ISLAMABAD: The Securities and Exchange Commission Pakistan (SECP) has included anti terror financing clauses in its new draft regulations on anti-money laundering that will be applicable for the insurance sector, capital markets and modaraba companies.
The regulations termed as ‘Securities and Exchange Commission Anti Money Laundering and Countering Financing of Terrorism Regulations, 2018’ have been formed in view of Financial Action Task Force (FATF) requirements for the country.
Under the current regulatory regime SECP has no jurisdiction over anti-terror laws. An official of the SECP said that there were anti-money laundering laws under the SECP but they were scattered for different sectors.
“SECP had issued circular regarding Non-Banking Financial Companies in 2009, regulation was issued for insurance sector in 2012 and guidelines were issued to the management of stock market in 2012,” the official added, “However, the current draft regulations have centralised all the relevant laws at one forum.”
The official added that the SECP has been empowered to regulate both the anti-money laundering as well as terror financing laws under its jurisdictions.
“Though there has not been any report of terror financing through the financial institutions falling under the SECP, but these regulations will help prevent and maintain checks in this regard,” the official added.
‘Financial Institutions’ falling under the jurisdiction of SECP are brokers of capital markets including the commodity exchange, insurance sector, takaful operators, NBFCs and Modarabas.
The draft regulations also call upon the financial institutions to implement appropriate internal risk management systems and policies to determine if any of their customers is a politically exposed person (PEP) under anti-money laundering regime.
The draft regulations have been floated for public comments by the SECP and are expected to be implemented from June 2018.
The draft regulations have directed that a ‘Financial Institution’ will have to take appropriate steps to identify, assess and understand, its money laundering and terrorism financing risks in relation to its customers, the jurisdictions or countries its customers are from or in, the jurisdictions or countries the financial institution has operations or dealings in as well as the products, services, transactions and delivery channels of the financial institution.
The notification says that for launching ‘New Products, Practices and Technologies’ the financial institution will have to identify and assess the money laundering and terrorism financing risks that may arise in relation to the development of new products and new business practices, including new delivery mechanisms and the use of new or developing technologies for both new and pre-existing products.
The institutions need to undertake the risk assessments, prior to the launch or use of such products, practices and technologies, and shall take “appropriate measures” to manage and mitigate the risks.
The draft regulation also imposes penalty up to Rs10 million in case of any violation, extendable to Rs100,000 per day after the first penalty is imposed if such contravention continues.
Published in Dawn, May 1st, 2018