Violation of Foreign Exchange Regulation Act: SBP to be empowered to impose penalty up to Rs one million

The State Bank of Pakistan (SBP), is to be given powers to impose financial penalty up to one million rupees on banks and foreign exchange companies on violation of Foreign Exchange Regulation Act, well informed sources told Business Recorder. The SBP is the regulator of foreign exchange regime and is responsible for administration of the Foreign Exchange Regulation Act, 1947 (the Act).
Since the promulgation of the Act, the volume of foreign currency transactions to and from Pakistan has considerably increased. However, under the existing provisions of the Act, the SBP has no direct power to impose monetary penalties on violation of the provisions of the Act and it has to follow a lengthy procedure of adjudication. SBP can only suspend or cancel the licence of a bank or an exchange company on violation of any provision of the Act which often becomes more severe than the violations warrant.
The sources said, SBP has proposed an amendment in the Foreign Exchange Regulation Act, 1947 empowering SBP to impose monetary penalties on violation of the provisions of the Act to enable SBP to take appropriate, effective and prompt remedial measures. Accordingly, draft Bill for insertion of a section (23k) in Foreign Exchange Regulation Act, 1947, has been drafted, however, drafting of the Act is being considered as inappropriate. The drafted amendments are as follows; Amendment of Act VII of 1947.-In the Foreign Exchange Regulation Act, 1947 (VII of 1947), after section 23J, the following new section shall be inserted.
Namely: "23K. Powers to impose penalty, etc.
(l) Without prejudice to the provisions of sections 3AA, 23 or 23B, if any person in the opinion of State Bank, contravenes any provision of this Act or any order, rule, regulation or direction issued thereunder, the State Bank may impose penalty which may extend to one million rupees for each contravention and where the contravention is a continuous one, with a further penalty which may extend to twenty thousand rupees for each day during which such contravention Continues.
2- Where the person guilty of such contravention is a company or a body corporate, every director, manager, secretary or other officer or agent thereof shall be deemed guilty of such contravention, if the contravention was committed with his knowledge or consent or if he did not exercise due diligence to prevent the commission of the offence.
3- If any person fails to pay any penalty imposed, within the time stipulated in the order imposing the penalty, the State Bank may, without any notice to such person, recover the amount of such penalty from any account, or assets, monetary or otherwise, of the defaulter held with State Bank or any bank or a financial institution.
4 If any bank or financial institution to which notice has been sent under subsection (3) fails to debit the amount of penalty under the said sub-section, it shall itself be liable to pay such amount to the State Bank, as if it had itself committed the contravention.
5. Any person aggrieved by an order passed and penalty imposed under this section may, within thirty days of the order, prefer appeal to the Governor, State Bank."