By law every bank account must be associated with a name, but these ‘benaam’ accounts are, in fact, associated with names of individuals who often have no idea that the accounts exist. PHOTO: FILE
For all its virtues as an institution, the State Bank of Pakistan (SBP) seems to do a poor job of regulating the behaviour of institutions that fall within its jurisdiction. The latest example is the report that several banks and currency exchange companies are being used by financiers of terrorism to funnel cash to militants in the tribal areas. This activity was not discovered in a regular SBP audit of the banks and exchange companies in question, but by accident by the Federal Investigation Agency (FIA), which was investigating a completely unrelated incidence of financial malfeasance.
We applaud the FIA for its efforts to catch backers of terrorism, but find ourselves appalled by the SBP’s lack of action on this front. What is especially disturbing is the use of an age-old trick that the central bank is well aware of: the ‘benaam’ (unnamed, or anonymous) account. By law, of course, every bank account must be associated with a name, but these accounts are, in fact, associated with names of individuals who often have no idea that the accounts exist, let alone transfer large sums of money through them. It is illegal for banks to allow such accounts to exist, since the law requires them to know who the true beneficiary of every account is. But it is clear from the FIA’s investigation that such accounts have been allowed to exist for quite some time without any action on the part of either the banks themselves or, more disturbingly, their regulators at the SBP.
This is quite simply unacceptable. As commendable as the FIA’s investigation is, the SBP has far more resources and technical expertise to handle the issue of money laundering. And the SBP also has the regulatory tools to make it painful for the banks not to crack down on such activity, for instance, by levying fines. The SBP’s current policies on fines are a running joke in the financial services industry since the profits from illicit activity often significantly exceed the fines. The SBP needs to reverse this policy and take a firmer stand against money laundering. The nation cannot afford for it to continue business as usual.
Published in The Express Tribune, January 8th, 2014.
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Benjamin accounts must be frozen and and the money confiscated. Period