The State Bank of Pakistan (SBP) has issued new Anti Money Laundering, Combating the Financing of Terrorism, and Countering Proliferation Financing (AML/CFT/CPF) Regulations for SBP’s Regulated Entities (REs) as the country is awaiting a decision this month on its status in the list of the Financial Action Task Force [FATF], on Wednesday.
Regulated entities may be understood as the financial institutions that are licensed or authorized, and regulated by the SBP under any law administered by the SBP, including banks, development finance institutions, microfinance banks, exchange companies, payment systems operators, payment service providers, electronic money institutions and third-party payment service providers.
These institutions must ensure an entity level internal risk assessment report (IRAR) to document the identified money laundering, terrorist financing, and proliferation financing risks, the SBP said in a statement.
The central bank has also warned of penalties and administrative actions under the applicable laws in case of violations of these regulations.
The IRARs will be used for evaluating the residual risks of money laundering, terrorism financing, and proliferation financing which the REs will then take into account while taking onboard new customers, executing financial transactions, launching new financial products as well as using technology.
The SBP said it has been endeavoring to prevent the possible use of its regulated entities for illicit activities with preserving the integrity, soundness, and safety of the financial system, and this is where IRAR will come into action. These reports will be presented to the board of directors for approval, which will then incorporate the recommendations from the BoD along with a time-bound action plan aimed at mitigating the risks concerned.
“For ensuring verification of documents and information obtained for customer due diligence purposes, the SBP’s entities will refer to the source from which the document or information originates or use reliable and independent document, data or source,” said the SBP.
Meanwhile, the SBP also issued guidelines on targeted financial sanctions under the United Nations Security Council (UNSC) regulations. The objective of the regulations is to further enhance the understanding and ensure effectiveness on implementation under the UNSC resolutions.
The Financial Action Task Force (FATF) is expected to announce a decision this month about the status of Pakistan in its list of jurisdictions that need monitoring under anti-money laundering and curbing of terrorism financing. Pakistan has met a number of obligations to come out of the grey list and avert risks of inclusion in the blacklist with deficiencies in anti-money laundering laws.