ISLAMABAD, Dec 20: The Securities and Exchange Commission of Pakistan (SECP) has set up an anti-money laundering unit with the technical assistance of World Bank. The unit will examine all the relevant rules before coming up with concrete proposals.

Addressing a press conference here on Friday, the SECP Chairman Khalid A. Mirza said the commission is taking measures aimed at obviating money laundering through stock market and insurance under its resolve to uphold the image of capital market as “clean” untainted by dirty money.

While the State Bank of Pakistan is the implementing agency for this banking sector reforms project, SECP has been awarded the specialized project on anti-money laundering. An IDA loan of $350,000 has been approved for this four-year assignment. It will focus on capacity building of the commission, carrying out studies on this subject, networking with other markets and research and publications.

To a question, Mirza said the MoU on technical assistance did not stipulate sharing of information, although the commission would welcome signing of MoUs with IOSCO, for example, for obtaining information in order to make its work more effective in the development of capital market in Pakistan. He said the commission was asking the brokerage houses to develop account opening forms in order to ascertain the source and kind of money on offer for investment. He made it clear, nevertheless, that the SECP would not countenance any measures that might hinder smooth working of the market.

In reply to a question, he admitted that it was still unclear both in Pakistan and elsewhere in the world what was the basis for entertaining doubt about a transaction fitting the term “laundering”. During his recent visit to UK and USA, Mirza said, he had raised this issue but found that many aspects of the matter had yet to be worked out to obviate discrimination and inequity.

He said that the government of Pakistan was also working on an anti-money laundering legislation on which the SECP too had been consulted. Such a law, he said, would serve as umbrella for the commission’s operations in this connection.

A journalist expressed the concern that “anti-money laundering” might be exploited by some governments to curb legitimate cross-border investment. As it was still unclear what exactly constitutes money laundering, the commission would move only if there was prima facie evidence about an attempt to use financial instruments for criminal activity whereby a white collar criminal might try to disguise tainted money as genuine money.

As the SECP completes third year of its establishment, its Chairman went on to spell out its policies in other areas with a view to putting the capital market on an even keel.

The initial focus of reforms was towards improving the market integrity, price discovery process and settlement system. In the second phase, it turned its focus on the corporate sector so as to build confidence in the issuers of securities.

The commission, Mirza went on to state, was also focusing on its developmental role as the apex regulator of the capital market and non-bank financial sector. It was as such designing programmes to create awareness amongst local and foreign investors about the effect of measures taken by the SECP to attract further investment in the market.

In an effort to reduce barriers to business, he disclosed, the SECP was planning to introduce online reporting for companies. The recently approved digital transactions law was expected to facilitate online reporting of financials, he added.

The SECP Chairman, responding to a question, did not agree that the current stock market boom was a bubble that might burst any moment. Had this been the case, the market should have shot up like an arrow and then plummeted to the ground as a result of even a brief slide of the index.

The occasional resurgence of bearish trend was, in fact, in the nature of stints at correction that were followed by further rise. He attributed this to the improved corporate governance enforced by the Commission which had restored the investor’s confidence in the integrity of the market.

He also did not agree with a correspondent who suggested that the market boom was the outcome of 9/11. Foreign buying was very limited. This factor should also have translated into creation of other assets such as real estate. But this had not happened, he noted.

His main concern, Mirza further stated, was the absence of new issue. The challenge was to infuse in the new issuers the confidence about his stock receiving the right price. Referring to his discussions with some brokers, he said 10 to 12 issuers might soon venture out to offer their stock in the near future.