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Unclear changes

September 14, 2012

THE revisions to the Anti Money Laundering and Combating the Financing of Terrorism Regulations may be a positive move but hardly go far enough. For instance, under the new regulations “banks/DFIs shall not open or maintain anonymous accounts or accounts in the name of fictitious persons or numbered accounts” and “shall 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”. The layperson can be forgiven for being puzzled. Does this mean that before the new regulations, banks were able to open anonymous accounts, numbered accounts, accounts in the name of proscribed entities and persons connected with the latter? If so, how was this possible after years of fighting a war against internal insurgent groups widely reported to be using funds earned from illegal activities to finance their operations? If not, why were these regulations issued in the first place?

There is much in the new regulations that makes one wonder if we have been serious in our campaign against militancy all along. For example, we know that money is moving through the clearing houses of Quetta and Peshawar in quantities so large that one cannot even guess what kind of economic activity is driving these. If it’s true that banks have not been maintaining enough data about the intercity movement of funds, especially data that would help identify the beneficiary, then that is an oversight that must be explained. Will banks now maintain a list of proscribed groups and individuals associated with them so as to be able to deny them account-opening privileges? Much of what needs to be done to ensure the financial system has no entry points for illicit money — for money belonging to proscribed groups and for tax-evaded wealth — requires greater cooperation between the financial system and authorities such as the Federal Board of Revenue and interior ministry. Let’s hope this first step towards cleaning up our financial system is followed up by other measures required to make anti money-laundering and terror-financing efforts more effective.