Anti Money Laundering Policy

1. Preamble

The Prevention of Money Laundering Act, 2002 (PMLA) was enacted in 2003 and brought into force with effect from 1st July 2005 to combat money laundering and terrorist financing.

Pursuant to the recommendations made by the Financial Action Task Force on anti-money laundering standards, SEBI has issued a master circular on anti-money laundering/Combating the Financing of Terrorism (CFT) in line with the FATF recommendations and PMLA Act, 2002. As per the Guidelines on Anti Money Laundering standards notified by SEBI, all registered intermediaries such as Stockbrokers, Depository Participants have been advised to ensure that proper policy frameworks are put in place.

AIIONGOLD Ltd (“Company”) is committed to transparency and fairness in dealing with all stakeholders and ensuring adherence to all applicable rules and regulations. The Company is committed to deterring, to the best of its ability, money laundering and related activities. In view of the above, Company has framed its Anti-Money Laundering policy (“Policy”) basis Know Your Customer (“KYC”) guidelines; Anti-Money Laundering (“AML”) standards, SEBI Master Circular Ref No: SEBI/HO/MIRSD/DOP/CIR/P/2019/113 and directives issued by SEBI from time to time, collectively hereinafter referred to as AML measures.

2. Objective

The objective of this policy is to ensure that we identify and discourage any money laundering or terrorist financing activities and that the measures taken by us are adequate to follow the spirit of the Act and guidelines. The policy has been framed by the Company to achieve the below mentioned objectives:

• To lay down a detailed AML framework and to ensure that the Company is not used as a conduit for money laundering and/or terrorist financing.
• To put in place an effective system and procedure for client identification and verification of the client’s identity and address on the basis of which clients will be accepted.
• To put in place appropriate controls and a robust framework for detection and reporting of suspicious activities in accordance with applicable laws/laid down procedures.
• To take necessary steps to ensure that the concerned staff is adequately trained in KYC/AML procedures.
• Record keeping/retention of documents as per applicable rules and regulations.

3. Concept of Money Laundering

Section 3 of the Prevention of Money Laundering (PML) Act 2002 has defined the offence of money laundering as under:

Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of the offence of money-laundering.

In simple terms, money laundering refers to the act of concealing or disguising the origin and ownership of proceeds of criminal activity, including drug trafficking, corruption, terrorism, fraud, and organized crime activities. The process of money laundering involves creating a web of financial transactions so as to hide the origin and true nature of these funds. For the purpose of this document, the term ‘money laundering’ also covers financial transactions where the end use of funds goes towards terrorist financing, irrespective of the source of the funds.

Generally, the money laundering process involves three (3) stages: placement, layering and integration. As illegal funds move from the placement stage through the integration stage, they become increasingly harder to detect and trace back to the illegal source.

• Placement: Initial introduction of illicit funds into a financial system.
• Layering: After illegal funds have entered the financial system, layers are created by closing and opening accounts, purchasing and selling various financial products, and transferring funds among financial institutions and across national borders, to disguise the audit trail and provide the appearance of legitimacy.
• Integration: The placing of laundered proceeds back into the economy in such a way that they re-enter the market appearing as normal and legitimate funds.

4. Money Laundering Risks

The risks that the Company may be exposed to if the KYC/AML framework is not strictly adhered to are as follows:

• Reputational harm – Any failure to comply with this Policy could have a severe impact on the reputation of the Company, given the nature of the business in the Stock Broking industry, which requires the confidence of investors/public.
• Legal penalties – Failure to comply with applicable laws or regulations may result in a negative legal impact on the Company, such as fines, confiscation of illegal proceeds, suspension/termination of licenses by any regulators, or criminal liability.
• Financial losses – Risk of loss due to any of the above risks or a combination thereof resulting in a negative financial impact on the Company.

The Company wishes to make it abundantly clear that non-compliance with this Policy by any of the Company’s employees/staff may be grounds for disciplinary action, including dismissal from employment, in addition to formal legal proceedings.

