Internal control lapses: Rs90m penalties on erring banks termed ‘peanuts’

ISLAMABAD: The State Bank of Pakistan (SBP) has imposed penalties of Rs90 million on different banks and disciplinary action was taken against 17 employees of the banks for control lapses in over-pricing in solar panel imports.

However, the Senate Standing Committee on Finance expressed dissatisfaction with the SBP’s response regarding the investigation into substantial money laundering by solar panel importers.

The committee, suggesting that the SBP might be withholding crucial details, proposed an in-camera meeting for further discussion.

The committee which met with Saleem Mandviwalla in the chair here on Tuesday termed the penalty of Rs90 million “peanuts” while observing that money laundering to the tune of around Rs300-400 billion was reported and sought an in-camera briefing from the SBP.

Senate Musadik Masood Malik while criticising the extent of fine imposed on the banks, said that the fine is an even better deal than what people get through Hawala/ Hundi. However, the SBP deputy governor said that they imposed the maximum limit of the penalty as per their jurisdiction.

The committee members observed that the deputy governor has provided insufficient details on actions taken against accused parties and banks involved in money laundering.

The committee was informed that banks had filed 9,170 cash transaction reports (CTSs) against importers flagged by the SBP, resulting in penalties totalling approximately Rs90 million for overpricing.

The committee argued that the imposed penalties did not align with the gravity of the crime and advocated for enhanced legislation with stricter penalties for offences impacting the country’s economy. Additionally, the committee recommended further discussions on fortifying rules and regulations, requesting a comprehensive, tabulated report on the number of banks involved, the amount of money in laundering activities, and the penalties imposed.

In a separate briefing on the reported strategic cooperation agreement between HBL and the Bank of China, the committee learned that a memorandum of understanding (MoU) for strategic cooperation had been signed. The committee commended this initiative, anticipating improved trade opportunities for Pakistan.

The State Owned Enterprises (Governance and Operations) (Amendment) Bill, 2023, introduced by Senator Bahramand Khan Tangi, was deferred.

The committee proposed presenting a comparative report between the previous bill and the proposed amendments for a comprehensive evaluation.

The bill aims to amend the act, ensuring the board’s detachment from the day-to-day functioning of the company. It was argued that directors using company assets for political purposes should be disqualified, and the appointment of the CEO should shift from the board to the controlling ministry after board’s recommendation. The committee endorsed the proposition but sought a comparison report for further deliberation.

The Banking Companies (Amendment) Bill, 2023 moved by Senator Naseebullah Bazai was also deferred as the mover sought time for detailed briefing. Public petition related to the SEZ was recommended to be referred to the Standing Committee on Cabinet Secretariat since the matter pertains to BOI (Board of Investment).

The chairman committee also emphasised the SBP to ensure the implementation of an advance mechanism to handle fraudulent currency matters.

The meeting was attended by senators, Farooq Hamid Naek, Musadik Masood Malik, Saadia Abbasi, Zeeshan Khanzada, Mohsin Aziz, Faisal Saleem Rahman, Kamil Ali Agha, Dilawar Khan, Bahramand Khan Tangi, and Naseebullah Bazai. Representatives of the attached departments were also in attendance.

Copyright Business Recorder, 2023