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Fresh moves to restrain money laundering,terror financing

KARACHI: The State Bank of Pakistan (SBP) has taken some new steps to combat money laundering and terror financing, directing all banks and development finance institutions (DFIs) to take strict measure for minimizing risks.

The SBP made a number of amendments on Wednesday in the regulations for anti-money laundering and combating the financing of terrorism (AML/CFT), and asked banks and DFIs for comprehensive assessments to eliminate risks.

On June 9, the SBP issued fresh guidelines, asking banks and DFIs to tighten the rules against money laundering and choke flow of funds to finance terrorism, responding to the mounting pressure on Pakistan.

The central bank said the National Risk Assessment (NRA) of Pakistan has been undertaken in collaboration with relevant stakeholders, including ministries, law enforcement agencies, regulatory bodies and SBP’s Financial Monitoring Unit (FMU). The objective was to identify and understand the money laundering and terrorist financing risks in the country and follow a risk-based approach to mitigate the risks.

“Based on the findings of NRA, it is necessary to enhance risk-based approach in AML/CFT obligations,” said an SBP circular.

According to new amendments, banks and DFIs will make comprehensive assessment of controls on asset products and related customers to ensure effective implementation of due diligence requirements as per their own assessment of materiality and risk without compromising on identity and verification requirements. This will include monitoring of the customers and related risks on an ongoing basis as per standard norms and best practices to mitigate the risks related to such product or customers.

The adequacy of staff posted for effective monitoring and reporting of suspicious transactions is a critical factor of customer due diligence. Banks and DFIs shall place adequate number of analysts for monitoring and reporting. Moreover, steps should be taken by banks and DFIs to develop knowledge and skills of their staff and utilise technology solutions required for effective monitoring and reporting of suspicious transactions.

Banks and DFIs will incorporate procedures to record and maintain data of account opening cases rejected by compliance or central account opening units, the cases where customers’ risk ratings recommended by business units were challenged or revised, and the cases where accounts were closed based on risks of money laundering and terror financing.

An important instruction was that the banks and DFIs should not assign unrealistic business targets and conflicting roles to their employees. Appropriate strategies may be devised to ensure provision of safe and smooth banking services.

Moreover, risks of money laundering and terror financing should be included in key performance indicators, or KPIs, of officers responsible for enterprise risk management and operational risk management functions.

“All banks/DFIs are also advised to complete their internal risk review of remaining legacy portfolio of customers who opened their bank accounts prior to introduction of revised AML/CFT framework in 2012 at the earliest but not later than Dec 31, 2017,” said the SBP circular.

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Hamza Jaffery

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