FATF: Senate panel on finance to move two bills today

ISLAMABAD: The Senate Standing Committee on Finance has decided to present certain amendments along with two bills including Limited Liability Partnership (Amendment) bill 2020 and the Companies (Amendment) bill before the Upper House of Parliament today (Wednesday) with three major changes.

These bills are aimed at to comply with the FATF requirements. However, if the Upper House of Parliament would approve the bill with amendments it would be again tabled before the Lower House of Parliament. The government functionaries made all out efforts to convince the parliamentarian to pass the bills without any amendments but they could not succeed for convincing the senators.

The Senate Standing Committee on Finance and Revenue has cleared the FATF related two bills — the Limited Liability Partnership (Amendment) Bill, 2020, and the Companies (Amendment) Bill, 2020, with three alterations. The Committee met at Parliament on Tuesday under the chair of Senator Farooq H. Naek.

It was agreed that committee members, Senator Musadiq Malik, Senator Imam Ud Din and Senator Sherry Rehman will present their proposed amendments in Senate today when the Bill will be tabled in the Upper House. The proposed amendments will be related to information of Ultimate Beneficial Ownership. The Committee Chairman Farooq Naek said that the FATF related amendments are need of the hour and in favour of country but government should maintain the standards of justice in the proposed laws.

Earlier, the officials of FMU and Chairman SECP Aamir Khan briefed the sub-committee of Senate Committee on Finance on same amendments, which were later discussed in the Senate committee. The SECP proposed amendments in the Companies Act, 2017 and Limited Liability Partnership Act, 2017 to address gaps identified by Asia Pacific Group on Money Laundering in recommendation No 24, relating to transparency of legal persons.

The new proposed provision will be called 60 A- prohibition on issuance of bearer shares or bearer share warrants etc. (1)The provisions relating to the prohibition on issuance of bearer shares, bearer share warrants and similar equity or debt securities of bearer nature, as well as the manner of registration and cancellation in case any such bearer securities have been issued, are being introduced in order to prevent the misuse of companies from money laundering or terrorist financing abuses in line with the recommendations issued by the Financial Action Task Force.

It is further proposed to insert that (2) All existing bearer sales or bearer share warrants, if any, shall be registered or cancelled, in such manner and period, as may be specified. (3) No civil proceedings shall be instituted or maintainable in any court in respect of bearer share, share warrant or any other equity or debt security or a bearer nature, by whatever name called, allotted, issued, sold, transferred, assigned or disposed of any by a company. (4) In case of any violation of the provisions of this section, the company and every director and officer of the company shall be liable to a fine which may extend to one million rupees.

The SECP chairman told the committee that these amendments are being introduced in order to prevent the misuse of companies from money laundering or terrorist financing abuses in line with the recommendations issued by the FATF. Recommendation 24 of FATF related to (transparency and beneficial ownership of legal persons) is the relevant standard for the purpose. The proposed Section 60-A is meant to comply with this recommendation.

Pakistan's Mutual Evaluation report issued in October 2019 by the Asia Pacific Group on Money Laundering also highlighted certain deficiencies in the regulatory framework relating to the misuse of bearer shares and bearer share warrants etc.

Further, in the Companies Act, after Section 123, the following section 123A shall be inserted, namely:- 123A. Information and Maintenance of Record of Ultimate Beneficial Owner:-(1) A company shall maintain information of its ultimate beneficial owners in such form and manner, within such period, and obtain such declaration from its members as may be specified.

Any person who fails to comply with any provision of this section shall be liable to a fine that may extend to Rs1 million and the company shall also withhold payment of dividend till complete information of documents as specified are provided to the company.

Amendments of Section 413, in the said Act, in Section 413 (a) in sub-section (2) for the phrases "three years", the phrase "such period as may be specified" shall be omitted; (b) for sub-section (3), the following shall be substituted, namely:- the Commission may by regulations, prevent the destruction of the books and papers of a company which has been wound up.

Similarly, in the Limited Liability Partnership Act, 2017 which shall be called the Limited Liability Partnership (Amendment) Act, 2020, SECP has proposed similar amendment related to maintenance of Ultimate Beneficial Ownership information by LLPs.

A vote was held to make a decision as to whether amendments seeking further clarity into the definitions and specifying the percentage of ownership should be added to the bill or not. In voting, 4 members voted in favour of the amendments while 3 voted against them. Consequently it was decided that amendments shall be brought in House.