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A Brief Overview Financial Monitoring Unit

Financial Monitoring UnitFinancial Monitoring Unit (FMU)

Financial Monitoring Unit is an independent Federal Government entity initially established in October 2007 in terms of section 6 of the Anti Money Laundering Ordinance, 2007 (now AML Act, 2010), with an aim of combating against money laundering and terrorist financing.

The FMU works under the supervision of National Executive Committee and General Committee.

National Executive Committee (NEC)Financial Monitoring Unit (FMU)National Executive Committee is composed of:Minister for Finance or Advisor to the Prime Minister on Finance/ Concerned Minister ChairmanMinister for Foreign Affairs MemberMinister for Law and Justice MemberMinister for Interior MemberGovernor SBP MemberChairman SECP MemberChairman NAB MemberDirector-General FMU Member & Secretary of NECAny other member to be nominated by Federal Government

General Committee (GC)Financial Monitoring Unit (FMU)General Committee is composed of:Secretary Finance ChairmanSecretary Interior MemberSecretary Foreign Affairs MemberSecretary Law MemberGovernor SBP MemberChairman SECP MemberDirector-General, FCIW, NAB MemberDirector-General FMU Member & Secretary of GCAny other member to be nominated by Federal Government

Powers & Functions of FMU(Core Functions)Financial Monitoring Unit (FMU)To receive Suspicious Transaction Reports (STRs) and Currency Transactions Reports (CTRs) from reporting entities.To analyze STRs and CTRs and to seek additional information in this respect.To disseminate STRs to Regulatory Authorities and Law Enforcement Agencies wherever there is an element of Money Laundering or Terrorist Financing.To maintain database of STRs and CTRs and related information.DG-FMU may order to freeze assets which are reasonably believed to be involved in money laundering or financing of terrorism for a maximum period of fifteen days.

Powers & Functions of FMU(General Functions)Financial Monitoring Unit (FMU)To cooperate with Financial Intelligence Units of other countries.

Represent Pakistan on regional / international forums.

Provide recommendations to the regulatory authorities relating to issuance of regulations in the context of AML/CFT.

To frame regulations in consultation with regulators for ensuring STRs/CTRs.

Financial Monitoring Unit (FMU)FMU Core FunctionsFMU

Reporting Entities / PersonsReporting Entities

Other Authorities

Law Enforcement AgenciesRegulatory Bodies

Internal & External DatabasesInformation Collection During AnalysisDisseminationAnalysisReceipt

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Organogram of Financial Monitoring UnitFinancial Monitoring Unit (FMU)

Strategy and Policy Division

Financial Monitoring Unit (FMU)Strategy and Policy Division is mainly responsible for reviewing/framing of laws & regulations relating to the AML/CFT Regime. Devising the National Strategy for Combating Money Laundering and Terrorism Financing.Keeping record of NEC / GC meetings and follow-up actions. Carry out Study of Best International Practices around the world regarding AML/CFT Framework.

Reports Analysis & Dissemination Division Financial Monitoring Unit (FMU)This division is performing the core function of receipt, analysis and dissemination of the STRs and CTRs. Maintaining database of STRs/CTRs.

Seeking Information from FIs, LEAs, Regulators and Others.

Disseminate STRs or CTRs to LEAs/Regulatory authorities.

Coordination DivisionFinancial Monitoring Unit (FMU)Coordination Division deals primarily with domestic and international cooperation. It is a contact point of FMU for coordination with APG, FATF and other regional / international bodies. Coordinates with the domestic stakeholders to collect status of developments in respect of legal, regulatory, law enforcement and international cooperation in the domain of AML/CFT and, accordingly, prepares reports and updates for onward submission at the different forums. On the other hand, the Division disseminates documents / information being received from regional / international forums regarding international standards, interpretive notes, best practices and other reports & studies, to raise AML/CFT awareness amongst the domestic stakeholders. Arrange Capacity Building Programs.

Finance & Administrative DivisionFinancial Monitoring Unit (FMU)Finance & Administrative Division is the integral Division of FMU and responsible for subjects concerning HR, Budget & Finance, procurement, IT and other dayto-day administrative matters.

