Attention of all banks/DFIs is invited towards Prudential Regulations for Corporate and Commercial Banking M-1 to M-5 and related regulations on governance along with instructions issued on the subject from time to time.

2.         To this end, State Bank will like to re-emphasize on the implementation of certain critical areas. The following requirements should be specifically noted for strict compliance.

a) It is reiterated that before opening of any account, the banks/DFIs should conduct thorough Customer Due Diligence (CDD) as per requirements of PR-M-1 and monitor the account activities to ensure that the transactions in the accounts remain in line with the overall profile of the customers. The Paragraph 5 (a) of Regulation M-1 states that “The Banks/DFIs should not open and maintain anonymous accounts or accounts in the name of fictitious persons.” Besides strict compliance of the requirement, the banks/ DFIs shall incorporate the same in their internal policies and ensure that no such accounts/relationships exist forthwith.

 

b) Banks/ DFIs shall not provide any banking services to proscribed entities and persons or to those who are associated with such entities and persons, whether under the proscribed name or with a different name. The banks/DFIs should monitor their relationships on a continuous basis and ensure that no such relationship exists. If any such relationship is found, the same should be immediately reported to Financial Monitoring Unit (FMU).

c) In terms of Paragraph 2 of PR M-5, all the banks/DFIs are required to implement systems which could flag out-of pattern transactions for reporting suspicious transactions. It is observed that a few of the banks have not yet installed a suitable system or some have installed the systems which lack necessary capabilities to perform desired level of monitoring. Therefore, it is re-emphasized to implement software monitoring systems capable of producing meaningful results by June 30, 2012.

3. Banks/ DFIs should carefully note that subject regulations are binding instructions issued under the Banking Companies Ordinance, 1962 and failure to comply with them shall attract severe penalties.

 

4. Please acknowledge receipt.