State Bank mulls easing banking rules for freelancers

KARACHI: State Bank of Pakistan (SBP) is mulling easing bank account opening rules for freelancers by streamlining documentary requirements to attract foreign exchange inflows through official channels, boosting remittances, a source said on Friday.

The freelancer community faces difficulties in maintaining bank accounts in Pakistan. As self-employed people, they can't provide a valid income source as they are not employed by the organisation they are working for. They just provide services online.

These hurdles compelled a majority of freelancers to not bring foreign exchange into the country so they keep their payments in foreign bank accounts.

By contrast, banks are needed to follow standard operating procedures to facilitate the account opening process of their customers without compromising strict due diligence requirements as prescribed by the SBP under anti-money laundering and combating the financing of terrorism regime. They have to comply with know your customer (KYC) obligations.

Banks have implemented tough regulations in financial transactions as Pakistan is struggling to exit from global anti money laundering watchdog FATF’s (Financial Action Task Force) grey list.

The SBP sought banking industry input on facilitating freelancers in their bank account opening process in an effort to generate more funds via formal banking channels, the source told The News.

“The SBP has accepted banks’ recommendations to make it easier and simpler for freelancers to open an account with the bank,” the source added.

Many freelancers make their payments using international payment platforms built for them and service providers, and the SBP wants to channelise these funds through bank accounts, according to the source.

“The representatives of banks will have a meeting with the SBP to discuss this issue soon and the SBP is likely to announce some measures by the end of this month, requiring banks to relax their restrictions on providing evidence for employment and source of funds documents by freelancers or independent workers.”

“Banks have given two proposals to the SBP, which are being considered by it. One is allowing freelancers to open a bank account by submitting self-declaration documents for source and ownership of funds. Second is to set a specific threshold limit for the amount/income to come in their accounts.”

The SBP didn't respond to a request for comment.

Banks have a big list of required documents for account opening and KYC. They require an undertaking by the customer regarding sources of funds and income in the account is sufficient in lieu of proof of profession. Banks evaluate the risk factor and take decisions on a risk-sensitive basis.

The SBP fined eight commercial banks Rs524.24 million in the quarter ended June 30, 2021, for deficiencies in foreign exchange and general banking operations, as well as failure to comply with customer due diligence and know your customer requirements.

The bank’s suggestions come as the government approved National Remittance Loyalty Programme, the incentives to be offered to overseas Pakistanis to sustain a higher trend in remittances.

Moreover, the government announced a package for the IT and telecom sector to boost exports in this sector.

“A majority of banks don't allow freelancers to open accounts solely on the basis of income received through their services despite the fact that evidence for these payments is abundantly available,” said Syed Qumber Hussain, a freelancer working for some international companies as a content creator.

“Banks refuse to accept statements from websites through which freelancers receive payments as a valid source of income.” “This can be a challenge as the payment eventually has to be received in a proper bank account,” Hussain added.

At present, freelancers use mediators like Payoneer which can process the payment but ultimately, this service is also linked to a bank account. JazzCash has recently facilitated Payoneer payments and freelancers can withdraw their balance through these accounts but the mobile wallet has its own limitations as well.

Pakistan's current freelance market consists of more than one million individuals working in various specialized fields. Various reports from different sources have ranked the country quite high in terms of the growth of freelancing individuals as the industry can offer lucrative earnings at times.

Pakistani freelancers are spread across various fields like content management, search engine optimisation, social media management, creative design, and website development, etc.

Most of the projects received are through websites like Upwork, Fivver, and PeoplePerHour, which offer gigs and projects for freelancers to work on. Other individuals also work on a temporary or part-time basis with international as well as local clients.