Introduction

LLama Research, a registered investment advisory firm under the Securities and Exchange Board of India Act, 1992, recognizes its responsibility in safeguarding the financial system from money laundering and terrorist financing activities. The Prevention of Money Laundering Act, 2002 (PMLA), along with its associated Rules, establishes a comprehensive framework for combating these financial crimes. This Anti-Money Laundering (AML) Policy outlines the principles and procedures we have adopted to comply with the PMLA and actively mitigate the risks associated with financial misconduct.

Legislative Background

The PMLA, enacted in 2002 and enforced in 2005, empowers authorities to track and seize proceeds derived from criminal activities. It mandates specific obligations for "Reporting Entities" like investment advisors, including:

• Maintaining records of all transactions exceeding ₹10 lakhs (or its equivalent in foreign currency) conducted in cash.
• Reporting suspicious transactions, regardless of the payment method, that raise reasonable suspicion of involvement in crime proceeds, possess unusual complexity, or lack economic justification.
• Implementing a robust Know Your Customer (KYC) program to verify client identities and the legitimacy of their funds.

Policy Objectives

By implementing this AML Policy, LLama Research aims to achieve the following key objectives:

• Proactive Suspicious Activity Reporting: We are committed to identifying and reporting any transactions that may be linked to money laundering or terrorist financing activities. Our employees will be trained to recognize red flags and suspicious patterns to ensure timely reporting to the Financial Intelligence Unit-India (FIU-IND) as mandated by the PMLA.
• Rigorous KYC Program: We will maintain a robust KYC program to verify the identity and source of funds for all clients. This includes collecting and validating essential documents like PAN cards, passports, proof of address, and information regarding the source of wealth. We will also conduct ongoing due diligence, particularly for high-risk clients, to ensure the legitimacy of their activities.
• Enhanced Transaction Monitoring: We will implement a system for ongoing monitoring of client transactions. This system will be designed to detect unusual patterns or activities that deviate from established client profiles or investment objectives. Any such anomalies will be promptly investigated, and appropriate action will be taken, including reporting to authorities if suspicion arises.
• Employee Training and Awareness: We recognize that our employees play a crucial role in effectively combating financial crime. We will provide ongoing training programs to educate employees on their AML responsibilities, including identifying suspicious activity, KYC procedures, and reporting obligations. This will foster a culture of compliance within the firm.

Scope of the Policy

This AML Policy applies to all employees, representatives, and third parties associated with LLama Research. We are committed to ensuring that everyone involved with our firm understands their obligations and adheres to the guidelines set forth in this document.

Objectives and Guidelines
Objectives

LLama Research is committed to complying with the PMLA and achieving the following key objectives:

• Customer Due Diligence (CDD): We will implement a robust CDD process to verify the identity and source of funds for all clients. This includes:
1. Policy for Client Acceptance: We will establish a clear policy outlining the criteria for client acceptance. This policy will consider factors such as the client's risk profile, source of wealth, and business activities
2. Client Identification Procedures: We will implement thorough procedures to identify all clients, including beneficial owners in the case of corporate entities. This involves collecting and verifying essential documents like PAN cards, passports, proof of address, and other relevant information.
3. Ongoing Due Diligence: We will conduct ongoing due diligence, particularly for high-risk clients, to ensure the legitimacy of their activities and continued adherence to AML regulations.
• Transaction Monitoring: We will establish a system for ongoing monitoring of client transactions. This system will be designed to detect unusual patterns or activities that deviate from established client profiles or investment objectives. Suspicious transactions will be promptly investigated, and appropriate action will be taken, including reporting to authorities.
• Suspicious Transaction Reporting (STR): We are committed to identifying and reporting any transactions that may be linked to money laundering or terrorist financing activities. Our employees will be trained to recognize red flags and suspicious patterns to ensure timely reporting to the Financial Intelligence Unit-India (FIU-IND) as mandated by the PMLA.
• Compliance Culture:
We will foster a culture of compliance within the firm by providing ongoing training programs to educate employees on their AML responsibilities and the importance of adhering to the PMLA. This includes identifying suspicious activity, KYC procedures, and reporting obligations.

Guidelines

As a SEBI-registered investment advisor, LLama Research will comply with the PMLA's anti-money laundering provisions. To achieve this, we will focus on three specific parameters related to the overall CDD process:

• Policy for Client Acceptance: We will establish a clear policy outlining the criteria for client acceptance, considering factors like client risk profile, source of wealth, and business activities.
• Client Identification Procedures: We will implement thorough procedures to identify all clients, including beneficial owners in the case of corporate entities. This involves collecting and verifying essential documents like PAN cards, passports, proof of address, and other relevant information as defined by SEBI regulations for institutional clients.
• Transaction Monitoring and Reporting: We will establish a system for ongoing transaction monitoring and reporting. This includes identifying and reporting suspicious transactions to the FIU-IND as mandated by the PMLA.

