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July 21, 2019

SBP revises regulations on foreign exchange operations


July 21, 2019

KARACHI: The State Bank of Pakistan (SBP) on Saturday issued a revised set of instructions to regulate foreign exchange operations.

“Considering the market dynamics, business environment and changes in way of doing business, the State Bank is in the process of revising the Foreign Exchange Manual in consultation with relevant stakeholders in a phased manner,” the SBP said in a statement.

“The revision is mainly aimed at simplification of the existing instructions, adoption of best international practices, removal of redundancies, introduction of new foreign exchange regulations and gradual delegation of powers to the Authorised Dealers (banks) for facilitation of the stakeholders.”

In this respect, seven chapters of the FE Manual have already been revised in November 2018 and placed on the SBP’s website.

Now, three chapters of the manual regarding regulations on non-resident rupee accounts, blocked accounts and dealings in foreign currency notes and coins etc by the authorised dealers stand revised.

The central bank said that accounts of individuals, firms or companies resident outside Pakistan were designated as non-resident accounts.

A person would be treated as non-resident if his/her period of stay in Pakistan during a calendar year was less than 183 days, in aggregate.

The resident outside Pakistan could open non-resident rupee account-repatriable and non-resident rupee account-non-repatriable. These accounts could be opened by the banks without prior approval of the State Bank.

In this respect, banks should follow their standard operating procedures for opening and maintaining of such accounts and ensure compliance of all applicable Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidelines, including identification of ultimate beneficial ownership and purpose of the account.

“An initial deposit up to Rs5,000/- may be made in the account from domestic sources, if required,” the guidelines said.

Section 6 of the Foreign Exchange Regulation Act, 1947 empowers the State Bank to block the accounts in Pakistan of any person resident outside Pakistan and direct that payment of any sums due to that person should only be made to a blocked account.

In other words, amounts due to a person resident outside Pakistan, to whom remittances could not be allowed, would be credited to the blocked accounts of that person to ensure that the funds were not directly remitted or otherwise used in a manner contrary to the provisions of the Act.

The SBP might direct an authorised dealer (AD) to open a new or designate an existing account as “Blocked Account”. A blocked account might also be opened as a joint account in the name of a resident and a non-resident. No blocked account should be un-blocked or an existing ‘free’ account should be blocked by (AD) except under the directions from the SBP.

All people coming to the country, including Pakistanis and foreign nationals both, have been allowed to bring in $10,000 or equivalent of foreign currency and other instruments; however, for amounts exceeding the limit, they have to submit a declaration to the Customs authorities.

“Such currencies/instruments may be freely purchased by the Authorised Dealers against payment in PKR,” the SBP’s revised Foreign Exchange Manual said.

“Authorised Dealers may also purchase foreign currencies withdrawn by the account holders from their foreign currency accounts and from the walk-in-customer against payment in PKR subject to fulfilment of applicable AML/CFT regulations/guidelines issued by the State Bank,” it added.

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