Jewellers community directed to ensure enhanced due diligence of customers

ISLAMABAD: The Federal Board of Revenue (FBR) has directed the jewellers community to ensure enhanced due diligence of customers, who are politically-exposed persons (PEPs) under the FBR's Anti-Money Laundering and Countering Financing of Terrorism Regulations for Designated Non-Financial Businesses and Professions.

The FBR has issued guidelines for dealers in precious stones and metals to provide guidance to Dealers in Precious Stones and Metals (DPMS) in implementing and complying with requirements in the AML/CFT legislations.

All DPMS should review the guidelines to determine, whether they meet the definition of a DPMS and engage in cash transactions with customers equal or above the cash threshold of Rs2 million.

The higher risk categories are customers and those that use cash Rs2 million or above e.g. PEPs, international visitors.

The FBR's guidelines are focused on the AML/CFT measures such as risk assessment, AML/CFT programme, customer due diligence (CDD), beneficial ownership, politically-exposed persons, reliance on third party, targeted financial sanctions, suspicious transaction report (STR), currency transaction report (CTR), and record keeping.

According to the FBR, PEPs are individuals who, by virtue of their position in public life, may be vulnerable to corruption.

The requirements of enhanced due diligence for PEPs and their close associates and family members are rule mandated.

Under Section 9 (1) of the FBR AML/CFT Regulations for DNFBPs, enhanced due diligence must be applied to all PEPs and their close associates and family members. Unlike for other customers, where enhanced due diligence will depend on whether the customer (and beneficial owner) is rated high risk or not.

The PEPs are defined in the Definitions sections of the FBR AML/CFT Regulations for DNFBPs, as: "Politically exposed person" or "PEP" means an individual who is or has been entrusted with a prominent public function either domestically or by a foreign country, or in an international organization and includes but is not limited to foreign PEPs, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations and political party officials.

For domestic PEPs, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, political party officials.

For international organisation PEPs, members of senior management or individuals who have been entrusted with equivalent functions.

The section 9 of the FBR AML/CFT Regulations for DNFBPs states that DPMS must undertake enhanced CDD on PEPs, and their close associates and family members, and have risk management systems in place to identify PEPs, which includes whether any beneficial owners are PEPs.

This includes whether any such persons are beneficial owners of a company or a trust, the FBR stated.

The key CDD requirements are mandated in Section 8 of the FBR AML/CFT Regulations for DNFBPs.

The DPMS must not only obtain the required information on the identity of the customer, beneficial owner and any person acting on behalf of the customer, it must also verify the information collected is correct for the customer and any authorised representative, and take reasonable measure to verify the identity of the beneficial owner, the FBR added.

Copyright Business Recorder, 2021