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Importance of Compliance – Investment Blog

Importance of Compliance – Investment Blog


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In the wake of the Paytm crisis, many knowledgeable folks have shared insightful views. Some are supportive of and some are against Paytm. However, a key aspect has been missing in all the debates and arguments which I felt should be highlighted.

 We being a SEBI-regulated entity very well understand the importance of regulatory compliance. Compliances are in place to ensure:

– Services provided in the interest of the end consumer
– Reduce the risk in the system
– Provide clarity regarding the operating framework for checks & balances

The most important compliance requirement in regulated financial services business is KYC (Know Your Client). KYC is essentially required to ensure legitimate money gets into the system. It’s an efficient way of blocking shady operators/hawala money from getting into the system and being used for activities that can threaten the economic, social, and financial stability of the country.

KYC in a nutshell is the backbone of complying with PMLA (Prevention of Money Laundering Act) regulations. Its importance is often reminded by the regulators in the form of circulars, sessions, and during audits. Taking this lightly is unthinkable and unpardonable by the regulators who have the responsibility to ensure the long-term stability of the system. This is where Paytm failed big time among other critical things.

There is no denying that following the compliances is time-consuming, expensive, and hinders growth. Even we at Truemind crib sometimes that how much time and costs we have to spend on compliance.

No doubt, there is a strong need for regulators to reduce the compliance burden to free bandwidth for businesses to focus on innovation and growth. But there are some sacrosanct requirements which can’t be and shouldn’t be breached and all businesses should be mindful of that.

Growth shouldn’t be at the expense of adhering to critical regulatory requirements.

This episode with Paytm reminds me of the wise words of Pual McNulty –
If you think, compliance is expensive, try non-compliance“.

Originally posted on LinkedIn: www.linkedin.com/sumitduseja

Truemind Capital is a SEBI Registered Investment Management & Personal Finance Advisory platform. You can write to us at connect@truemindcapital.com or call us at 9999505324.


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