5. Definitions

6. Implementation of AML Measures/Directives

Company has laid down three specific parameters related to the overall ‘Client Due Diligence Process’:

• Policy for acceptance of clients
• Procedure for identifying the clients
• Transaction monitoring and reporting, especially Suspicious Transactions Reporting (STR)

Other AML measures include:

• Staff hiring policies and training programs
• Review of the policy

7. Client Due Diligence (CDD)

The CDD measures shall comprise the following:

• Obtaining sufficient information in order to identify persons who beneficially own or control the securities account. The beneficial owner is the natural person or persons who ultimately own, control or influence a client and/or persons on whose behalf a transaction is being conducted.
• Verify the client’s identity using reliable, independent source documents, 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, including for clients other than individuals or trusts (companies, partnerships, unincorporated associations) and for clients which are trusts, subject to defined ownership/control thresholds (e.g. more than 25% of shares/capital/profits for a company, or more than 15% for a partnership or unincorporated association).
• Exemption in case of listed companies where the client or owner of the controlling interest is listed on a stock exchange, or is a majority owned subsidiary of such a company.
• Compliance with applicable SEBI circulars for the purpose of identification of beneficial ownership for foreign investors.
• Verify the identity of the beneficial owner and understand the ownership and control structure of the client.
• Conduct ongoing due diligence and scrutiny of transactions throughout the business relationship, taking into account the client’s source of funds where necessary.
• Periodically update all documents, data or information of clients and beneficial owners collected under the CDD process.

8. Policy for Client Acceptance

Where the client is a new client, the account must be opened only after ensuring that the KYC verification process is complete. The Company follows the industry standard procedure for KYC as per SEBI Guidelines, including uniform KYC norms developed under the SEBI (KYC Registration Agency) Regulations, 2011, and mandated In-Person Verification (IPV) for new investors.

The below points are considered before accepting any client:

• No account shall be opened in an anonymous or fictitious/benami name.
• Factors of risk perception are clearly defined with regard to the client’s location, nature of business activity, trading turnover and manner of payment, enabling classification of clients into low, medium and high risk. Clients of special category may be classified even higher and require a higher degree of due diligence.
• Documentation requirements and information collected shall depend on the perceived risk, having regard to Rule 9 of the PML Rules and applicable SEBI directives and circulars.
• An account shall not be opened where appropriate CDD measures/KYC policies cannot be applied, or where the client’s identity cannot be ascertained or is suspected to be non-genuine or non-cooperative; a suspicious activity report shall be filed in such cases.
• The circumstances under which a client may act on behalf of another person/entity, the manner of operating such an account, transaction limits, and verification of the agent’s authority shall be clearly laid down.
• Necessary checks shall be put in place to ensure a client’s identity does not match any person with a known criminal background or one banned by any enforcement agency worldwide.
• The CDD process shall be revisited whenever there are suspicions of money laundering or terrorism financing (ML/FT).

9. Risk-Based Approach

Certain clients may fall into a higher or lower risk category depending on their background, type of business relationship or transaction, etc. The Company applies each client due diligence measure on a risk-sensitive basis — adopting enhanced due diligence for higher-risk clients and a simplified process for lower-risk clients. Low risk provisions shall not apply where there are suspicions of ML/FT or other factors suggesting the client does not in fact pose a low risk.

10. Risk Assessment

The risk assessment carried out shall consider all relevant risk factors before determining the level of overall risk and the appropriate level and type of mitigation to be applied. The assessment shall be documented, updated regularly and made available to competent authorities and self-regulating bodies, as and when required.

