Proscribed persons/entities: SECP issues directive to brokers, NBFCs and Modarabas

Securities brokers, futures brokers, insurance companies, Takaful operators, Non-Banking Finance Companies and Modarabas would immediately scan their customer database for any match with state designated/proscribed persons/entities, immediately freeze customer's fund/policy or block their transactions and lodge a suspicious transaction report (STR) with the Financial Monitoring Unit (FMU).

The Securities and Exchange Commission of Pakistan (SECP) Tuesday issued a directive to the securities brokers, futures brokers, insurance companies, Takaful operators, NBFCs and Modarabas through an SRO 55(I)/2020.

The SECP directive has been issued to the said regulated persons for urgent compliance without any delay.

For this directive implementation, the SECP has clarified that the term Regulated Person ("RP") means securities brokers, futures brokers, Insurers, Takaful Operators, NBFCs and Modarabas".

In a major development, the SECP has also issued new reporting requirements for these RPs with directions to conduct internal annual risk assessment in line with the latest National Risk Assessment of the country.

Each regulated person (RP) is required to immediately scan its customer data bases and their Beneficial Owners /associates for any matches with the stated designated/proscribed person(s)/entity(ies) on the receipt of notifications issued by the Ministry of Foreign Affairs on United Nations Security Council Resolutions or intimation from National Counter Terrorism Authority/Law Enforcement Agencies/ Home Departments of Provinces/Ministry of Interior regarding updates in list of proscribed persons under the Anti- Terrorism Act, 1997, SECP directive said.

In case of a true match or suspicion of a proscribed/designated person following actions shall be taken by the RP immediately; (a) Freeze without delay the customer's fund/ policy or block the transaction, without prior notice if it is an existing customer; (b) Reject the customer, if the relationship has not commenced; (c) Lodge a STR with the FMU and simultaneously notify SECP and the Ministry of Foreign Affairs in case that person is designated under United Nations Security Council Resolutions, or the National Counter Terrorism Authority ("NACTA") in case that person is designated under the Anti-Terrorism Act, 1997.

The SECP directive said that the compliance report on statutory regulatory orders issued by the Ministry of Foreign Affairs on United Nations Security Council Resolutions or intimation from National Counter Terrorism Authority/Law Enforcement Agencies/ Home Departments of Provinces/Ministry of Interior regarding updates in list of proscribed persons under the Anti- Terrorism Act, 1997, shall be submitted to the Commission within three day of receiving the same in the manner as may be instructed from time to time by the Commission. Any person to whom this directive applies and who contravenes or fails to comply with the requirements of this directive or submits a return which is false in material respect or where under a misstatement is made shall be liable to imposition of penalty under section 40A of the Securities and Exchange Commission of Pakistan Act, , which may extend to ten million rupees and where such contravention is a continuing one, with a further penalty which may extend to one hundred thousand rupees for every day after the first during which such contravention continues. This directive shall not affect anything done, order made, show cause issued, proceeding commenced, penalty imposed, investigation, inspection or inquiry conducted or any other action taken or done under or in pursuance of above referred superseded directive shall be valid and under lawful authority, SECP clarified.

Now, the Commission hereby directs all the Regulated Persons to comply with following reporting requirements and submit information in the manner prescribed below to the respective supervisory departments of the Commission, in consonance with the requirements of the Regulations and Guidelines:

The SECP directive further stated that the annual risk assessment and control/compliance assessment framework based on data and information as on June 30, to be filed by July 31 of each financial year ("FY"), starting from the date of notification of this directive, and as instructed from time to time by the Commission.