SBP Reveals New Regulations to Combat Financial Crimes

Banks and Financial Institutions Required to Verify Customer Identity, Comply with Data Privacy Standards

In a bid to curb financial crimes, the State Bank of Pakistan (SBP) has issued new regulations requiring banks and financial institutions to comply with customer due diligence (CDD) requirements.

Key Requirements

SBP-Registered Entities (REs) must verify the identity of customers and beneficial owners.
REs must identify every person who acts on behalf of a customer or occasional customer and verify their identity using reliable documents, data, or information set out in Annexure-I and Annexure-II.
REs must verify the authority of these individuals to act on behalf of the customer.

Data Privacy and Protection

The regulations emphasize the importance of data privacy and protection of customers’ information.
SBP REs are required to comply with minimum standards prescribed by the SBP from time to time.

Legal Persons or Arrangements

For legal persons or arrangements, SBP REs must:
- Identify the customer and verify its identity by obtaining specific information, including:
  - Name
  - Legal form
  - Proof of existence
  - Powers that regulate and bind the entity
  - Senior management positions
- Understand the nature of the customer’s business and ownership structure

Beneficial Owners

SBP REs must take reasonable measures to verify the identity of beneficial owners, including identifying natural persons who have ultimate effective control of a legal person or arrangement.

Additional Requirements

In cases where an account or relationship is held by an entity with an abbreviated name or title, SBP REs must satisfy themselves that the subject name/title is in accordance with the constituent documents of the entity.
SBP REs must not open or maintain numbered accounts and conduct transactions on fake identity documents.

Effective Date

The new regulations come into effect immediately, and SBP REs are required to comply with them forthwith.