Money laundering and financing of terrorism: SECP frames regulations for reporting financial entities

Securities and Exchange Commission of Pakistan (SECP) has framed comprehensive regulations for the reporting financial entities in the context of combating money laundering and financing of terrorism, including customer due diligence and ancillary record keeping that fall within the regulatory ambit of the SECP.
It is learnt that the SECP's SRO 557(I)/2018 has complied with the recommendations of the Financial Monitoring Unit established under section 6 of the Anti-Money Laundering Act, 2010. The SECP has issued draft Securities and Exchange Commission Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Regulations, 2018 seeking comments of the stakeholders.
Under the regulations, Financial groups should implement group-wise programs against money laundering/terrorist financing (ML/TF), which should be applicable, and appropriate to, all branches and majority-owned subsidiaries of the financial group. These should include the measures set out in these regulations and also policies and procedures for sharing information required for the purposes of CDD and ML/TF risk management; provision at group-level compliance, audit, and/or AML/CFT functions, of customer, account, and transaction information from branches and subsidiaries when necessary for AML/CFT purposes and adequate safeguards on the confidentiality and use of information exchanged.
"Financial group" means a group that consists of a parent company or of any other type of legal person exercising control and coordinating functions over the rest of the group for the application of group supervision, together with branches and/or subsidiaries that are subject to AML/CFT policies and procedures at the group level, the SECP said.
Financial Institutions shall develop and implement a comprehensive employee due diligence policy and procedure to be implemented/ carried out at the time of hiring all employees permanent, contractual, or through outsourcing. This shall include but not limited to verification of antecedents and screening procedures to verify that person being inducted/ hired has a clean history and chalk out and implement suitable training program for relevant employees on annual basis, in order to effectively implement the regulatory requirements and Financial Institutions' own policies and procedures relating to AML/ CFT. The employees training shall enable them to understand new developments, money laundering and financing of terrorism techniques, methods and trends. The training should also include their responsibilities relating to AML/ CFT.
Financial Institutions shall maintain all necessary records on transactions, both domestic and international, including the results of any analysis undertaken (eg. inquiries to establish the background and purpose of complex, unusual large transactions) for a minimum period of ten years from completion of the transaction.
Financial Institutions shall, however, retain those records for longer period where transactions, customers or accounts involve litigation or it is required by court or other competent authority.
The records shall be sufficient to permit reconstruction of individual transactions including the nature and date of the transaction, the type and amount of currency involved and the type and identifying number of any account involved in the transactions so as to provide, when necessary, evidence for prosecution of criminal activity. The transactions records may be maintained in paper or electronic form, provided it is admissible as evidence in a court of law.
The records of identification data obtained through CDD process like copies of identification documents, account opening forms, KYC forms, verification documents and other documents along with records of account files and business correspondence shall be maintained for a minimum period of ten years after termination of the business relationship. Financial Institutions shall ensure, to timely make available, all CDD and transaction records to the Commission, FMU and law enforcement agencies whenever required, the SECP added.