The Narendra Modi government has been cracking down on shell
companies as the issue of money laundering and tax evasion has
been prevalent in India.
The Securities and Exchange Board of India (Sebi) has
released a detailed framework to identify and verify beneficial
owners specifically for foreign portfolio investments (FPIs).
Beneficial owners need to be identified based on controlling
ownership interest and control basis. Sebi requires FPIs with
non-compliant structures need to make changes before October 10
2018. The move signals a move by SEBI to strengthen anti-money
laundering/know your customer (AML/KYC) requirements.
Moin Ladha, partner at Khaitan & Co, said that due
to additional restrictions placed on the ability of NRIs to
invest in India through the FPI route, genuine investments by
NRIs will suffer. Additionally, since the new framework
mandates additional requirements with regard to KYC review of