11. Clients of Special Category (“CSC”)

Such clients shall include the following:

• Non-resident clients
• High net-worth clients
• Trusts, charities, Non-Governmental Organizations (NGOs) and organizations receiving donations
• Companies having close family shareholdings or beneficial ownership
• Politically Exposed Persons (PEPs) – individuals who are or have been entrusted with prominent public functions in a foreign country, including family members or close relatives of PEPs
• Companies offering foreign exchange offerings
• Clients in high-risk countries or geographic areas where the effectiveness of anti-money laundering or terror financing controls is suspect, guided by FATF statements and publicly available information
• Non face-to-face clients
• Clients with dubious reputation as per publicly available information

12. Client Identification Procedure (“CIP”)

• The Company proactively puts in place risk management systems to determine whether a client, potential client, or beneficial owner is a Politically Exposed Person, using client-provided information, publicly available information, or commercial electronic PEP databases.
• Senior management approval is required for establishing or continuing business relationships with PEPs.
• Clients are identified using reliable sources including documents/information, with adequate information obtained to establish identity and the purpose of the intended relationship.
• Information must be adequate to satisfy competent regulatory/enforcement authorities that due diligence was observed. Each original document is seen prior to acceptance of a copy.
• Failure by a prospective client to provide satisfactory evidence of identity is noted and reported to higher authority within the Company.

13. Reliance on Third Party for Carrying Out Client Due Diligence

Company may rely on a third party for identification and verification of a client’s identity, and for determining whether the client is acting on behalf of a beneficial owner. Such third parties must be regulated, supervised or monitored, and have measures in place for compliance with CDD and record-keeping requirements under the PML Act, in accordance with Rule 9(2) of the PML Rules and applicable SEBI regulations. The Company remains ultimately responsible for CDD and enhanced due diligence, as applicable.

14. Record Keeping

Company shall ensure compliance with the record keeping requirements contained in the SEBI Act, 1992, Rules and Regulations made thereunder, PMLA as well as other relevant legislation, Rules, Regulations, Exchange Byelaws and Circulars, maintaining records sufficient to permit reconstruction of individual transactions as evidence for prosecution of criminal behavior where necessary. Company retains, reviews periodically and updates the following information to maintain a satisfactory audit trail:

• The beneficial owner of the account
• The volume of the funds flowing through the account
• For selected transactions: the origin of the funds, the form in which the funds were offered or withdrawn, the identity of the person undertaking the transaction, the destination of the funds, and the form of instruction and authority

Company also maintains proper records of transactions prescribed under Rule 3 of the PML Rules, including:

• All cash transactions of value more than ten lakh rupees or its equivalent in foreign currency
• All series of cash transactions integrally connected to each other, individually valued below ten lakh rupees, where the monthly aggregate exceeds ten lakh rupees or its equivalent
• All cash transactions involving forged or counterfeit currency notes or forged documents
• All suspicious transactions, whether or not made in cash

15. Information to Be Maintained

Company shall maintain and preserve the following information in respect of transactions referred to in Rule 3 of the PML Rules:

• The nature of the transaction
• The amount of the transaction and the currency in which it is denominated
• The date on which the transaction was conducted
• The parties to the transaction

16. Retention of Records

Company shall evolve an internal mechanism for proper maintenance and preservation of records, allowing easy and quick retrieval of data when requested by competent authorities. Records under Rule 3 of the PML Rules shall be maintained and preserved for a period of ten years from the date of transactions between the client and Company. Records evidencing client and beneficial owner identity, account files and business correspondence shall be maintained for ten years after the business relationship has ended or the account has been closed, whichever is later. Records related to ongoing investigations or suspicious transaction reports shall be retained until the case is confirmed closed.

17. Records of Information Reported to FIU-IND

Company shall maintain and preserve records of information related to transactions, whether attempted or executed, which are reported to the Director, Financial Intelligence Unit-India (FIU-IND), as required under Rules 7 and 8 of the PML Rules, for a period of ten years from the date of the transaction between the client and Company.

18. Monitoring of Transactions

Regular monitoring of transactions is vital for the effectiveness of AML procedures. Company pays special attention to complex, unusually large transactions/patterns which appear to have no economic purpose, and may specify internal threshold limits for each class of client accounts. Findings are examined carefully, recorded in writing, and made available to auditors and to SEBI/stock exchanges/FIU-IND/other relevant authorities during audit, inspection, or as required. These records are maintained and preserved for a period of five years from the date of the transaction. Suspicious transactions are reported to the Director, FIU-IND under Section 12 of the PMLA, and regularly reported to higher authorities within the Company. The compliance cell randomly examines transactions to assess whether they are suspicious in nature.

