State Bank of Pakistan (SBP) has ordered all financial institutions to fire all C-level executives of the top management and board of directors, who have been involved in white-collar crimes, criminal and terrorist activities in the past.
The central bank said in a circular: “Any person(s) linked to any criminal activities or affiliated to any terrorist organizations shall not become part of financial institutions as well as Payment System Operators and Payment Service Providers (PSOs/PSPs).
The person shall become disqualified if he/she is found to be designated/ prescribed or associated directly or indirectly with designated/proscribed entities/persons (terrorist groups or banned outfit) under United Nations Security Council Resolution or Anti-Terrorism Act 1997.”
The central bank issued a questionnaire for professionals of financial institutions including top officials and other rank and files of the organization in a first step to scrutinize their background.
The pre-hiring investigation of the top management and board’s directors are already very comprehensive as per of the central bank’s regulations on Fit and Proper, however, the new directives will tighten the appointment process of these high officials.
Recently, many cases surfaced in which top-level bankers having associations with political parties were made CEOs under the influence of the federal and provincial government. They were included in various inquiries of accountability and even arrested in few cases.
This trend raised questions over the transparency and professionalism of the banking industry, as such professionals influence the operations of particular banks and could cause damage to the reputation of the whole banking and financial system.
It has also been observed that massive cases of fake accounts have been unearthed since the start of 2018, which were attributed to the financial corruption of political leaders with the support of banks and bankers.
This trend is worrisome for the banking industry that should be operated transparently without organized crimes such as money laundering through the involvement of bankers backed by political affiliations.
Inquiry of Top Brass of Financial Institutions
The central bank commented on the issuance of the circular saying: “SBP, from time to time, has been issuing instructions to strengthen the FPT criteria in view of the potential risks arising from money laundering, terror financing and proliferation financing.”
The central bank issued a questionnaire to commercial banks and financial institutions which is seemingly designed for top officials and directors of the banks rather than other professionals like (Vice President and Managers), and other lower staff.
Out of 25 questions, there is one question related to terrorism, the rest of the 24 questions inquire about the track record of top brass for their involvement in the financial crime, fraud, forgery, defaulter, illegal deposit dealing, and etc. Some of the questions are related to the misuse of powers, tax evasion, violations of regulations, misconduct, and disqualification of any designations.
The questionnaire also requires officials to state whether they hold dual office in terms of designations and dual nationality of any country, ownership and sponsorship in different organizations and subsidiaries.
The directives were issued to CEOs and directors of payment system operators and payment system providers in view of the expansion of new businesses. However, the instructions are seemingly for all financial institutions including commercial banks, microfinance banks and DFIs, which were also addressed by the central bank in the said circular.
It is likely that the central bank will introduce more strict regulations for the hiring of the bankers from the top level to lower staff in the coming days in order to combat white-collar crimes rate in the banking sector.