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Circulars

Compliance of AML/CFT Regime for MFBs

December 30, 2019
8357

The Presidents/Chief Executive Officers
All Microfinance Banks (MFBs)

Dear Sir/Madam,

Compliance of AML/CFT Regime for MFBs

Please refer to the instructions issued vide AC&MFD Circular No. 02 dated October 05, 2018 to mitigate various risks arising from money laundering and financing of terrorism.

  1. As stipulated under Regulation M-1, ongoing Customer Due Diligence (CDD) is an essential aspect of effective KYC/CDD procedures and applies to all customers to whom the MFB is offering any type of service(s).
  2. Accordingly, it is reiterated that MFBs must ensure strict observance of all applicable instructions including identification and verification of customers and their beneficial owner(s) and obtain information on the purpose and intended nature of business relationship. The monitoring mechanism in place at MFBs should be adequately resourced and strengthened to ensure that the transactions being conducted in the accounts are consistent with the MFB’s knowledge of their customer, business, risk profile and the source of funds. With the objective to know the ultimate beneficial ownership of accounts/transactions, the MFBs shall enhance their efforts to obtain relevant information and examine background and purpose of all complex, unusual large transactions and unusual patterns of transactions, which do not commensurate with customer profile or have no apparent economic or visible lawful purpose.
  3. MFBs are also advised to refer to the SECP Circular No. 16 of 2018 dated August 29, 2018 (SECP Circulars) through which the Commission has directed all companies to enhance their efforts to obtain and maintain up-to-date information relating to their ultimate beneficial owners, i.e. natural persons or individuals who ultimately own or control the company. Therefore, MFBs may also seek such ultimate beneficial ownership information from their relevant customers during the CDD process.
  4. Moreover, with the view to further strengthen the measures already in place and mitigate the money laundering and terrorist financing risks, MFBs are advised to immediately take following steps:
    1. Ensure optimal utilization of biometric technology and carry out biometric verification of the existing customers (if already not done) as per following timelines and thresholds:
Priority Category of Customers Threshold Timeline
High Priority Listed /Public Limited Companies Account turnover exceeding PKR 1,000 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019. 31st January, 2020
Private Limited Companies Account turnover exceeding PKR 500 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
All customers except Public/Private Limited Companies Account turnover exceeding PKR 250 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
Medium Priority Listed/Public Limited Companies Account turnover from PKR 500 million to PKR 1000 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019. 31st March, 2020
Private Limited Companies Account turnover from PKR 250 million to PKR 500 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
All customers except Public/Private Limited Companies Account turnover from PKR 100 million to PKR 250 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
Normal All other accounts not covered in the above categories 30th June, 2020

Note:

  1. Biometric verification of persons authorized to open and operate the account of legal entities or legal arrangements shall be conducted.
  2. In case of customers whose eligible identity documents are other than biometrically verifiable documents, re-validation/verification of identity shall be done based on documents, data or information obtained from customer and/or from reliable and independent sources having regard to MFB’s own assessment of materiality and risk.
  1. Submit compliance status in respect of biometric verification of their existing/legacy portfolio of customers within 15 days of aforesaid timelines.
  1. Furthermore, MFBs are advised to adhere to the following instructions regarding biometric verification of existing customers presently outside Pakistan:
Type of Customer Treatment
a) Non-resident Pakistanis (NRPs)
As defined in Income Tax Ordinance, 2001 – Chapter 5, Division II, Section 82 		For customers who fall under the definition of NRP, the MFB may obtain a signed undertaking from the customer invariably containing the following:

• Customer’s NRP status along with proof (i.e. copy of valid passport, visa, exit stamp, resident permit, etc.).

• Copy of valid identity document

• Account number(s) of the customer’s account(s) maintained with the bank as per customer record.

• Undertaking by the customer to inform the bank of any change in residency status.

The MFB, after verification of the customer’s signature from its record, shall accordingly update/ reflect the NRP status in the customer profile.

For such customers, as an alternative to biometric verification, the MFB may conduct fresh NADRA Verisys using the information provided by the customer.
b) Resident Pakistanis temporarily outside Pakistan For customers who do not qualify under the definition of NRP, but are currently/temporarily outside Pakistan for any reason, the MFB may obtain reasonable evidence/proof from the customer regarding his/her absence from the country and expected date of return.

For such customers, as an alternate to biometric verification, the MFB may conduct fresh NADRA Verisys using the information provided by the customer.

The MFB may retain the NADRA Verisys in place of biometric verification until the customer returns, subject to reasonable time limit (not more than six months) to be defined by MFB.
c) Joint Accounts where one account holder is outside Pakistan (NRP/temporarily) For joint account holders, treatment of biometric verification should be done according to the status of respective individual. Biometric verification should be conducted for the joint account holder who is resident Pakistani, while for other joint account holders, the relevant procedure described at (a) and (b) above should be adopted.
  1. Moreover, MFBs may operate accounts on the basis of NADRA Verisys in genuine cases, in line with Frequently Asked Questions (FAQ No. 8, Annexure-I) on Use of Biometric Technology, provided MFBs are satisfied and proper reason/proof is recorded/retained by them.
  2. For such cases in line with Para-7 above, in the absence of biometric verification, MFB may ensure that requisite identification document has been obtained, marked as ‘original seen’ by their staff and verified through NADRA Verisys. Moreover, an undertaking should be obtained from the customer declaring that the particulars provided to the MFB are correct and that their staff has verified the same.
  3. All other instructions on the subject shall, however, remain unchanged.
  4. SBP, during the course of inspection, will particularly assess the compliance of above requirements and non-compliance will attract appropriate enforcement action in accordance with relevant laws.
  5. Please acknowledge receipt.

Enclosed:

Yours sincerely,

Noor Ahmed
Director