25 countries in global banks’ ‘high risk’ list

MUMBAI: China, UAE, Cyprus and significantly, Mauritius, along with 21other countries have been tagged as “high-risk jurisdictions” by global banks acting as custodians for foreign funds which comprise the largest group of investors in the Indian stock market.

Large investors and beneficial owners of these funds entering India through these high-risk jurisdictions will face close scrutiny while non-resident Indians and persons of Indian origin will run into new hurdles in participating ..

A week ago, the main custodian banks shared a list of 25 countries with the capital markets regulator Securities and Exchange Board of India (Sebi), two persons aware of the development told ET. HSBC, Deutsche Bank, Citi, Standard Chartered and JP Morgan are among the banks that compiled the list.
“The impact of treating a particular jurisdiction as high risk will be significant. Firstly, even regulated and low-risk (category 2) funds investing from such jurisdictions will have to undertake full KYC as applicable to a category 3 FPI (like hedge funds). This will mean providing financial information of the fund and identity proof of ultimate beneficial owners (UBOs) and authorised signatories which some investors might not be uncomfortable with,” said Rajesh H Gandhi, Partner, Deloitte Has ..

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The custodian banks did not respond to ET’s query which sought to know the basis on which the countries have been included in the highrisk category. “This is done at the instruction of the regulator which wants custodians to come out with a list. Probably due to existing treaties and diplomatic relations, Sebi and the ministry are reluctant to draw a list on their own… Now Sebi has to finalise the names on the basis of the list from custodians,” said a banker.