State Bank empowered to impose penalty on foreign exchange firms

KARACHI: The State Bank of Pakistan will impose up to Rs500,000 as penalty on foreign exchange companies in case of their non-compliance with the rules under the Foreign Exchange Regulation (Amendment) Act, 2016, the bank said.

The penalty will increase Rs10,000 daily in addition to the prime penalty if an exchange company fails to comply with the regulations, the central bank said in a notice on its website.

The bank got new powers under the Foreign Exchange Regulation (Amendment) Act, 2016 that allows the regulator to impose penalties on errant exchange companies.

The bank issued a circular to the heads of exchange companies on late Friday’s night, inviting their attentions to an enactment of the amended Act.

“Whoever contravenes, attempts to contravene or abets the contravention … shall be liable to a penalty to be imposed by an official of the State Bank, not below the rank of senior joint director,” the amended Act said. “Where the contravention is continuing one… a further penalty… may extend to ten thousand rupees for each day.” 

It said the action should follow a notice to foreign exchange companies found in contravention of the amended Act.

Under the previous provision of the Act, the SBP was powerless in imposing penalties in case of any violation of the provisions of the foreign exchange regulation laws.

Prior to the enactment of the amended Act, foreign exchange policy and operations of the companies in the country were regulated in accordance with the Foreign Exchange Regulation Act, 1947.

The objective of the recent amendments into the Act is to regulate certain payments in foreign currencies, securities, import/export of foreign currencies and bullion.

Malik Bostan, president of the Forex Association of Pakistan welcomed the move. 

Bostan, however, urged the central bank to “provide the details of the fee structure of the penalties supposed to impose on the companies, which are not compliant with the specific rules and regulations.”