Client/Customer Due Diligence (CDD) for Institutional Clients

LLama Research, as a SEBI-registered investment advisor, is required to conduct thorough Customer Due Diligence (CDD) on all clients before establishing a business relationship. Since we primarily deal with institutional clients, the CDD process will focus on verifying the identity and legitimacy of the institution itself.

SEBI Definition of Institutional Clients

SEBI regulations define institutional clients as a specific category of investors, including:

• Banks
• Mutual Funds
• Foreign Institutional Investors (FIIs)
• Financial Institutions
• Insurance Companies

CDD Requirements for Institutional Clients

Due to the nature of institutional clients and their settlement processes, our CDD will involve the following steps:

1. KYC (Know Your Customer) Verification: We will obtain basic details of the institution to comply with SEBI's KYC norms. This may include information such as the institution's name, address, and registration details.
2. Authorized Representatives: We will require a list of the institution's directors and individuals authorized to trade on their behalf. Additionally, a copy of the board resolution formally granting such trading authorization is necessary.
3. SEBI Registration: Verification of the institution's SEBI registration number is crucial to ensure they operate legally within the Indian securities market.
4. Custodian Details: Since trades for institutional clients are typically settled through clearing houses, we need to obtain details of the custodian bank or institution responsible for settling trades on the client's behalf.
5. Contact Information: We will establish clear communication channels by obtaining contact details for the client's front and back office operations, along with designated contact persons for efficient communication.
6. PAN Card: We will require a copy of the institution's Permanent Account Number (PAN) issued by the Income Tax department of India.
7. Risk Disclosure Document: As mandated by SEBI, we will require the prospective client to duly execute the SEBI-prescribed Risk Disclosure Document. This document outlines the inherent risks associated with investing in the financial markets.

Client/Customer Due Diligence (CDD) Process for Institutional Clients

LLama Research is committed to upholding the highest standards of KYC (Know Your Customer) and AML (Anti-Money Laundering) compliance. Our CDD process for institutional clients is designed to thoroughly verify their identity, legitimacy, and source of funds. This multi-step process ensures we mitigate potential risks associated with financial crime.

Client Information and Identity Verification

• Antecedent Information: Before onboarding any client, we obtain comprehensive background information. This includes independently verifying details submitted by the client, such as:
1. Registered and correspondence office addresses
2. Contact details
3. Occupation
4. Promoters/Directors
5. Source of income
6. Securities market experience
7. PAN card number
8. SEBI registration number (if applicable)
• Global Recognition and Independent Verification: We leverage reliable sources like Bloomberg, Reuters, internet services, or other independent sources to verify the client's identity and origin beyond the information they provide. This ensures the legitimacy of the institution and its operations.
• Compliance Officer Approval: Once information is verified, the registration form and supporting documents require approval by a designated Compliance Officer. This ensures adherence to our internal KYC/AML policies and regulations.

Beneficial Ownership and Control

• Independent Account Verification: Following registration, an independent employee verifies the client account to identify the actual beneficial owners and those in control.
• Shareholder and Promoter Details: We obtain details regarding shareholders and promoters directly from the client and then independently verify this information.
• Account Operator and Control Identification: This step involves determining who is authorized to operate the client's account and who ultimately controls it.
• Source of Funds Verification: We verify the source of funds used for transactions to ensure legitimacy. This includes examining the nature of the transaction, movement of funds, and source of funds during settlements.
• Periodic Financial Review: To maintain ongoing vigilance, we periodically request updated client financial information to confirm the genuineness of transactions.

Ongoing Due Diligence and Scrutiny

• Transaction Monitoring and Risk Assessment: We conduct regular reviews of client transactions and accounts. This ongoing due diligence helps us identify the client's risk profile, source of funds, and overall business activities.
• Transaction Consistency Monitoring: Throughout the business relationship, we monitor client transactions to ensure they remain consistent with our established understanding of the client's business, risk profile, and source of funds.

By implementing this comprehensive CDD process, LLama Research builds strong relationships with our institutional clients while safeguarding the integrity of the financial system. We are committed to preventing money laundering and other financial crimes through robust KYC/AML practices.

Policy for Acceptance of Clients

LLama Research is committed to building strong relationships with trustworthy clients. To ensure compliance with KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations, we have established a comprehensive policy for client acceptance. This policy outlines the criteria and procedures we follow before onboarding a new client.