19. Suspicious Transaction Monitoring and Reporting

Company has procedures in place to recognize and report suspicious transactions, guided by the definition of a suspicious transaction contained in the PML Rules. Circumstances that may indicate a suspicious transaction include (illustrative, not exhaustive):

• Clients whose identity verification seems difficult or who appear not to cooperate
• Services for clients where the source of funds is not clear or inconsistent with the client’s apparent business activity
• Clients based in high-risk jurisdictions
• Substantial increases in business without apparent cause
• Clients transferring large sums of money to or from overseas locations with instructions for payment in cash
• Attempted transfer of investment proceeds to apparently unrelated third parties
• Unusual transactions by CSCs and businesses reportedly involving offshore banks/financial services or import-export of small items

Any suspicious transaction is immediately notified to the Money Laundering Control Officer/Principal Officer, with continuity maintained in dealing with the client without disclosing the report or suspicion. All attempted transactions, even if abandoned or aborted by clients, are reported in STRs irrespective of the transaction amount. Clients from high-risk countries are categorized as CSC and subject to appropriate counter measures, including enhanced scrutiny and reporting.

20. List of Designated Individuals/Entities

Company ensures that accounts are not opened in the name of anyone appearing on the updated list of individuals and entities subject to sanction measures approved by the Security Council Committee pursuant to relevant United Nations’ Security Council Resolutions (UNSCRs). Company continuously scans existing accounts to ensure no account is held by or linked to any listed entity or individual, and immediately intimates SEBI and FIU-IND of any matching accounts.

21. Procedure for Freezing of Funds, Financial Assets or Economic Resources or Related Services

Section 51A of the Unlawful Activities (Prevention) Act, 1967 (UAPA), relating to the prevention of and coping with terrorist activities, was brought into effect through the UAPA Amendment Act, 2008. The Central Government has issued orders detailing the procedure for implementation of Section 51A of the UAPA, which the Company strictly complies with, including subsequent orders reallocating related work to the Counter Terrorism and Counter Radicalization (CTCR) Division of the Ministry of Home Affairs.

22. Reporting to Financial Intelligence Unit-India

In terms of the PML Rules, Company reports information relating to cash and suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND) at the following address:

Company adheres to the following reporting requirements:

• The Cash Transaction Report (CTR), wherever applicable, is submitted to FIU-IND by the 15th of the succeeding month.
• The Suspicious Transaction Report (STR) is submitted within 7 days of arriving at a conclusion that a transaction is suspicious, with reasons recorded by the Principal Officer without undue delay.
• The Non-Profit Organization Transaction Reports (NTRs) for each month are submitted to FIU-IND by the 15th of the succeeding month.
• The Principal Officer is responsible for timely submission of CTR, STR and NTR to FIU-IND.
• No nil reporting is made to FIU-IND where there are no reportable transactions.
• Utmost confidentiality is maintained in filing CTR, STR and NTR to FIU-IND.

Company does not restrict operations in accounts where an STR has been made, and does not disclose (“tip off”) that an STR or related information is being reported to FIU-IND, at any stage before, during or after submission. Company files an STR whenever there are reasonable grounds to believe transactions involve proceeds of crime, irrespective of the transaction amount or threshold limits under Part B of the Schedule of PMLA, 2002.

23. Designation of Officers for Ensuring Compliance with Provisions of PMLA

24. Employees’ Hiring/Training/Investor Education

25. Review of the Policy

The Company reserves the right to amend or modify this Anti-Money Laundering Policy in whole or in part to ensure its effectiveness. To ensure effectiveness of policies and procedures, the person conducting such review shall be different from the one who framed the policies and procedures. Any such amendment will be made only after obtaining the requisite approvals.