The federal government has decided to give appellate authority powers to the Governor of State Bank of Pakistan (SBP) in case any foreign exchange company or bank is penalised for violating the Foreign Exchange Regulation Act of 1947, officials said on Tuesday. SBP is the regulator of the foreign exchange regime in Pakistan and is responsible for administration of the Act.
According to the Finance Ministry, the country needs effective enforcement powers to regulate the foreign exchange business of banks and exchange companies, however, under the existing provisions, SBP has no direct power to impose monetary penalties and has to follow a lengthy procedure of adjudication. It can only suspend or cancel the licence of a bank or an exchange company on violation of any provision of the Act which often becomes more severe than the violations warrant.
The sources said the Federal Cabinet during its meeting on June 26 this year considered a proposal of the Finance Ministry for insertion of a new section ie 23 k through an amendment in the Foreign Exchange Regulation Act of 1947(Fera), 1947 and decided that "amendments will be resubmitted to the Cabinet after addressing the reservations of Law and Justice Division in accordance with the constitutional provisions".
The Law and Justice Division observed that the expression "SBP may oppose penalty" was vague and penalty imposing authority should not be the same. The clause 23 k (1) has, therefore, been modified in the light of Law Ministry's observations.
Accordingly, a modified draft bill for insertion of the section 23 K in the Act duly vetted by the Law and Justice Division is as follows: (i) "Without prejudice to the provisions of sections 3AA, 23 or 23B, if any person, contravenes any provision of this Act, or any order, rule, regulation or direction issued there under and it is necessary to take immediate action to deal with such contravention, no officer of the State Bank other than the Additional Director or Director may, after giving him or it show cause notice to be replied within fifteen days and affording such person an opportunity of being heard, impose fine which may extend to one million rupees for each contravention, and where the contravention is a continuous one with a further penalty which may extend to twenty thousand rupees for each day during which such contravention continues; (ii) where the person guilty of such contravention is a company or a body corporate, every director, manager, secretary or other officer or agent thereof shall be deemed guilty of such contravention, if the contravention was committed with his knowledge or consent or if he did not exercise due diligence to prevent the commission of the offence;(iii) if any person fails to pay any penalty imposed, within the time stipulated in the order imposing the penalty, the State Bank may, without any notice to such person, recover the amount of such penalty from any account, or assets, monetary or otherwise, of the defaulter held with State Bank or any bank or a financial institution; (iv) if any bank or financial institution to which notice has been sent under sub-ection (3) fails to debit the amount of penalty under the said sub-section, it shall itself be liable to pay such amount to the State Bank, as if it had itself committed the contravention; and (v) any person aggrieved by an order passed and penalty imposed under this section may, within thirty days of the order, prefer appeal to the Governor, State Bank."
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