The Presidents/Chief Executives

All Banks/DFIs

Dear Sirs/Madams,

Compliance of AML/CFT Regime by Banks/DFIs

1. State Bank of Pakistan (SBP) with the objective to preserve the integrity, soundness and safety of the financial system, has been endeavoring to prevent the possible use of the banking sector for money laundering, terrorist financing and other illicit activities. Towards this end, SBP has issued various instructions/ guidelines to the banks/DFIs from time to time.
2. Attention of all banks/DFIs is invited towards Regulation-1 (Customer Due Diligence - CDD) of AML/CFT Regulations, which requires banks/DFIs, on on-going basis, to perform such CDD measures as may be appropriate to its existing customers having regard to their own assessment of materiality and risk but without compromise on identity and verification requirements. Thus, ongoing CDD is an essential part of an effective AML/CFT regime.
3. In this context, it is reiterated that banks/DFIs 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 banks/DFIs should be adequately resourced and strengthened to ensure that the transactions being conducted in the accounts are consistent with the banks/ DFIs’ 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 banks/DFIs 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.

4. Banks/DFIs are also advised to refer to the SECP Circular No. 16 of 2018 dated August 29, 2018 (https://www.secp.gov.pk/laws/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. The banks/ DFIs may seek such ultimate beneficial ownership information from their relevant customers during CDD process.

5. Moreover, with the view to further strengthen the measures already in place and mitigate the money laundering and terrorist financing risks, banks/DFIs 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:

Note
i. Biometric verification of persons authorized to open and operate the account of legal entities or legal arrangements shall be conducted.
ii. 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 bank/DFI’s own assessment of materiality and risk.

5. Confirm compliance status of their internal risk review of remaining legacy portfolio of customers, as required vide BPRD Circular Letter No. 20 dated June 14, 2017 latest by October 31, 2018.

6. 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.
7. Please acknowledge receipt.