SBP Seeks Collaboration of Exchange Companies with Foreign Entities 

In order to increase the flow of home remittances, State Bank of Pakistan (SBP) has allowed and encouraged exchange companies to explore new agency arrangements with foreign entities including banks and currency wire transfer on a non-exclusive basis.

The exchange companies are instructed to comply with the due diligence and other requirements of the prescribed framework and approach this department along with draft agreements for seeking regulatory input on such agreements.

Earlier, the banking regulator instructed exchange companies to overcome structural weaknesses which could impair the ability of exchange companies to effectively mobilize funds from overseas. Therefore, in order to facilitate exchange companies in their diligence process and bring uniformity & discipline in agency arrangements of exchange companies, it is considered necessary to provide fundamental structure of agency arrangements through the below guidelines.

Selection of Foreign Entities

1. Only those foreign entities that have effective customer acceptance and KYC policies and are effectively supervised by the relevant authorities should be selected for agency arrangements
2. No arrangements should be entered into or continued with a correspondent entity incorporated in a jurisdiction in which it has no physical presence and which is unaffiliated with a regulated financial group.
3. Particular attention should be paid when continuing relationships with entity located in jurisdictions that have poor KYC standards or have been identified by Financial Action Task Force as being “non-cooperative” in the fight against money laundering.

Essentials of the Agreement

1. The agreement should be for payment of home remittances in PKR only.
2. All funds against home remittances should be received in advance in Exchange Company’s FCY Accounts maintained with banks in Pakistan.
3. For transactions greater than $1,000 the agreement should require foreign entity to provide address of senders in addition to his/her name. However, address may be substituted with any unique Identification Number/ National Identity Number/Customer Identification Number/Date & Place of Birth.
4. The agreement should be non-exclusive meaning thereby that it should not restrict Exchange Company, directly or indirectly,  to offer similar competing  services under other arrangements.
5. The agreement should give ownership rights of all related accounting/book-keeping and other record to Exchange Company and the same is be maintained for at least five years.
6. The agreement should not contain clauses which give blanket approval to foreign entity to assign or transfer their part of the agreement or any right or duty thereof, to any third party without prior approval of SBP.
7. The agreement should be in compliance with all the regulations, instructions, directives, circulars and other communications issued by the State Bank and contains provision of incorporating any amendments made therein from time to time.
8. The agreement should ensure compliance of prudent practices and standard policies related to Internal Controls, Information Technology, Anti Money Laundering and Know Your Customer etc.
9. The agreement should not compromise State Bank right to terminate the agreement at any time.

The exchange companies are authorized to deal in foreign currency notes, coins, postal notes, money orders, bank drafts, travelers’ cheques, transfers and other businesses as allowed by SBP.