Client Identification and Categorization

• Client Type: Before registering, we determine the client category (individual, corporate, FII, Mutual Fund, PMS, etc.).
• Client Information: We require all necessary documents for registration, including photo identification, proof of address, PAN card, and bank statements. All documents are verified with originals and countersigned by a designated representative.

Client Due Diligence (CDD)

• Physical Presence: Client registration generally requires physical presence to facilitate identification and verification.
• Antecedent Details: We gather background information on prospective clients to assess potential risks.
• Beneficial Ownership: We ensure registration is in the client's real name and not a fictitious or benami name. We also identify the beneficial owners and controllers behind the account.
• Source of Income: We understand the client's occupation and source of income to assess the legitimacy of their transactions.
• Risk Categorization: Based on various factors, we categorize clients as low, medium, or high-risk to determine the level of CDD required.
• Financial Statements: For high-risk clients, we may require audited financial statements for the past two years.
• KYC Completeness: We ensure all KYC form details are complete and accurate. Incomplete forms will not be accepted.
• Suspicious Activity: If any doubt arises regarding a client's legitimacy (inability to provide documents, suspicious behavior), we reserve the right to decline registration and potentially file a suspicious activity report.

Client Account Management

• Account Opening Restrictions: We will not open accounts in fictitious names or anonymously.
• Transaction Monitoring: Client accounts are regularly reviewed to identify suspicious transactions. Any such activity may lead to account freezing or restrictions on securities/money delivery.

Risk-Based Approach

We employ a risk-based approach to CDD. The extent of due diligence varies depending on the perceived risk associated with a client. This allows for a more efficient process while maintaining robust KYC/AML practices.

Clients of Special Category (CSC)

Clients with a higher risk profile are categorized as CSC (Clients of Special Category). These include:

1. Non-resident Indians (NRIs)
2. High Net-worth Individuals (HNIs)
3. Trusts, Charities, NGOs, and donation-receiving organizations
4. Companies with close family shareholding or beneficial ownership
5. Politically Exposed Persons (PEPs) of foreign origin
6. Companies offering foreign exchange
7. Clients from high-risk countries
8. Non-face-to-face clients
9. Clients with a negative public reputation

For CSC clients, we implement enhanced CDD measures to mitigate potential risks associated with money laundering or terrorist financing activities.

Continuous Vigilance

We reserve the right to exercise independent judgment in classifying clients and may request additional information or documentation when necessary. This policy is subject to change based on evolving regulations and best practices.

Client Identification Process

LLama Research is committed to upholding the highest standards of Know Your Customer (KYC) compliance. Our client identification process adheres to the following principles:

Strict KYC Policy Adherence:

• We strictly adhere to our KYC policy throughout the client lifecycle, including:
1. Account opening
2. Client transaction processing
3. Any situations where the accuracy or completeness of existing client information is questioned

Reliable Sources for Identification:

• We use reliable sources, such as documents and information, to verify client identities effectively.
• We obtain sufficient information to establish the client's identity and the intended nature of the business relationship to our satisfaction.

Meeting Regulatory Requirements:

• The information collected is comprehensive enough to demonstrate due diligence to regulatory and enforcement authorities if required.
• All original documents must be reviewed and verified before accepting a copy. Copies are then duly attested (certified) for our records.

Addressing Incomplete Information:

• If a prospective client fails to provide satisfactory identification evidence, we document this and report it to a designated internal authority for further action.

Internal Guidelines and Regulatory Compliance:

• We maintain internal KYC guidelines that align with the principles set forth by SEBI (Securities and Exchange Board of India) and the PMLA (Prevention of Money Laundering Act).
• We continuously monitor client information for inconsistencies and take appropriate follow-up actions.

Record Keeping Requirements:

• We comply with record-keeping requirements mandated by SEBI, PMLA, and other relevant regulations. These records are crucial for reconstructing individual transactions and providing evidence for potential investigations.

Audit Trail for Tracing Financial Activity:

• We maintain detailed records to facilitate the reconstruction of a client's financial profile. This includes:
1. Identifying beneficial account owners
2. Monitoring transaction volume
3. Recording the origin and form of deposited funds
4. Capturing the identity of individuals conducting transactions
5. Tracking the destination and form of outgoing funds
6. Documenting instructions and authorization for transactions

Cooperation with Law Enforcement:

• We ensure that all client and transaction records are readily available to competent investigating authorities upon request. This facilitates swift action in cases of suspected money laundering, terrorist financing, or other criminal activities.

Retention of Records

LLama Research adheres to strict record-keeping requirements to comply with PMLA (Prevention of Money Laundering Act) and other relevant regulations. These records are critical for reconstructing transactions and identifying potential financial crimes.

