ML, TF feared in backdrop of Covid-19: SECP cautions regulated persons to remain vigilant

The Securities and Exchange Commission of Pakistan (SECP) has cautioned regulated persons (securities brokers, commodities brokers, insurers, Takaful operators, non-banking finance companies (NBFCs) and Modarabas to remain vigilant as criminals may try to exploit products and services for money laundering and terrorism financing purposes in the backdrop of Covid-19 pandemic.

In this regard, the SECP on Monday asked the Regulated Persons (RPs) to use Risk Based Approach to ensure effective compliance with the anti-money laundering (AML) regulations, as regulated persons are facing challenges in meeting their obligations under the AML/CFT Regime.

The Financial Action Task Force (FATF) has encouraged governments to work with financial institutions and other businesses to use the flexibility built into the risk-based approach to address the challenges posed by Covid-19 whilst remaining alert to new and emerging illicit finance risks. The FATF has also highlighted that criminals are taking advantage of the Covid-19 pandemic to carry out financial fraud and exploitation scams, including malicious or fraudulent cybercrimes, fundraising for fake charities, investment and product

scams, as well as insider trading in relation to Covid-19. Like criminals, terrorists may also exploit these opportunities to raise funds, the SECP informed regulated entities.

It is also important to be aware that in this challenging environment, RPs should remain vigilant as criminals may try to exploit products and services for ML/TF purposes in the backdrop of Covid-19 pandemic. RPs must continue to effectively manage money laundering and financing of terrorism risks, and timely report suspicious activities to the Financial Monitoring Unit, the SECP directed.

The SECP will continue to monitor the situation to determine whether additional guidance and relief may be appropriate. As coronavirus related risks decrease, RPs should expect to return to meeting any regulatory obligations for which relief has been provided. All these measures shall be taken during the Covid-19 Period up to June 30, 2020.

According to the SECP - guidelines on Risk Based Approach to AML/CFT during Covid-19 pandemic issued here on Tuesday, due to the recent outbreak of Covid-19, the SECP understands the challenges SECP Regulated Persons (RPs) are facing in meeting their obligations under the AML/CFT Regime due to reduced staff, as well as staff remotely working from home. In this context, RPs are advised to use Risk Based Approach by efficiently prioritizing and reallocating their resources to ensure effective compliance with the AML/CFT Regulations, 2018 in light of statement issued by the FATF President on April 1, 2020.

Further, it is reiterated that the implementation of Targeted Financial Sanctions is not risk based. Therefore, RPs should allocate appropriate human and technological resources to immediately scan their customer

data bases and their Beneficial Owners /associates for any matches with the stated designated/proscribed person(s)/entity(ies); Required actions should be taken immediately 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 regarding updates in list of proscribed persons under the Anti-

Terrorism Act, 1997.

In this regard, as an interim measure, the RPs can use responsible digital customer onboarding in response to social distancing measures needed for the protection of their staff and customers alike, while also mitigating ML/TF risks by using the full range of tools at their disposal. In the absence of face to face customer onboarding, and difficulties in carrying out Customer Due Diligence (CDD) the risk-based approach may be used, SECP added.