Govt seeking bids to make CDNS compliant with FATF proposals

ISLAMABAD: Finance Division has decided to engage an AML-CFT compliant bank, through competitive bidding, to put in place the requirement as well as the necessary training of employees of the Central Directorate of National Savings (CDNS).

The division would be doing this through the promulgation of National Savings Schemes (AML-CFT) Rules 2019, a statement issued by the information department said on Saturday.

Accordingly, Expression of Interest, in consultation with SBP, has been sought from the interested bank to conduct KYC (Know Your Customer) and other requirement of new as well as existing client of CDNS.

This would include the biometric verification and screening of potential clients in UN Proscribed Person List. “All these screenings are meant to stop any ill-gotten money to become part of financial system and to safeguard the valued investor from the menace of money laundering and terrorist financing.”

The CDNS was one of the longstanding institutions in the country with a legacy of more than 140 years. The institution has always been a symbol of unshakable trust of the public. National Savings plays a pivotal role to inculcate the culture of savings, facilitate financial inclusion and extending social security net to the deserving sections of the society.

Around 33 percent of CDNS deposits are in welfare schemes, which attribute around 2.0 percent incremental rate of profit over and above other regular savings schemes.

Currently, CDNS manages portfolio of Rs4,038 billion (November 2019) of more than seven million investors. National Savings Schemes (NSS) provides risk free and competitive avenue to all segments of the society, especially the senior citizens, pensioners, widows, physically challenged persons, and family members of Shuhada. On the other hand, it also provides a non-inflationary and cost effective borrowing to the government to bridge the overall fiscal deficit which ultimately reduces dependency on external borrowing.

Nineteen percent of domestic debt consists of NSS, while these deposits are equal to 28 percent of total deposit of scheduled bank.

One of the main challenges to CDNS was its manual operations and lack of information technology. Therefore, the CDNS started its journey of automation in 2009 and successfully completed PSDP-funded Automation Project Phase I and II in 2013 and 2017. Through these projects, 223 National Savings Centres (NSC) or 60 percent out of total 376, have been successfully automated. Automation of remaining 153 was in active process with support of Department for International Development (DFID), UK. Meanwhile, CDNS has upgraded its core business solution from decentralised to centralised architecture. Around 144 branches have already been shifted to upgraded solution where customer transaction time has significantly reduced. Also, the provision of Alternate Delivery Channels (ATM) was in the final stages, which would further improve the service delivery. Introduction of technology has provided CDNS the opportunity to modernise its process, which include swift data reporting, reconciliation with other departments, budgeting and forecasting, customer data base etc.

Due to IT progress, the CDNS was now capable to implement number of initiatives which was not possible due to manual operations. In this context, Asia Pacific Group in its recently published Mutual Evaluation Report (MER 2019) has pointed out a number of deficiencies on the part of CDNS in terms of compliance to FATF recommendations, which has negatively affected the overall grading of different recommendations specially the recommendation 10, 11, 12 and 15.

In this context, CDNS is committed to mitigating the deficiency to improve customer service delivery and to comply with the FATF recommendation to safeguard the interest of investors. Banks under the supervision of SBP have already put in place all the required systems and KYC processes to comply with FATF recommendations.