AML / CFT Regime in

Pakistan

By
FAISAL KAMRAN
Peshawar
 Legislative Framework
 National Accountability
Ordinance, 1999

 Control of Narcotics Substance

Act 1997

 Anti-Terrorism Act 1997.

 National Accountability
Ordinance, 1999
 Deals mainly with the detection,
investigation, prosecution and speedy
disposal of cases involving corruption and
corrupt practices
 The following offences under NAO
covers the offence of money laundering :
• Acquisition of any property /
pecuniary advantage through corrupt,
dishonest or illegal means
• Having assets beyond known sources
of income which can not be
reasonably accounted for.
• Pursuant to Section 20, financial
institutions are bound to report
suspicious financial transactions to NAB.
Control of Narcotics Substance
Act 1997
The following offences/ provisions under CNSA
covers the AML measures:
 Makes the acquisition of assets through
drug money an offence
 The suspected properties / assets may be
frozen and subsequently forfeited through
the Court. This measure can be construed
as an anti-money laundering measure.
 Section 67: it is mandatory for financial
institutions to report STRs to ANF,
suspected to be related to drug business.
 Anti-Terrorism Act
1997
 Deals comprehensively with the
offences of terrorism and financing of
terrorism.
 Makes compulsory for the prescribed
organizations to submit all accounts
for it’s political and social welfare
activities and disclose all funding
sources.
 Freezing, Seizure and Forfeiture of
assets
 AML/CFT Measures by SBP
Institutional Arrangements

• Setting up of dedicated AML/ CFT Units.

• Capacity Building- training
Regulatory Framework
 Issuance of Prudential Regulations
Monitoring & Enforcement
 On-site inspection and off-site surveillance
International Obligations
 UNSC Resolutions- Freezing of accounts
Curbing of Informal Value Transfers
 Formation of Exchange Companies
Documentation of Economy
 Restriction on RTCs – Bearer Instruments
 AML/ CFT UNITS
 Primary Responsibilities of the Units
• Issuance of regulations and directions
to banks and DFIs in accordance with
FATF Recommendations and
international best practices
• Receive STRs and process them for
suitable action
• Coordination and liaison with relevant
Govt. departments, International and
Multilateral bodies
• Issue directives for freezing of
accounts
 Regulatory Framework
 A separate section in new PRs has
been dedicated to regulations
pertaining to AML and CFT.
 PR Compliant with 40 + 9
recommendations
 In line with Basel Core Principle
No.15
 Violations of regulations dealt with
penal action
 M-1:Know Your
Customer
 Formulation of KYC Policy duly
approved by the Board of Directors
of banks/DFIs.
 True Identity of Beneficial Owner,
Real Party in interest or Controlling
person
 Requirement of minimum documents
 Requirement of Introduction
 M-1:Know Your Customer
 Enhanced due diligence to be applied on
the following high risk customers:
• Customers belonging to Offshore tax
heavens, etc.
• Customers in cash based businesses
or high value items
• High net worth customers with no
clearly identifiable sources of income
• Customers who have been refused by
another bank
• Correspondent banks
• Non-face-to-face/on-line customers
• verification of walk-in customers
M-2: Continuous Monitoring
 Ensure that the business is conducted in
conformity with high ethical standards,
banking laws and regulations
 Specific Procedures be established for:
• Ascertaining customer’s status and his
source of earnings
• Monitoring of accounts on regular basis
• Checking identities and bonafides of
remitters and beneficiaries
• Retaining internal record of transaction
M-2: Continuous Monitoring
 Transactions out of character /
inconsistent with the history, pattern
and normal operation of the account
to be viewed suspiciously and
properly investigated
 Suitable training to employees
 Banks/DFIs to issue necessary
instructions for guidance and
compliance by all concerned
 M3: Record Retention
 All necessary record of transactions both
domestic and international be retained for
five years.
 Such records should be sufficient to permit
reconstruction of individual transactions
 Records relating to identification including
business correspondence to be retained
for at least five years
 Records relating to STRs to be retained
even after the lapse of five years and not
to be destroyed without prior permission
of State Bank
M4: Correspondent Banking

Banks/DFIs to gather sufficient

information about their
correspondent banks to
understand fully the nature of their
business including:
• Management and ownership
• Major business activities
• Location
• ML prevention and detection
measures
M4: Correspondent Banking

 The purpose of account

 The identity of any third party
that will use the correspondent
banking services
 Condition of the bank regulation
and supervision in the
correspondent’s country
 Banks/DFIs not to enter or
continue correspondent banking
relationship with shell banks
M-5: Suspicious Transactions
 Banks/DFIs to pay special attention to
all complex, unusually large
transactions, which have no apparent
economic and visible lawful purpose.
 Examples of suspicious transactions
 STRs to be reported if there are
reasonable ground to suspect that funds
are proceeds of a criminal activity,
within three days, through Compliance
Officer to Banking Policy Department
 Tipping off strictly prohibited
 Further Processing of STRs.

 STRs reported by banks, at present,

are forwarded to NAB which is the
relevant agency for investigation and
prosecution of of all kinds of
corruption.
Thank You