Record Retention Period

The following minimum record retention periods are observed:

• Transaction Records: All records related to domestic and international transactions, including electronic records, must be maintained for at least ten (10) years from the transaction date.
• Client Identification Records: Copies of official identification documents (passports, ID cards, etc.), account files, and business correspondence must also be retained for ten (10) years from the transaction cessation date.

Record Storage Formats

Records are maintained in both hard copy and soft copy formats to ensure accessibility and redundancy in case of unforeseen circumstances.

Extended Retention for Special Cases

• Ongoing Investigations: If records pertain to ongoing investigations or transactions reported as suspicious, they will be retained until the case is officially closed.

Monitoring of Transactions

Regular transaction monitoring is essential for our AML (Anti-Money Laundering) program's effectiveness. We focus on identifying:

• Complex Transactions: Transactions with complex structures or unusual characteristics.
• Unusually Large Transactions: Transactions exceeding established thresholds for specific client categories.
• Transactions Lacking Economic Justification: Transactions that appear to have no clear economic purpose.

Internal Reporting:

• We maintain internal thresholds for transaction monitoring based on client categories. Transactions exceeding these limits receive special attention.
• Records of all suspicious transactions are preserved and reported to the appropriate authorities as mandated by PMLA Section 12.
• We also report suspicious activity to our internal superiors, including the head of the department.

Compliance Department Review

The Compliance Department conducts random examinations of client transactions to assess their nature and identify potential suspicious activity.

Suspicious Transaction Monitoring & Reporting

LLama Research is committed to identifying and reporting suspicious activity to prevent money laundering and other financial crimes. Our robust Suspicious Transaction Monitoring & Reporting program is designed to detect potentially suspicious transactions and report them to the appropriate authorities.

Identifying Suspicious Transactions

Determining if a transaction is suspicious depends on several factors, including:

• Client Background and Transaction Details: We consider the client's background information, the nature of the transaction, and any other relevant circumstances.

Examples of Potentially Suspicious Transactions

The following are some examples of transactions that may warrant further investigation:

• Difficulty verifying client identity or lack of cooperation from the client.
• Providing asset management services to clients with unclear or suspicious sources of funds.
• Clients from high-risk jurisdictions or those introduced by high-risk entities.
• Unexplained significant increases in client activity.
• Unusually large cash deposits by individuals or businesses.
• Transferring large sums overseas with instructions for cash payment.
• Investment proceeds diverted to seemingly unrelated third parties.
• Unusual transactions by Clients of Special Category (CSCs) or businesses like shell corporations or those involved in high-risk exports/imports of small value goods.

Reporting Suspicious Activity

• Any suspected suspicious transaction is promptly reported to a designated Principal Officer.
• Detailed reports are submitted outlining the client's transactions, the nature of the suspicion, and supporting evidence.

Client Confidentiality

• We maintain normal business relations with the client until officially notified otherwise.
• Clients are not informed about suspicion reports to avoid tipping them off.

Exceptional Action

• In rare circumstances, we may suspend account activity, transactions, or take other actions if continued business dealings pose a high risk.
• Such actions may involve multiple jurisdictions depending on the transaction's complexity.

Collaboration with Authorities

We cooperate fully with relevant authorities in investigating suspicious activity and reporting potential financial crimes.

Principal Officer Designation and Duties Appointment

LLama Research is pleased to announce the appointment of Karan Shah as the Principal Officer responsible for overseeing compliance with anti-money laundering (AML) policies related to our Remittance Transfer Agent (RIA) activities.

Responsibilities

Mr. Shah will assume the following key duties:

• Implementation of Internal Controls & Procedures: He will be responsible for developing and implementing effective internal controls and procedures to identify and report suspicious transactions or activities related to money laundering. These controls may include:
1. Customer Due Diligence (CDD) procedures to verify client identities and sources of funds
2. Transaction monitoring to identify unusual or high-risk transactions
3. Suspicious Activity Reporting (SAR) procedures to report suspected money laundering to the Financial Intelligence Unit – India (FIU-IND)
• Oversight and Training: Mr. Shah will oversee the ongoing implementation of these AML controls and procedures. He will also be responsible for ensuring that all relevant LLama Research personnel are adequately trained in AML compliance.
• Reporting and Escalation: Mr. Shah will be the designated point of contact for all AML-related matters. He will receive reports of suspicious activity and ensure timely and accurate reporting to the FIU-IND. Additionally, he will escalate any potential concerns to senior management as necessary.

Commitment to AML Compliance

By designating a dedicated Principal Officer and implementing a robust AML program, LLama Research demonstrates its commitment to preventing money laundering and other financial crimes. We are dedicated to upholding the highest ethical standards and contributing to a safe and secure financial environment.