AML Regime in Pakistan

8/3/2019 AML Regime in Pakistan

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By

Taslim KaziChief Manager SBP BSC (Bank)

Peshawar

AML / CFT Regime inPakistan


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Legislative Framework National Accountability

Ordinance, 1999

Control of Narcotics SubstanceAct 1997

Anti-Terrorism Act 1997.


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National AccountabilityOrdinance, 1999

Deals mainly with the detection,investigation, prosecution and speedydisposal of cases involving corruption andcorrupt practices

The following offences under NAO

covers the offence of money laundering : Acquisition of any property /pecuniary advantage through corrupt,dishonest or illegal means

Having assets beyond known sources

of income which can not bereasonably accounted for.

Pursuant to Section 20, financialinstitutions are bound to report

suspicious financialtransactions

to NAB.


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Control of Narcotics Substance

Act 1997The following offences/ provisions under CNSAcovers the AML measures:

Makes the acquisition of assets throughdrug money an offence The suspected properties / assets may befrozen and subsequently forfeited throughthe Court. This measure can be construed

as an anti-money laundering measure. Section 67: it is mandatory for financialinstitutions to report STRs to ANF,suspected to be related to drug business.


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Anti-Terrorism Act

1997 Deals comprehensively with the

offences of terrorism and financing ofterrorism.

Makes compulsory for the prescribedorganizations to submit all accountsfor its political and social welfare

activities and disclose all fundingsources.

Freezing, Seizure and Forfeiture of

assets


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AML/CFT Measures by SBP

Institutional Arrangements

Setting up of dedicated AML/ CFT Units. Capacity Building- training

Regulatory Framework Issuance of Prudential Regulations

Monitoring & Enforcement On-site inspection and off-site surveillance

International Obligations

UNSC Resolutions- Freezing of accountsCurbing of Informal Value Transfers

Formation of Exchange CompaniesDocumentation of Economy

Restriction on RTCs Bearer Instruments


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AML/ CFT UNITS

Primary Responsibilities of the Units Issuance of regulations and directionsto banks and DFIs in accordancewith FATF Recommendations and

international best practices Receive STRs and process them for

suitable action

Coordination and liaison with relevantGovt. departments, International andMultilateral bodies

Issue directives for freezing of

accounts


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Regulatory Framework

A separate section in new PRs hasbeen dedicated to regulationspertaining to AML and CFT.

PR Compliant with 40 + 9recommendations

In line with Basel Core Principle

No.15 Violations of regulations dealt with

penal action


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M-1:Know Your

Customer Formulation of KYC Policy duly

approved by the Board of Directorsof banks/DFIs.

True Identity of Beneficial Owner,Real Party in interest or Controllingperson

Requirement of minimum documents

Requirement of Introduction


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M-1:Know Your Customer

Enhanced due diligence to be applied onthe following high risk customers: Customers belonging to Offshore tax

heavens, etc.

Customers in cash based businessesor high value items High net worth customers with no

clearly identifiable sources of income

Customers who have been refused byanother bank Correspondent banks Non-face-to-face/on-line customers

verification of walk-in customers


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M-2: Continuous Monitoring

Ensure that the business is conducted inconformity with high ethical standards,banking laws and regulations

Specific Procedures be established for: Ascertaining customers status and hissource of earnings

Monitoring of accounts on regular basis

Checking identities and bonafides ofremitters and beneficiaries

Retaining internal record of transaction


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M-2: Continuous Monitoring

Transactions out of character /inconsistent with the history, patternand normal operation of the account

to be viewed suspiciously andproperly investigated

Suitable training to employees

Banks/DFIs to issue necessaryinstructions for guidance andcompliance by all concerned


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M3: Record Retention

All necessary record of transactions bothdomestic and international be retained forfive years.

Such records should be sufficient to

permit reconstruction of individualtransactions

Records relating to identification includingbusiness correspondence to be retained

for at least five years Records relating to STRs to be retained

even after the lapse of five years and notto be destroyed without prior permissionof State Bank


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M4: Correspondent Banking

Banks/DFIs to gather sufficientinformation about theircorrespondent banks to

understand fully the nature of theirbusiness including:

Management and ownership

Major business activities Location

ML prevention and detectionmeasures


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M4: Correspondent Banking

The purpose of account The identity of any third partythat will use the correspondent

banking services Condition of the bank regulationand supervision in the

correspondents country Banks/DFIs not to enter or

continue correspondent banking

relationship with shell banks


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M-5: Suspicious Transactions

Banks/DFIs to pay special attention toall complex, unusually largetransactions, which have no apparenteconomic and visible lawful purpose.

Examples of suspicious transactions STRs to be reported if there are

reasonable ground to suspect thatfunds are proceeds of a criminalactivity, within three days, throughCompliance Officer to Banking PolicyDepartment

Tipping off strictly prohibited


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Further Processing of STRs.

STRs reported by banks, at present,are forwarded to NAB which is the

relevant agency for investigation andprosecution of of all kinds ofcorruption.


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Thank You

Documents

AML Regime in Pakistan