State Bank amends rules to combat money laundering

KARACHI: The State Bank of Pakistan (SBP) said on Wednesday that banks would ensure complete due diligence of customers and their assets to ease the risks related to money laundering and terrorists financing.

“Banks shall 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,” it said.

“This shall include monitoring of the customers and related risks on ongoing basis as per standard norms and best practices to mitigate the risks related to such products/ customers,” it added.

The SBP’s circular follows risk assessment of banking sector and other financial institutions regulated by it in consultation with the focal persons of nominated financial institutions. The central bank made some amendments in the anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations based on the findings of the National Risk Assessment (NRA).

NRA has been undertaken in collaboration with the relevant stakeholders, including ministries, law-enforcement agencies, regulatory bodies and Financial Monitoring Unit (FMU). The main objective of the assessment was to identify and understand the money laundering and terrorist financing risks in the country, and follow risk based approach to mitigate the risks.

The adequacy of staff posted for effective monitoring and reporting of suspicious transactions is a critical factor of customer due diligence. Under the new regulations, the banks and development finance institutions would place adequate number of analysts for monitoring and reporting purposes.

Moreover, steps should be taken by banks / DFIs to develop knowledge and skills of their staff and utilise technology solutions required for effective monitoring and reporting of suspicious transactions.

The SBP also said that the banks would 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 money laundering or terrorist financing risks. Banks are needed to assign monitoring of compliance and anti-money laundering function, as terms of reference to one of the management committees responsible for risk and control.

All banks / DFIs are also advised to complete their internal risk review of the remaining legacy portfolio of customers who opened their bank accounts prior to the introduction of revised AML/CFT framework in 2012 at the earliest, but not later than December 31, 2017. Besides, related policies and procedures would also be brought in line with the above amendments in AML / CFT regulations by the end of this year.