SECP Seeks to Stop Money Laundering Through Corporate Entities

In an attempt to improve the standards of transparency and to prevent misuse of corporate entities for money laundering, the Securities and Exchange Commission of Pakistan (SECP) has proposed certain amendments to the laws and regulations.

In this regard, the SECP has issued a set of notifications, soliciting public consultation on drafts of amendments to the Companies (Incorporation) Regulations, 2017, Companies (General Provisions and Forms) Regulations, 2018, Foreign Companies Regulations, 2018, and Limited Liability Partnership Regulations, 2018,. The proposed amendments collectively make disclosures regarding the ownership and control structure of the companies and limited liability partnerships more transparent.

These amendments, issued in line with the recommendations on transparency of legal persons issued by the Financial Action Task Force, will help in identifying the real owners of such entities. The amendments also propose to explicitly prohibit the issuance or transfer of equity and debt securities of a bearer nature as well as to increase the period for retention of records of dissolved companies. The amendments will address the deficiencies highlighted in the country’s mutual evaluation report published by the Asia Pacific Group on Money Laundering in October 2019.

With the effect of propose amendments, Companies and LLPs would have to provide additional information to SECP, if the ownership and control structure of such entities is obscured through a chain of multiple entities, whether registered in Pakistan or abroad.

The draft Regulations define an ultimate beneficial owner as a person who exercises ownership or control rights over a company or LLP indirectly through multiple layers of corporate entities or other legal persons or any other arrangements. Amendments suggested specifying a threshold of a minimum of 25 percent of ownership or control rights of the ultimate beneficial owner in the reporting entity, which would be owned through multiple layers of intermediate corporate entities.

In order to give effect to the proposed amendments, the Commission has also publicized the substantive provisions being added to the enabling laws, i.e. the Companies Act, 2017 and the Limited Liability Partnership Act, 2017. The proposed amendments are placed on SECP’s website for public consultation


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