Financial Crime World

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Pakistan’s Central Bank Issues New Regulations to Combat Money Laundering

The State Bank of Pakistan (SBP) has issued new regulations to combat money laundering and terrorist financing in the country. The regulations, which come into effect immediately, require banks and other financial institutions to implement stringent customer due diligence (CDD) measures to prevent illegal activities.

Key Requirements for Financial Institutions

Financial institutions must:

  • Identify every person who acts on behalf of a customer or occasional customer
  • Verify their identity using reliable documents and data
  • Verify their authority to act on behalf of the customer
  • Take reasonable measures to verify the identity of beneficial owners and understand the nature of their business and ownership structure
  • Identify and verify the identity of customers who are legal persons or arrangements, including trusts and other types of legal entities
  • Obtain information about the powers that regulate and bind these entities, as well as the names of relevant senior management officials

Prohibitions and Compliance Requirements

Financial institutions are prohibited from:

  • Opening or maintaining numbered accounts
  • Conducting transactions on fake identity documents
  • Ensuring account relationships are in accordance with the constituent documents of entities
  • Allowing abbreviated names if the entity has a complete non-abbreviated name in its documents

Customer Profiling and Risk Assessment

The SBP has categorized customers, financial services, and geographical locations based on their risk profiles. Financial institutions must profile their business relationships, occasional transactions, or operating locations accordingly.

Compliance with Anti-Money Laundering (AML) Act

Financial institutions must comply with Section 7A of the AML Act at minimum for all types of customers, financial services, and geographical locations.

Strengthening Pakistan’s Anti-Money Laundering Regime

The new regulations are designed to strengthen Pakistan’s anti-money laundering regime and prevent illegal activities that can undermine the country’s financial system. They come into effect immediately and require financial institutions to implement them within a specified timeframe.

Annexure-I: Reliable Documents and Data

  • Reliable documents:
    • Valid passport
    • National ID card
    • Driver’s license
    • Utility bills
    • Bank statements
  • Reliable data includes:
    • Information from credit reporting agencies
    • Information from public records

Annexure-II: Sources of Information

  • Sources of information include:
    • Publicly available information
    • Information from government agencies
    • Information from financial institutions
    • Information from non-governmental organizations