ISLAMABAD, Dec 10: Government is considering strengthening the banking system and improving enforcement of law to discourage money laundering practice.

This was stated at the first meeting of the Task Force on Money Laundering here on Monday. The meeting discussed various options to draft a law to discourage money laundering.

Dr Waqar Masood Khan, additional finance secretary and head of the task force, told Dawn that the meeting had decided to associate with it bank representatives, members of the National Accountability Bureau, and officials of the Security and Exchange Commission of Pakistan to deal with the issue.

He said there was a need to remove flaws in the financial system and “that is why we are examining to have new legislation against money laundering and to plug the informal market”. He said international circumstances were shaping up in such a manner that it was becoming increasingly unacceptable to allow informal money markets.

In reply to a question, Dr Waqar said that the lack of documentation, wherever existed, would have to be taken up seriously. The task force, he said, was in touch with the concerned people to come out with laws aimed at ensuring legitimate practices in the market.

In reply to a question, he said that money-changers were being converted into exchange companies with a view to streamlining their functioning.

He said that a proposal was being finalized to convert money-changers into exchange companies shortly.

Officials said that there had been a sharp decline in the demand for dollar for many reasons, including a check on opening of LCs under the Afghan Transit Trade which was mainly financed through informal money. Other reasons included a decline in the trend on the part of the rich in the country to transfer their unaccounted money to the banks in western countries after the Sept 11 attacks, and the reported bias of American nationals against colour immigrants.

People in the stock market generally believe that eversince the government of United Arab Emirates passed a law that any transaction exceeding $10,000 would have to be declared, the hawala and hundi systems had received a big blow.

Until recently, there was no such law in the UAE and that was why it had become one of the most attractive places for foreign currency business. The law has been framed by the UAE on the appeal of the United States.