Customer due diligence a must, SBP tells banks

The State Bank of Pakistan (SBP) has again instructed banks/DFIs to conduct customer due diligence thoroughly before opening any account. It asked banks/DFIs not to open and maintain anonymous accounts and also prohibited banks/DFIs to provide any banking services to proscribed entities and persons.
"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 (Prudential Regulations for Corporate and Commercial Banking) and monitor the account activities to ensure that the transactions in the accounts remain in line with the overall profile of customers."
The Paragraph 5 (a) of Regulation M-1 states: "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, says BPRD Circular Letter No 01 of January 6, 2012.
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), the circular letter added.
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-emphasised to implement software monitoring systems capable of producing meaningful results by June 30, 2012. Banks/DFIs should carefully note that SBP Prudential Regulations are binding instructions issued under the Banking Companies Ordinance, 1962 and failure to comply with them shall attract severe penalties, the circular letter added.