The Securities and Exchange Commission of Pakistan (SECP) on Wednesday directed securities brokers, futures brokers, insurance companies, Takaful Operators, non-banking finance companies (NBFCs) and Modarabas to ensure implementation of Targeted Financial Sanctions (TFS) of freezing and prohibition obligations in relation to the money, assets or property of the designated or proscribed persons (customers) under the guidelines issued by the commission.
According to the SECP’s directive issued to the regulated entities here on Wednesday, the SECP has issued Guidelines for implementation of Anti-Money Laundering/Counter Financing of Terrorism (“AML /CFT”) framework as contained in the Regulations for assistance and guidance of Regulated Entities.
These Guidelines supplement the Regulations and the AML/CFT regime by clarifying and explaining the general requirements of the AML Law to help Regulated Entity (R P) in applying AML/CFT measures, developing an effective AML/CFT risk assessment and compliance framework suitable/compatible to their business, and in particular, in detecting and reporting suspicious activities.
The Guidelines also contain guidance for preparing AML/CFT Risk Assessment; AML/CFT Compliance Assessment Checklist; ML/TF warning signs/ red flags; proliferation financing warning signs/red alerts.
The AML Act requires all Reporting Entities to ensure implementation of Targeted Financial Sanctions (TFS) of freezing and prohibition obligations in relation to the money, assets, or property of the designated or proscribed persons under the United Nations (Security Council) Act, 1948 and under the Anti-Terrorism Act, 1997, SECP directive said.
The SECP hereby directs all the Regulated Entities to comply with following reporting requirements and submit information in the manner prescribed to the respective supervisory departments of the Commission, in consonance with the requirements of the Regulations and Guidelines:
The annual risk assessment and control/compliance assessment framework based on data and information as on 30 June, to be filed by 31st July of each financial year (“FY”), starting from the date of notification of this directive, and as instructed from time to time by the Commission.
The SECP directed that the Regulated Entities should undertake and submit their internal annual risk assessment which should be aligned with the risks identified in the latest National Risk Assessment of the country and cover the process adopted for risk identification.
Compliance Assessment Checklist: Regulated Entities should submit their annual compliance assessment checklist to demonstrate the adequacy and effectiveness of AML/CFT compliance framework in light of the Regulations, and are encouraged to use the checklist provided to the Guidelines for this purpose, SECP said.
The SECP further directed that the regulated entities should provide quarterly information/ data on 30th of the subsequent month of every quarter, containing the specified information.
Red Flags Applicable to all SECP Sectors
The following indicators should be used to identify suspected persons:
- A customer appears to have conducted transactions on behalf of or at the direction of a designated/proscribed individual.
- A customer is an office-bearer (trustee/member/director/authorized signatory etc.) of a designated/proscribed entity.
- A customer is a business partner of an office-bearer (trustee/member/director etc.) of a designated/proscribed entity.
- A customer is a close family member of a designated/proscribed individual who is also suspected to be associated with the business of the designated/proscribed individual by way of financial or other assistance.
- An entity has a designated/proscribed individual on its board or management.
- Unilateral sanctions listing identifies linkage/association of a customer with a designated/ proscribed individual or entity.
- Media (Broadcast/Print/Social) news highlights customer’s involvement in providing financial or other assistance to designated/ proscribed individual or entity.
- Inquiry from law enforcement agency/intelligence agency indicating linkage of a customer with designated/ proscribed individual or entity.
Red Flags that specifically relate to Non-banking financial institutions (NBFIs)
- The customer declares a proscribed person as a guarantor of the loan or nominee of the customer.
- The customer has obtained a loan from an NBFC, but the loan shall be utilized by a proscribed person.
- The repayment of a loan to the customer is made by a proscribed person.
- In the case of Mutual Funds account to account transfer involving transfer to a proscribed individual or entity.
- A customer who is refused financial services/loan due to association with a proscribed person approaches another financial institution for securing a loan.
Red Flags based on behavior of an Account Holder associated with proscribed individuals or entities
- A customer has provided the same residential/office address that matches the known residential/office address of a designated/proscribed individual or entity.
- A customer has provided the same personal contact number that matches the contact number provided earlier by a proscribed/designated customer.
- A customer depositing funds in the account of a person or entity listed in an international or foreign jurisdiction’s sanctions lists maintained in accordance with UNSC resolution 1373. A customer listed in an international or foreign jurisdiction’s sanctions list maintained in accordance with UNSC resolution 1373, is depositing funds in another customer’s account.