The cabinet, in its meeting on Thursday, is set to approve amendments to the law to comply with the Financial Action Task Force’s (FATF) demand to expand cooperation with foreign countries in providing information about owners of companies in a bid to stop money laundering and terror-financing.
The Asia-Pacific Group (APG), in its report on Pakistan, had pointed out that there were limited provisions in place for international cooperation by Pakistan in relation to the basic and beneficial ownership information on the basis set out in Rule 37 and Rule 40.
Section 42D of the Securities and Exchange Commission of Pakistan (SECP) Act provides “the Commission may, on a reciprocal basis, cooperate with and provide assistance under this Act or any administered legislation to a foreign regulatory authority.”
It said Section 42D (7) adds “any assistance provided under this section to any foreign regulatory authorities or international organisations may be refused by the Commission on the grounds of national security and public interest.” The APG - an FATF body - also pointed out that there were no mechanisms in place to monitor the quality of assistance Pakistan received from other countries in response to requests for basic and beneficial ownership information or requests for assistance in locating the beneficial owners residing abroad.
Sources told The Express Tribune that now a summary had been tabled before the cabinet for approving amendments to the Companies Act 2017 and Limited Liability Partnership Act 2017 in order to address the gaps identified by the APG regarding money laundering and implement the FATF recommendation relating to the transparency of legal persons.
The cabinet has been informed that the SECP has proposed amendments to the Companies Act 2017 and the Limited Liability Partnership Act 2017 to address these issues.
The proposed amendments have been approved by the SECP policy board and have also been shared with foreign consultants by the SECP to further synchronise the amendments with the FATF suggestions.
The proposed amendments have been vetted by the Ministry of Law, and the Ministry of Finance has endorsed the amendments.
The cabinet will also consider another summary relating to money laundering to ensure compliance with the APG recommendations.
Two offences have not been included so far as predicate crimes in the money laundering offence - grievous bodily injury and marine piracy - and the latter is not yet a criminal offence.
The APG pointed out that Pakistan’s money laundering offence was generally compliant with the standards except for deficiencies in the scope of predicate offences. The Financial Monitoring Unit (FMU) has said that one of the FATF-designated categories of offences ie grievous bodily injury, is not part of the Schedule of the Anti-Money Laundering Act 2010. This gap has also been highlighted in the APG Mutual Evaluation Report.
The FMU has requested that the case should be processed for approval by the federal cabinet under Section 42 of the Anti-Money Laundering Act 2010 for the addition of predicate offences recommended in the APG’s Mutual Evaluation Report.
Published in The Express Tribune, July 7th, 2020.
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