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March 8, 2020

CDNS musters banks’ prowess to improve compliance with anti-money laundering laws

Business

March 8, 2020

KARACHI: The Central Directorate of National Savings (CDNS) sought assistance of the banks to improve vigilance on the transactions by millions of its customers as the global financial system’s watchdog extended timeline for Pakistan to comply with anti-money laundering laws till June this year, it emerged on Saturday.

CDNS sought revised proposals from banks willing to conform their bids with the revised technical requirements for hiring of services for anti-money laundering (AML) and combating of financing terrorism (CFT) compliance in CDNS in line with National Savings Schemes (AML-CFT) Rules, 2019, AML Act, 2010 and Financial Action Taskforce (FATF) recommendations for its existing and new customers, a document, available with The News, said.

In February, Paris-based FATF kept Pakistan on the grey list of countries with deficiencies in AML/CFT standards till June 2020. FATF asked the country to improve compliance with all the conditions of its 27-point action plan, especially those concerned with penalising and prosecuting terrorist financing network, to come out of the list and avoid being blacklisted.

“To date, Pakistan has largely addressed 14 of 27 action items, with varying levels of progress made on the rest of the action plan,” the FATF said in a statement then at the conclusion of its plenary meeting.

Pakistan was put on the grey list in June 2018. The country had remained on the grey and black lists since 2008. Finally, it was excluded from the greylist in 2015.

The document said CDNS planned to engage a commercial bank to act as a watchdog to monitor transactions, maintain CDNS customers’ record and generate suspicious and customer transaction reports in order to comply with anti-money laundering laws and FATF recommendations. The central bank’s latest date showed that the national debt market of saving schemes and prize bonds exceeded Rs3.99 trillion up to November 2019. Of total debt market, the contribution of bearer prize bonds is around Rs720.57 billion. Investment in saving accounts of CDNS is around Rs826 billion, while that in saving certificates is around Rs2.42 trillion.

The directorate has already begun a drive as a part of the larger initiative to increase documentation of the economy since the government banned bearer bonds of Rs40,000 with no ownership trace and asked investors to surrender the instruments in return of alternative investment avenues.

Analysts said the level of vulnerability associated with CDNS centres is very high due to lack of integration and absence of whistle blowing system.

Under the proposed agreement, the bank will perform screening, customer due diligence of all existing customers of CDNS, screen approximately four million existing customers in six months and make risk profiling of the existing customers in a year.

The bank, under a third party arrangement, will further undertake end-to-end onboarding of all existing and new customers of CDNS and open a linked account for CDNS customers on the basis of information provided by the investor.

The directorate said it plays a pivotal role to inculcate the culture of savings, facilitate financial inclusion and extend social security net to the deserving sections of the society.

“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,” it said in the document.