State Bank of Pakistan (SBP) has instructed Pakistan Banks’ Association (PBA) to develop a web directory of bank defaulters who are considered as the high-risk customers involved in suspicious transactions of trade business.
PBA shall arrange a system on its website in a searchable mode with primary search key to be the CNIC of directors/partner/sole proprietor of the company/firm/proprietorship, which has committed default, said SBP in its guideline draft on “Framework for Managing Risks of Trade Based Money Laundering, Terrorist Financing and Proliferation Financing.”
The prime objective of this framework is to strengthen the trade-related Anti- Money Laundering / Combating Terrorism Financing/ Combating Proliferation Financing regime and conserve foreign exchange. This framework applies to all banks authorized by SBP to deal in foreign exchange.
In the guidelines, banks are asked to develop accurate and comprehensive Management Information System (MIS) of the trade transactions at their head/principal office so that the data extraction becomes easy and requirement of a regulator with respect to the requisition of data is met in a timely manner.
Monitoring System of Trade Transactions
Banks and ADs shall install a robust transaction monitoring system for monitoring trade transactions. In this respect, ADs shall develop a comprehensive set of trade-related Money Laundering risk scenarios/red flags, in their transaction monitoring system and shall ensure that any alerts generated are analyzed by the AML analyst for their logical conclusion.
The alert trail i.e. from the generation of alert till its closure shall be documented for later review, inspection or audit.
Banks shall keep the complete record of transactions rejected on the basis of ML/TF/PF concerns associated with it.
Suspicious Transaction Reporting
Where a bank forms a suspicion about a transaction, it shall be mandatory for the concerned AD to report the Suspicious Transaction Reporting to Financial Monitoring Unit no later than seven working days after forming suspicion on the transaction.
However, before reporting the STR, it is suggested that ADs may undertake appropriate inquiries on transactions. In all cases, the steps taken should be balanced against the risk of tipping-off.
Strict Due Diligence of Customers
SBP directed that banks or Authorize Dealers (ADs) shall ensure that higher risk transactions in the area of trade business are subject to more extensive due diligence.
SBP direct banks to develop a set of criteria whereby transactions falling in the high-risk category specifically Advance Payments (Imports & Exports), and clients having outstanding overdues/poor performance history, shall be escalated to the higher management. The clients’ transactions shall only be allowed after satisfying that the historic performance lapses by the client shall not be repeated in the future.
In case of recurrence of non-performance, banks shall consider debarring the customer unless it regularizes its position with respect to current/outstanding overdues.
In the event the default customer ends a banking relationship post non-performance with a bank or becomes irresponsive to bank’s correspondence, the concerned bank or authorized dealer shall report the details of such customer to PBA and the central bank, the draft stated.
The draft contains instructions that shall help ADs in effectively managing risks of money laundering and terrorism financing. The guidelines under the draft framework will ensure that Pakistan is compliant with the Financial Action Task Force (FATF) anti-money laundering and terrorist financing standards.