KARACHI, June 16: The State Bank on Wednesday introduced a set of amendments in existing anti money laundering measures and also laid down samples of suspicious transactions.

The Banking Policy Department of the SBP issued a circular (BPD20) to all banks and DFIs which envisages amendments in existing anti money laundering measures and introduces some new ones. It also envisages samples of suspicious transactions to help banks/DFIs check money-laundering.

The circular says that banks/DFIs should develop and implement appropriate screening procedures to ensure high standards and integrity at the time of hiring all employees whether contractual or permanent.

It says that banks/DFIs must also identify and verify the identity of walk-in customers conducting transactions above an appropriate limit to be prescribed by the banks/DFIs themselves.

The circular says that banks/DFIs shall maintain for a minimum period of five years all necessary records on transactions both domestic and international.

The record must be maintained in such a manner that it can be supplied to the State Bank or law enforcement agencies for investigation or as an evidence in legal proceedings. Banks/DFIs are required to retain the records for more than five years where transactions relate to litigation or are required by the court of law or by any other competent authority.

"Banks/DFIs shall keep records of official identification; documents like passports, identity cards, driving licences, account files and business correspondence for at least five years after the business relationship is ended."

The records relating to suspicious transactions reported by a bank or DFI will be retained by it even after the lapse of five years till such time the bank or DFI gets permission from the SBP to destroy them.

Banks/DFIs shall gather sufficient information about their correspondent banks to understand fully the nature of their business. They shall consider the following factors of their correspondent banks: (i) Know-Your-Customer or KYC Policy (ii) Information about the bank management and ownership (iii) major business activities (iv) location (v) money laundering prevention and detection measures (vi) the purpose of the account (vii) the identity of any third party that will use the correspondent banking services i.e. in case of payable through accounts; and (viii) condition of the bank regulation and supervision in the correspondent's country.

The SBP circular says banks/DFIs should establish correspondent relationship with only those foreign banks that have effective acceptance and KYC policies. It says that banks/DFIs should pay particular attention when continuing relationships with correspondent banks located in jurisdictions that have poor KYC standards or have been identified as being non-cooperative in the fight against money laundering.

Banks/DFIs should be particularly alert to the risk that correspondent accounts might be used directly by third parties to transact business on their own behalf e.g. payable-through- accounts.

Banks/DFIs should pay special attention to all complex, unusually large transactions and all unusual patterns of transactions which have no apparent economic or visible lawful purpose.

The back ground and purpose of suspicious transactions should be examined and the findings established in writing and made available to help the relevant authorities in inspection and investigation.

If the bank/DFI suspects or has reasonable ground to suspect that funds are the proceeds of a criminal activity it should report promptly. The report should contain at least the following information: (i) Title/type and number of the accounts (ii) amounts involved (iii) detail of the transactions (iv) reasons for suspicion (v) nature of the underlying criminal activity, the bank/DFI suspects, has generated the proceeds under suspicion.

"The employees of banks/DFIs are strictly prohibited to disclose the fact to the customer or any other irrelevant quarter that a suspicious transaction or related information is being reported for investigation."

"In cases of foreign branches of the banks/DFIs and subsidiaries of the banks/DFIs in foreign countries undertaking banking business, the banks/DFIs would ensure compliance with the regulations relating to anti money laundering and KYC of SBP or the relevant regulations of the host country - whichever is most exhaustive."