The International Financial Services Centres Authority ( IFSCA Official ) has issued a circular (F. No. IFSCA-FCS/1/2023-Banking, dated November 18, 2024) providing critical exemptions under its Anti-Money Laundering (AML), Counter-Terrorist Financing (CTF), and Know Your Customer (KYC) Guidelines, 2022. Let’s explore what these changes mean for regulated entities in the IFSC ecosystem.
Context and Background
The AML/CTF/KYC Guidelines were introduced on October 28, 2022, to promote compliance with global standards. However, feedback from market participants highlighted the need to exempt certain low-risk entities and activities from these compliance obligations. The IFSCA reviewed these representations and has provided targeted exemptions to enhance operational efficiency without compromising regulatory oversight.
Entities and Activities Exempted
The following entities and activities have been exempted from the AML/CTF/KYC Guidelines:
Global In-House Centres (GICs): Entities registered under the IFSCA (Global In-House Centres) Regulations, 2020.
International Branch Campuses (IBCs) and Offshore Educational Centres (OECs): These are registered under the IFSCA (Setting up and Operation of International Branch Campuses and Offshore Education Centres) Regulations, 2022.
Financial Crime Compliance Service Providers: Entities registered under the IFSCA (Book-keeping, Accounting, Taxation, and Financial Crime Compliance Services) Regulations, 2024.
Financial Institutions Serving their Own Financial Group: Entities providing services only to their group companies, located in jurisdictions not classified as high-risk by the FATF.
Key Compliance Requirements
While the exempted entities enjoy relief, they are still required to:
Conduct and document a Business Risk Assessment (BRA).
Comply with the Prevention of Money Laundering Act (PMLA), 2002, if any AML/CTF risks are identified in their BRA.
Ensure all monetary transactions occur only through accounts maintained with a Banking Unit in the IFSC.
Implications for the Industry
This exemption simplifies operations for eligible entities while maintaining a robust risk management framework. It aligns with the IFSCA's objective of fostering a conducive business environment in the IFSC, enabling innovation and global partnerships.
Takeaway for Regulated Entities
Entities in the IFSC ecosystem must evaluate their eligibility for these exemptions and implement the required safeguards, such as risk assessments and documented compliance processes.
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Disclaimer: This post is for informational purposes only and does not constitute professional advice. While efforts are made to ensure accuracy, we do not guarantee the completeness or reliability of the information provided. Any reliance is at your own risk. Consult professionals for specific advice.
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