The Securities and Exchange Commission of Pakistan (SECP) notified the Anti Money Laundering and Countering Financing of Terrorism Regulations, 2018. The regulations are fully compliant with the Financial Action Task Force’s (FATF’s) recommendations which are mandatory for Pakistan to adopt as a member of the Asia Pacific Group on money laundering.
The regulations supersede all earlier circular/notifications which had separate Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) requirements for financial institutions regulated by the SECP, namely securities brokers, insurance companies, non-banking finance companies and modarabas. These regulations provide a single set of regulations for all the aforementioned financial institutions with the aim to harmonise the AML/CFT regime.
Earlier, a draft version of the regulations was placed on the SECP website for soliciting public comments. The relevant comments have been duly incorporated in the final version.
There are certain changes and additional provisions in the regulations that make it substantially better equipped in serving its purpose than the previous regime. The focus has been enhanced towards high-risk areas and taking a risk-based approach towards combating money laundering and financing of terrorism.
The introduction of simplified due diligence for low-risk customers shall allow such customers to avail services of financial institutions with relative ease, whereas it will enable financial institutions to focus their resources on high-risk customers, which are subject to enhanced due diligence.
Low-risk customers include those dealing in pension schemes, limited services financial products and insurance products with an annual premium of Rs 100,000 or a single premium of Rs 250,000, while high-risk categories inter alia include politically exposed persons, legal persons and legal arrangements with complex ownership structures and not-for-profit organisations.
In order to ensure that criminals are not able to mask their identity through the use of complex ownership structure of companies, partnerships, trusts or other similar forms, the financial institutions are required to identify the ultimate beneficial owner, who is a natural person, of all legal persons and legal arrangements before offering their services to them.
Moreover, financial institutions are now required to carry out self-risk assessment relating to money laundering and terrorist financing risks faced by them. This requirement envisages instilling greater self-awareness in financial institutions and accordingly, enabling them to implement internal control measures that commensurate with their risk profile.
Other new provisions cover correspondent relationship between Pakistani financial institutions and their foreign counter parts, assessment of money laundering risks by the financial institutions of any new product or technology before its launch, implementation of AML/CFT controls at the financial group level and AML/CFT requirements for foreign branches and subsidiaries of Pakistani financial institutions.