The Securities and Exchange Commission of Pakistan (SECP) will carry out thematic review of securities brokers to assess their level of compliance with the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) framework. Sources said the SECP notified Anti-Money Laundering and Countering Financing of Terrorism Regulations, 2018 on June 14, 2018. The Regulations consolidate earlier AML/CFT regime for financial institutions regulated by the SECP, namely, Securities Brokers, Insurance Companies, Non-Banking Finance Companies and Modarabas.
These regulations are fully compliant with Financial Action Task Force Recommendations, which are mandatory to adopt for Pakistan as a member of the Asia Pacific Group on Money Laundering. They said the regulations shift perspective from one-size-all-fit to Risk Based Approach and will enable financial institutions to focus their resources on high risk customers. The introduction of simplified due diligence for low risk customers shall allow such customers to avail services of financial institutions with relative ease.
In order to ensure that criminals are not able to hide their identity through use of complex ownership structure of companies, partnerships, trusts or other similar forms, the financial institutions are now required to identify the ultimate beneficial owner. Financial institutions are now required to carry out self-risk assessment relating to money laundering and terrorist financing risks faced by them. This will enable them to have greater understanding on their risk profile and accordingly, implement effective internal controls.
The sources of wealth and income will be checked and validated in Enhanced Due Diligence cases only. AML/CFT requirement has been introduced at the groups level, each group is required to develop group-wide AML/CFT policies and procedures consistently applied and supervised across the group.
Sources said that the next step is implementation of these regulations to effectively control and limit the phenomenon of money laundering. It includes capacity building and awareness raising on AML/CFT obligations among all the stakeholders. The activities include developing guidance material, toolkits and trainings for the regulated entities.
The SECP has taken significant actions in past and includes thematic review of the life insurance companies and securities brokers. Insurance Division carried thematic review of the implementation of SRO 20(I)/2012 dated January 11, 2012, requiring insurers to develop detailed procedures to counter the potential threat of usage of their services for money laundering. Directive required insurers to have Customer Due Diligence/Know Your Customer policy, guidelines for conducting Enhanced Due Diligence, policy and program for training of its employees regarding compliance of the Directive and other AML obligations, and internal procedures to ensure compliance of the Directive and procedure for audit of compliance of the Directive and other money laundering obligations.
Thematic review of securities brokers is also being carried out to assess level of compliance with the AML/CFT framework, sources added.
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