The Securities and Exchange Commission of Pakistan (SECP) has served show-cause notices on almost 25 brokerage houses over non-compliance with the anti-money laundering (AML) and counter-financing of terrorism (CFT) laws.
Media reports said that the regulatory body has taken the actions for non-compliance of the anti-money laundering and terror financing regulations and laws.
Previously, the Financial Action Task Force (FATF) had allegedly expressed dissatisfaction over Pakistan’s steps to control terror financing and fix anti-money laundering laws.
The FATF in June this year formally placed Pakistan on the grey list due to ‘strategic deficiencies’ in its anti-money laundering and terror financing regime. The decision was taken by the FATF Plenary that met in Paris from June 24 to 29.
Following the FATF decision, the government has tightened the anti-money laundering and terror-financing regulations and taken a number of steps to strictly implement the relevant regulations.
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.
The SECP’s Anti-Money Laundering and Counter Financing of Terrorism Regulations, 2018, states that any person who contravenes or fails to comply with any provision of the regulations shall be liable to pay such sum as provided in section 40-A of the SECP Act 1997, in addition to any penalty provided under Anti-Money Laundering Act, 2010
The section 40-A of the SECP Act 1997, provides that any person who contravenes or fails to comply with any provision of rule or notification issued under this act shall be liable to pay by way of penalty a sum which may extend to Rs10 million and where the contravention is a continuing one, with a further penalty which may extend to Rs100,000 per day.
The government has recently passed new legislation to combat money laundering and terror financing in order to address the FATF’s concerns. The SECP has notified Anti Money Laundering and Countering Financing of Terrorism Regulations, 2018.
The Regulations are fully compliant with Financial Action Task Force’s (FATF) recommendations, which are mandatory to adopt for Pakistan 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 countering financing of terrorism (CFT) requirements for financial institutions regulated by the SECP, namely Securities Brokers, Insurance Companies, Non-Banking Finance Companies and Modarabas.
Furthermore, the Federal Board of Revenue (FBR) issued one SRO with regard to giving powers to its Directorate of Intelligence and Investigation wing to deal with the money laundering issue.