Market watchdog Securities and Exchange Board of India (SEBI) may tighten due diligence requirements for issuance and transfer P-Notes and put onus on investors to ensure compliance with anti-money laundering law.
While SEBI has been of the opinion that regulations have already been tightened to check any misuse of this route for money laundering like activities, it has decided to put in place additional safeguards as suggested by the Special Investigation Team (SIT).
SEBI plans to put in place six particular changes to the KYC (Know Your Client) norms and transferability of Offshore Derivative Instruments (ODIs) — commonly known as Participatory Notes or P-Notes — in this connnection.
Suggested changes have been finalised after discussing with stakeholders and they have agreed suggested measures in the interest of the markets, an official said.
These include mandating the issuers of P-Notes to file Suspicious Transaction Reports (STRs), if any, with the Indian Financial Intelligence Unit (FIU) in relation to the ODIs issued by them.
On the KYC rules, while present regulations also mandate that ODIs can be issued only after compliance to the KYC requirements, issuer entities have been adopting either the Indian AML (Anti Money Laundering) norms, norms in the jurisdiction of the issuer or the norms in the jurisdiction of the end beneficial owner or the ODI subscriber.