responsibilities. Thus, the Designated Director and Principal Officer of parent entity located in onshore India is not eligible to be designated or appointed as Designated Director and Principal Officer of Regulated Entity in IFSC.

9. Whether the Designated Director and the Principal Officer of the FME appointed for the purpose of Guidelines, can be designated as the Designated Director and Principal Officer for the Alternate Investment Fund (AIF) to undertake the compliances required under the Guidelines?

   The Designated Director and Principal Officer appointed for the purpose of implementation of Guidelines by the FME registered with IFSCA, can be designated as Designated Director and Principal Officer for the AIF(s) managed by the FME.

III. AML/CTF/KYC Policy

10. Which entities shall have the AML-CFT KYC policy as per the Guidelines?

    Every unit/entity which has been granted license, recognition, registration, or authorization by the IFSCA shall formulate an AML-CFT-KYC policy which shall be duly approved by the Governing Body or by a committee to whom such power has been delegated by the Governing Body. (Refer clause 1.5 of the Guidelines)

11. Which authority is considered as Governing Body for the purpose of approval of AML/CTF/KYC policy of a Regulated Entity?

    In view of clause 1.3.20. of the Guidelines, Governing Body for the purpose of approval of AML/CTF/KYC policy of a Regulated Entity means:

• (a) In relation to a company- the board of directors;
• (b) In relation to a partnership firm- the partner(s);
• (c) In relation to a limited liability partnership- the partners including any designated partner (s);
• (d) In relation to a trust- the managing trustee (s); and
• (e) In relation to an unincorporated association or a body of individuals - committees of management or anybody who controls and manages the affairs of such unincorporated association or a body of individuals (consisting of more than one person);
• (f) In relation to a Regulated Entity established as a branch, a committee constituted at the branch level with the authorization of the Governing Body of the parent entity of the Regulated Entity.

12. Whether a company already having an existing AML/CFT/KYC policy under Prevention of Money Laundering Act, 2002, is required to formulate and approve separate AML/CFT/KYC policy under Guidelines, or the existing AML policy can be amended to incorporate the requirements prescribed in the Guidelines?

    As per clause 1.5 of Chapter-I of the Guidelines, every Regulated Entity shall formulate an AML-CFT-KYC policy incorporating the key principles or elements of the Guidelines, which shall be duly approved by the Governing Body or by a committee to whom such power has been delegated by the Governing Body. Thus, in case existing AML/CFT/KYC policy of the Regulated Entities already includes key principles or elements of the Guidelines the same may be continued without the need for formulating a new AML/CFT/KYC policy. Alternatively, in case existing AML/CFT/KYC policy of the Regulated Entities does not includes key principles or elements of the Guidelines, the Regulated Entities shall incorporate the same and get approved by the Governing Body or by a committee to whom such power has been delegated by the Governing Body.

IV. FIU-IND Registration and obligations thereunder.

13. Which IFSC entities are required to register on FIU-IND FINGate 2.0 portal?

    All Regulated entities granted license, recognition, registration or authorization by the IFSCA except an Alternate Investment Fund (AIF) of an FME registered with IFSCA shall register on FIU-IND FINGate 2.0 portal.