integral part of the lexicon. India was recently validated by FATF to have adequately completed its promised actions, among which is placing the onus on regulated entities to conduct Client Due Diligence (CDD) in order to ascertain beneficial ownership as well as ‘control’ embedded within the structure of its client.
On-going CDD involves monitoring sources of income and wealth of the client and setting off alarm bells in case of suspicions. This applies equally to accounts held by FIIs wherein PNs have been issued. There is no reason why an account opened by a regulated entity in its home territory should be looked upon differently than one opened here, when both jurisdictions are signatory members of the FATF.
The implication is that past fears about the type of money and its ownership are not relevant or pertinent today since money entering India has passed the test of CDD in an Foreign Investment Promotion Board (FIPB) member country. In fact, the recent news on FIPB raising queries due to absence of beneficial ownership details appears straight out of the PML Rulebook and rightfully so.
The information about beneficial holders of PNs is uploaded on a periodic basis to the regulator. The additional mandatory conditions that could be imposed before the government of India truly smiles at PNs are that FIIs must perform a role of ‘execution only’ for any buy, sell, borrow or lend order of a PN client and that the bank account of PN holders must be located in an FATF member country.
The onus of tax and regulatory compliances arising from investing in India is on the FII; the PN holder bears the economic implications of the same. The PN holder therefore does not worry about obtaining a PAN or engaging tax services. The universal model of prime broking with all attendant conditions is thereby activated for channelising investments to India.
It was once stated that India will look like another emerging market in south-east Asia only when a desire to take exposure on India can be executed within a couple of hours. Step back and enquire of your kith and kin holding foreign nationality the quickest and hassle-free way of taking an exposure on Indian capital markets.
A likely answer will be investment through a PN contract with the local bank where they own an account ie KYC compliant. Surely such money coming into India