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Identifying, analyzing and understanding the risks in this sphere are essential in the conduct of the participants
CVM Instruction 617 came into force on 10/1/2020 and brought about significant improvements in the processes of preventing money laundering and terrorist financing (PLDFT).
In order to clarify the main points to be fulfilled by market participants and provide guidance on best practices, the Market and Intermediate Relations (SMI) and Institutional Investor Relations (SIN) Superintendencies of the Securities and Exchange Commission (CVM) ) issue a circular letter with guidelines.
The technical areas demonstrate which items have been improved and how the regulated ones should act according to them:
- Risk-Based Approach: identify, analyze and understand the LDFT risks of the relevant customers, products, services, distribution channels and relevant service providers, to subsequently minimally segment them into low, medium and high.
- Know Your Client Policy: in addition to the process of identifying and collecting customer registration data, ongoing steps were taken to collect supplementary information and, in particular, to identify their respective final beneficiaries.
- Client and Investor: the new standard adapted the concept of client with that of investor, maintaining the understanding of CVM Instruction 505 and clarifying, for the exclusive purposes of PLDFT, the more limited scope (species) of the client concept and the broader (gender) of the investor concept .
i) client: investor who maintains a direct commercial relationship with the persons mentioned in art. 3 of CVM Instruction 617.
ii) investor: natural or legal person, collective investment fund or vehicle or the non-resident investor on whose behalf transactions are carried out with securities.
- Investment Fund Considerations: the distributor will be the service provider who will maintain a direct commercial relationship with the shareholder, being responsible for collecting the registration information, maintaining the registration and adopting the measures provided for in its PLDFT Policy to control and monitor the PLDFT risk regarding their activities.
- Registration Update: the PLDFT Policy must necessarily address, among other points, the definition of criteria and periodicity for updating the records of active customers, in accordance with art. 11 of CVM Instruction 617, observing the maximum interval of five years.
- Alternative Registration System: o is available to all participants and its implementation is no longer pending authorization from CVM. However, it must be duly provided for in its PLDFT Policy, with the evidence of its implementation accessible to SMI and SIN, as well as to the self-regulator.
- About Account Blocking: and a customer with a blocked account operates solely to reduce or even “zero” his position, cases of requests for account closure or for disposal or redemption of assets.
In addition to these items, the following are also highlighted:
- Considerations for Non-Resident Investors (INRs)
- Monitoring and selection of operations, proposed operations or atypical situations. Analysis and communication of atypical events to COAF
- Registration of operations and maintenance of files provided for in Chapter VI of CVM Instruction 617
- Use of New Technologies
- Observations on the Director Responsible for CVM Instruction 617
“Our main objective with the circular letter is to provide clear and objective guidance on how institutions should act, establishing correct and careful practices, in order to avoid and mitigate inherent risks to which the securities market is subject, with regard to LDFT actions, while still serving the client’s best interest ”.
Francisco José Bastos and Daniel Maeda, Superintendents of SMI and SIN, respectively.
See all the details of recommendations of the technical areas in Circular Letter CVM / SMI / SIN 04/20.
CVM recalls that the disclosure of this Letter is part of the articulation of the Center for the Prevention of Money Laundering and the Financing of Terrorism of the General Superintendence (SGE) of the CVM with SMI and SIN.