One of the largest fund managers, which is a public limited company licensed to undertake business of asset management and investment advisory services, remained non-compliant with respect to Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) regulatory framework.
This has been stated by the Commissioner Securities Market Division (SMD) in an order issued by the Securities and Exchange Commission of Pakistan (SECP).
The SECP Commissioner SMD has directed the asset management company (AMC) to provide a time-bound plan wherein it should provide a roadmap for ensuring complete compliance with the AML and CFT regulatory framework.
The AML and CFT regulations were issued in June 2018 and made effective immediately after their issuance, and warranted that the AMC initiated the process of obtaining documents immediately. The statement of the AMC that the accounts selected by the inspection team are 5 to 12 years old is not tenable. The review was conducted in April 2019 which is almost one year after the issuance of the regulations, ie, June 2018 and that too when observations were raised by the inspection team. "It is my considered view that a year delay indicates weakness in responsiveness on the part of management," the SECP commissioner SMD said.
The scope of the SECP inspection comprises reviewing compliance of the AMC with the AML and CFT Regulations. However, during the course of inspection, various violations/non-compliances were observed. The inspection team highlighted several deficiencies in the customers' record/documentation (selected on sample basis) which were in violation of several provisions of AML and CFT Regulations.
The commissioner SMD said, "It is my considered view that given its professional management and sizeable customer base, the fund manager should set a much higher benchmark for compliance. It is the obligation of the management to ensure that it is implementing the AML and CFT Regulations in its letter and spirit. I note with concern that the AMC took steps to rectify the deficiencies observed in the inspection only after the same were brought to its notice. It is most likely that had the inspection not been carried out, the AMC would have remained non-compliant with respect to AML and CFT regulatory framework," he added.
"It is my considered opinion that while an effort to comply with AML and CFT Regulations is being made, the AMC will need to continue to review and monitor on a continuous basis," the commissioner SMD said.
The various instances observed by the inspection team indicated lapses in identifying the beneficial ownership of various investors. It is a matter of concern that even almost a year after the issuance of AML and CFT Regulations (i.e. issued in June 2018), the AMC had not been able to complete the process of verifying customers/beneficial owners' identity. In the absence of requisite documents/information, as mentioned in the preceding paragraphs, the screening of unit holder database is rendered ineffective and does not serve the purpose/objective of screening of unit holders/ beneficial owners completely. The absence of such critical information is likely to expose the company to inefficient screening of its customers with SROs/notifications issued by NACTA/provincial governments, Ministry of Foreign Affairs, etc. This constituted violation of Regulation 7(1) (a) and Regulation 7(1) (b) of the AML and CFT Regulations.
Copyright Business Recorder, 2019
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