LAHORE: Banks in developed countries concentrate on different types of training which help them minimize fraudulent transactions but in Pakistan their training focuses on generating more and more funds into their branches instead of focusing on prevention of money laundering, said money laundering experts.
They said banks in Pakistan prioritize and set a target for their branch managers to bring more money into their branches to get their bonuses and promotions.
It may be noted that Pakistan, being a member of Asia Pacific Group (APG), have had promulgated corresponding national legislations on money laundering and terror financing. Among these regulations, Know Your Customer (KYC), reporting of Transactions STRs/ CTRs and Customer Due Diligence (CDD) are of utmost importance. Through these policies, the central bank of Pakistan requires the financial institutions to be careful in their daily operation at banks. They are required to have complete knowledge of the customer's transactions and to report and take the proper action against fake and Benami account holders.
Despite numerous legislations, Rao Imran Habib, a legal expert on money laundering, said reports about money laundering through fake/ Benami bank accounts, in the names of 'Falooda' (a local sweet) vendors, a factory worker and even a dead man, by the investigating and regulatory authorities like the FIA and the FMU and issuance of notices to such persons by the FBR and the FIA, have changed the perception of opening an account by oneself and making transactions through it. He said there are certain factors that provide supportive environment for money laundering through banking medium. These factors include, but are not restricted to, the role played by financial institutions as advocate of the customer, the strange attitude of the banks towards account holder having strong balance sheet, the culture of secrecy adopted by every bank where they try to hide and protect every transaction of the customer, the secret reference, the lax and negligent controls and supervision and the rivalry with competing financial institutions.
Moreover, Attia Madni, another legal expert on the subject, said the banks' customers may have different accounts in the same bank in which different transactions take place but the banks in order to have more accounts and money, ignore such activities. In fact, she said, banks encourage customers to open multiple accounts without collecting the relevant information on these accounts. The supervision and control of these accounts is difficult and complex because of involvement of multiple sources, hence they prove to be perfect for the money laundering activities. Through such 'managed bank accounts' not only funds are routed to other accounts within the country or withdrawn without any ostensible trail available, but billions of rupees are transferred to numerous jurisdictions by skilfully structured methods.
Another expert Naureen Akhtar said there should be a special focus and training on account opening processes, especially for accounts opened by intermediaries on behalf of third parties (trusts and nominee accounts). Institutions should obtain satisfactory evidence of their identity to avoid or minimize the risk of fake accounts, she added.
Copyright Business Recorder, 2020
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