IT Unit Provide IT & infrastructure support to FMU. acquire computer equipment and necessary software / database tools Maintenance and security of IT systems. Development of website and electronic reporting.

Reporting EntitiesFinancial Monitoring Unit (FMU)Banks, DFIs & Exchange Companies: These are regulated by State Bank of Pakistan. These entities include Commercial Banks, Islamic Banks, MFBs, DFIs and Exchange companies.

Non Banking Entities: These are regulated by Securities Exchange Commission of Pakistan (SECP). The broad categories are NBFCs, Investment Banks, Leasing Companies, Assets Management Companies, Modarabas, Insurance companies, Stock Exchanges and Brokerage Houses etc.

Role of Reporting EntitiesThe reporting entities are required to have system in place to capture STR and CTR; The reporting entities are required to file STR and CTR with FMU within prescribed period. Confidentiality is to be ensured (NO TIPPING-OFF)The reporting entity to maintain all records of STR/CTR reported by them for at least five years.Focus on High Risk Customers, Products, Delivery Channels, etcExplicit protection has been provided to FMU, reporting entities and their officers from legal proceedings against them for filing STR or providing information under the AML ActFinancial Monitoring Unit (FMU)

Law Enforcement Agencies (LEAs/ RegulatorsFinancial Monitoring Unit (FMU)

At Present, Law Enforcement Agencies designated under AMLA 2010 includes:National Accountability Bureau (Corruption Cases), Anti Narcotics Force (Drugs Related Cases), Intelligence & Investigation FBR (Smuggling), Federal Investigation Agency (Other predicate crimes).

Likewise Regulators include SBP (banking institutions) and SECP (non banking institutions).

Financial Monitoring Unit (FMU)Role of Law Enforcement AgenciesAfter dissemination of STR by FMU, the Investigation Agency evaluates the financial intelligence report of FMUThe LEA can exercise the powers of search, seizure, attachment, arrest, etc. as given to them in the AML Act, 2010 read with AML rules 2008.The financial intelligence report is confidential and is not supposed to be disclosed in further proceedings.Capacity constraints in interpreting the financial intelligence and converting it into successful investigationTrainings requiredLEAs need to develop capacity to investigate ML/TF offences.

REGULATORY AGENCIESState Bank of PakistanSecurities & Exchange Commission of Pakistan

REPORTING INSTITUTIONSBanks:Commercial banksIslamic banksMFBsNon-Banking Financial Companies: Investment Banks Leasing Companies Assets Management Companies, Modarabas, Insurance companies, Stock Exchanges Brokerage Houses etc.LAW ENFORCEMENT AGENCIESNational Accountability BureauAnti Narcotics Force Intelligence & Investigation FBR Federal Investigation Agency FOREIGN FIUsFINANCIAL MONITORING UNITDFIsExchange CompaniesOthers: Law Enforcement Agencies Government agencies Regulators ,etc.Financial Monitoring Unit (FMU)

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Thresholds of STRs/CTRsFinancial Monitoring Unit (FMU)Under AMLA, 2010, every financial institution is required to file the STR with FMU in 7 days after forming suspicion of funds being laundered or related to terrorist financing. STRs do not have any threshold.

CTRs are reported with FMU in 7 days having a threshold of Exceeding PKR 2.5 Million per transaction.

STR may generate if:Financial Monitoring Unit (FMU)The financial institution and reporting entity knows, suspects, or has reason to suspect that the transaction or a pattern of transactions of which the transaction is a part (a) involves funds derived from illegal activities or isintended or conducted in order to hide or disguise proceeds of crime;(b) is designed to evade any requirements of AMLA 2010(c) has no apparent lawful purpose after examining the available facts including the background and possible purpose of the transaction;(d)involves financing of terrorism:

STR Analysis Risk Based ApproachFinancial Monitoring Unit (FMU)FMU has framed a risk-based procedure for analyzing Suspicious Transactions Reports (STRs). It includes

Identific