Checking terror funding and money laundering

According to a report, the government intends to empower the State Bank of Pakistan to get information relating to any business transaction from banking companies and other financial institutions, in order to identify offences of money laundering or funding of terrorism.
Under the amendments proposed to be made in the Banking Companies Ordinance, 1962, all the financial institutions shall disclose information on a confidential basis to the SBP about their clients according to the needs of the central bank.
If the SBP has reasonable grounds to suspect that a person, company or corporation is involved in money laundering or funding of terrorism or terrorists, it may send such information to the law-enforcement agencies having jurisdiction in the matter. Pending investigations, the SBP may pass orders for freezing the accounts of such a person or company or corporation, provided that the investigation shall be completed by the central bank within 180 days.
However, the aggrieved party may make a representation to the SBP which will be decided within 30 days. The aggrieved party may also go for an appeal in the High Court. The proposed amendments would also define money laundering, which may include engaging in any manner, whether directly or indirectly, in a transaction involving property that is the proceeds of a crime, or transferring proceeds of crime through any means, in order to conceal or make untraceable the original source of those proceeds.
Any loss incurred by an individual and company due to disclosure of such information is not likely to be compensated for by the central bank and no lawsuit or court proceedings may be instituted for an injury or loss.
A strong measure to identify and check offences of money laundering or funding of terrorism in Pakistan was long overdue. Empowering the State Bank to play a leading role in controlling these evil practices on the above lines, in our view, was the right course to adopt.
Pakistan, unfortunately, has been victim of terrorism more than any other country of the world and the State Bank is ideally placed to serve as the main institution to dig the information needed for the purpose. Since the informal sector of the economy also generally uses banking channels, vesting powers in the State Bank to investigate all the transactions, could also induce a part of the informal sector to document and report its activities properly, which would enhance the revenues of the government.
However, while the benefits of intended measure are obvious, its implementation needs to be immaculate and completely free from any element of harassment, otherwise deposit mobilisation efforts of the banks could be undermined and a large part of foreign remittances would again be channelled through a non-banking network. The fear of investigating officers to probe financial matters could also discourage private investment and antagonise the business community of the country.
One way to avoid witch-hunting and harassment could be some kind of punishment for the officers of the concerned agencies having malefic intentions, along with compensation for the aggrieved parties found innocent after the probe. Such an improvement would give confidence to the clients of the banking companies to continue with their usual business without fear. Also, the State Bank has to be careful that the authority to be given to it is not allowed to be used against the political opponents of the incumbent government.