State Bank unveils new AML/CFT regulations

KARACHI: The State Bank of Pakistan (SBP) on Wednesday unveiled new regulations to curb money laundering and terrorism financing as the country is awaiting a decision this month on its status in the list of global financial system’s watchdog.

The institutions or regulated entities must ensure an entity level internal risk assessment report to document the identified money laundering, terrorist financing and proliferation financing risks, the SBP said in a statement.

Regulated entities mean financial institutions licenced/authorised and regulated by the SBP under any law administered by the SBP, and include banks, development finance institutions, microfinance banks, exchange companies / exchange companies of ‘B’ category, payment systems operators, payment service providers, electronic money institutions and third party payment service providers.

The SBP said it has been endeavoring to prevent the possible use of its regulated entities for illicit activities with preserving the integrity, soundness and safety of the financial system.

The Financial Action Task Force (FATF) is expected to announce a decision this month about the status of Pakistan in its list of jurisdictions that need monitoring under anti-money laundering and curbing of terrorism financing.

Pakistan has met a number of obligations to come out of grey list and avert risks of inclusion in the black list of country with deficiencies in anti-money laundering laws.

“The internal risk assessment report (IRAR) will identify, assess and understand the risks for customers, products, services, delivery channels, technologies, and their different categories of employees,” the SBP said.

“IRAR shall take into account results of national risk assessment, major international/ domestic financial crimes and terrorism incidents that have probability of posing risks to the entity itself and to the Pakistan’s financial sector.”

The financial institutions need to conduct customer due diligence of their customers/ occasional customers in circumstances and matters set out in the law.

“For ensuring verification of documents and information obtained for customer due diligence purposes, the SBP’s entities will refer to the source from which the document or information originates or use reliable and independent document, data or source,” said the SBP.

Meanwhile, the SBP also issued guidelines on targeted financial sanctions under the United Nations Security Council (UNSC) regulations. The objective of the regulations is to further enhance the understanding and ensure effectiveness on implementation under the UNSC resolutions.