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December 7, 2018

SBP asks forex firms to scrutinise customers


December 7, 2018

KARACHI: Money exchange firms have been ordered by the central bank to screen all transactions and check and record the identification of the senders and receivers of all transfers to curtail the risk of illicit financial flows, officials said on Thursday.

“It was emphasized that ECs (exchange companies) and ECs-B must ensure that their staff is adequately trained and their systems are robust to screen all transactions so that no transactions could take place with the UNSC designated and/or ATA (Anti-Terrorism Act) proscribed individuals or their known associates,” said the State Bank of Pakistan (SBP) in a circular sent to the heads of exchange companies on December 3. In recent times, the SBP has become more aggressive about enforcing the rules on both banks and exchange companies, as foreign currency dealers, to remove concerns of Financial Action Task Force about anti-money laundering (AML) and terrorist financing. The SBP’s Banking Policy and Regulations Group called the chief executives of exchange companies on November 28 to discuss efforts being made to implement revised national risk assessment (NRA) on terrorist financing and targeted financial sanctions.

In the meeting, important matters related to AML and combating the financing of terrorism (CFT) requirements and management of exchange companies were discussed in detail, the circular said. Participants were informed about the ongoing NRA on terrorism financing. The methodology of NRA was explained to participants and the role of financial institutions, including the exchange companies, and exchange companies of “B” category, was discussed, it added.

Zafar Paracha, the secretary general at Exchange Companies Association of Pakistan said the SBP has clamped down on exchange companies’ money-laundering, as it pushes the exchange houses to monitor their own transactions and customers’ as well.

“We are trying to ensure unprecedented scrutiny of our customers, making our anti-money laundering systems stronger and checking to ensure exchange companies do not make any anonymous transactions,” he said. “We are trying to meet our sanctions compliance duties.”

The SBP in October issued instructions and guidelines which ordered all ECs to stop providing any services to designated or proscribed individuals and entities, to have effective screening mechanism for each transaction on real time basis, and to keep an updated list available throughout the company’s network.

“ECs should review the antecedents of all employees, franchise owners, counterparties in other contractual arrangements like landlords etc, to ensure that no designated individual is associated with the ECs and ECs-B in any capacity,” the circular advised. The SBP also directed exchange houses to comply with these instructions in letter and spirit. It was also advised to acquire suitable technological solutions for implementing the requirements of SBP instructions. It was informed that SBP would take strict enforcement actions against any violations and would not only impose monetary sanctions, but administrative actions could also be taken. Further, it was also informed that failure to comply with UNSC sanction regime might also attract monetary penalty up to Rs10 million, as prescribed the government.

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