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Terror financing: SBP issues tough regulations

September 13, 2012

Sbp, state bank of Pakistan, banks Pakistan, banking Pakistan, prudential returns, business news, pakistan business, business, dawn business
State Bank of Pakistan. – File photo.

KARACHI: The State Bank of Pakistan issued tough regulations to stop money-laundering and combat terrorism financing by making the regulations up to international standards on Thursday.

The State Bank made anti-money laundering and combating the financing of terrorism (AML/CFT) regulations more comprehensive by revising the existing regulations of Prudential Regulations on Corporate and Commercial Banking.

Most of the requirements of the new regulations are already in place, some of the requirements will be effective from Oct 31.

“These regulations have been issued to all banks and development finance institutions (DFIs) to introduce a comprehensive regulatory framework in line with international standards to mitigate various risks arising from money laundering and terrorist financing,” said a statement issued by the SBP.

The AML/CFT regulations provide a system of risk-based approach under which customers would be profiled as per risk involved.

A framework of scenario-based ranking of customers has been developed, which would help detect abnormal behaviour or transactions during the course of relationship.

“The revised system would ensure clean and transparent banking transactions on the one hand and enable the country to meet international standards on the other,” said the SBP.

The provisions of regulations introduce a system of comprehensive list of red alerts in the context of Pakistan, which will trigger scrutiny of accounts and transactions to ensure that proceeds of crime are not processed through the banking channels.

To address the issue of rigidity in obtaining documents for opening accounts, the list of identification and verification documents has been expanded and Nadra receipt or token included as eligible document for opening of a bank account. This would enable customers to open bank account by submitting any document issued by Nadra, including CNIC, passport, NARA, POC or even a Nadra receipt/ token.

The new regulations now require banks and DFIs to keep record for a minimum period of 10 years.

“With the view to tracing back illegal transactions, it is mandatory on banks and DFIs to obtain a copy of CNIC from occasional customers or walk-in customers conducting cash transactions above Rs1 million and in case of online transfers without any limit,” said the SBP.

Banks and DFIs now have to capture, retain and provide at the beneficiary end, all relevant details of customers while transferring funds between the cities.

Under the regulations, every customer would be identified for establishing business relationship. The bank and DFI would verify identity documents of customers from relevant authorities.

The verification would be responsibility of concerned bank and DFI for which the customer should neither be obligated nor the cost of such verification be passed on to the customers.

Banks and DFIs would not open or maintain anonymous accounts or accounts in the name of fictitious persons or numbered accounts. In the case of joint accounts, CDD measures on all of the joint account holders would be performed as if each of them were individual customers of the bank or DFI.

“The government accounts will not be opened in the personal names of the government official,” said the SBP.

Banks and DFIs would not provide any banking services to proscribed entities and persons or to those who are associated with such entities and persons, whether under the proscribed name or with a different name.