SBP hits eight banks with penalties

Pakistan’s central bank has charged eight banks with monetary penalties totalling at over half a billion rupees for violating regulations including anti-money laundering (AML), combating financing of terrorism (CFT) and foreign exchange rules during the quarter ended June 30, 2021.

The State Bank of Pakistan (SBP) has time and again directed banks to ensure compliance with banking regulations including AML, CFT and foreign exchange regulations. It has adopted strictness over implementation of such rules in financial transactions in letter and spirit, as the country is making efforts to escape the Financial Action Task Force’s (FATF) grey list.

“In addition to penal action, the bank has been advised to conduct an internal inquiry on breaches of regulatory instructions and take disciplinary action against the delinquent officials,” SBP directed one of the top five banks in the country.

A leading bank was charged Rs289.09 million for “violation of regulatory instructions pertaining to AML/CFT and general banking operations,” it said.

The regulator found at least four banks that compromised money laundering and terror financing regulations and directed all of them to conduct internal inquiry on violation of regulatory instructions and take disciplinary action against the officials found involved.

The regulator (SBP) has hit eight banks with penalties ranging from Rs10-290 million, totalling at Rs525.24 million under the subject “details of significant enforcement actions by SBP during the quarter ended June 30, 2021,” according to a statement issued by the central bank. Other banks, mostly tier-II ones, were hit with penalties for violating rules related to foreign exchange, customer due diligence (CDD) and know-your client (KYC). Gathering of incomplete information about the clients may let criminal elements get access to banks and conduct illegitimate financial transactions.

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“These actions (monetary and disciplinary) are based on deficiencies in compliance of regulatory instructions and do not constitute a comment on the financial soundness of the entities,” the central bank said.

In October, SBP directed financial institutions to invest in technology and human resources to create an enabling environment to detect illegal financial transactions and bound staffers to maintain secrecy of the likely suspected transaction. It also asked them to report the development to the Financial Monitoring Unit (FMU).

“Accordingly, all SBP REs (regulated entities) shall implement automated transaction monitoring systems (TMS) capable of producing meaningful alerts based on pre-defined parameters/ thresholds and customer profile, for analysis and possible reporting of suspicious transactions.

“Furthermore, SBP REs shall establish criteria in their AML/CFT/CPF policies and/or procedures for management of such alerts. The adequacy of staff posted for effective monitoring and reporting of STRs is a critical factor of customer due diligence,” it said.

Training to employees directly/indirectly responsible for AML/CFT/CPF shall enable them to understand new developments, money laundering and financing of terrorism techniques, methods and trends, it told the REs.

The REs included banks, development finance institutions, microfinance banks, exchange companies, payment system operators, payment service providers, electronic money institutions and third party payment service providers.

Published in The Express Tribune, August 8^th, 2021.

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