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Compliance Management Systems for Financial Institutions in Pakistan: A Must-Have for AML/CTF

In Pakistan, financial institutions are subject to Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations to prevent illegal activities. The country’s central bank, State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP), and Financial Information Unit (FIU-Pakistan) are responsible for overseeing AML/CTF compliance among financial institutions.

How to Comply with AML/CTF Regulations in Pakistan

Financial institutions in Pakistan must have a robust anti-money laundering/counter-terrorism financing policy in place, which includes:

  • Conducting customer due diligence
  • Determining beneficial owners
  • Monitoring business relationships
  • Implementing internal policies and procedures

They must also establish AML/CTF policies, processes, controls, responsibilities, and preventive measures that take into account their scale, nature of business, and operational complexities.

Risk-Based Approach

AML/CTF programs in Pakistan must be risk-based, with a thorough risk assessment serving as the foundation for the program. The risk assessment must identify, assess, and comprehend money laundering (ML), terrorist financing (TF), and proliferation financing (PF) risks at the entity level.

Reporting Obligations

Designated service providers are required to notify FIU-Pakistan regarding suspicious activity. Ongoing reporting responsibilities include:

  • Submitting Suspicious Transaction Reports (STRs) for any suspicious transaction, regardless of threshold
  • Currency Transaction Reports (CTRs) when a cash transaction exceeds PKR 2 million or equivalent

Conclusion

Compliance with AML/CTF regulations is crucial for financial institutions in Pakistan to prevent illegal activities. By having a robust compliance management system in place, financial institutions can ensure they are meeting their regulatory obligations and protecting their reputation. The country’s AML/CTF supervisors, including the SBP, SECP, and FIU-Pakistan, play a critical role in overseeing AML/CTF compliance among financial institutions.