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SEBI has asked AIFS to follow a sanction list issued by Financial Action Tax Force (FATF), a body of United Nation Security Council before onboarding any foreign nationals as clients. The move aims to check flow of unaccounted money in AIFs.
Financial action task force (FATF) is the global money laundering and terrorist financing watchdog. It sets international standards that aim to prevent these illegal activities and the harm they cause to society.
FATF issues two lists – one having list of countries with strategic policy to combat money laundering and terrorism financing or sanction list and another with countries who do not have such a policy (commonly known as grey list). While AIFs can onboard clients from the former list, they cannot do business of clients residing in the latter list.
SEBI clarified that if AIFs have clients from countries in the latter list, they cannot receive fresh investment and direct such a client to comply with the FATF regulations.