SBP for enhancing due diligence to check money laundering

KARACHI: State Bank of Pakistan (SBP) has asked banks/ DFIs to conduct "enhanced" due diligence, including obtaining senior management approval while establishing relationship with non-governmental organisations (NGOs)/ not-for-profit organisations (NPOs) and charities to ensure that these accounts are used for legitimate purposes and the transactions are commensurate with the stated objectives and purposes.

In its circular letter No. 04 of 2012 dated March 12, relating to Prudential Regulations M-1 to M-5, the Central Bank  said, the instructions have been issued to protect banks/ DFIs from risks arising out of money laundering and terrorist financing activities, implementation and strict compliance of the following needs to be ensured.

SBP said that the accounts should be opened in the name of relevant NGO/ NPO as per title given in its constituent documents. The individuals who are authorised to operate these accounts and members of their governing body should also be subject to comprehensive customer due diligence (CDD).

Banks/ DFIs should ensure that these persons are not affiliated with any proscribed entity, whether under the same name or a different name.

In case of advertisements through newspapers or any other medium, especially when bank account number is mentioned for donations, Banks/ DFIs will ensure that the title of the account is the same as that of the entity soliciting donations. In case of any difference, immediate caution should be marked on such accounts and the matter should be considered for filing Suspicious Transaction Report (STR).

Personal accounts shall not be allowed to be used for charity purposes/ collection of donations. All existing relationships of NGOs/ NPOs should be reviewed by June 30, 2012 to ensure that these organisations, their authorised signatories, members of their governing body and the beneficial owners are not linked with any proscribed entities and persons, whether under the same name or a different name.

In case of any positive match, Banks/ DFIs should consider filing STR and/ or take other actions as per law.

The following documents are being prescribed for opening the accounts of NGOs/ NPOs under the existing Annexure-VIII to Prudential

Regulation M-1: Sr. No Nature of Account   Documents/Papers to be Obtained

VIII NGOs/NPOs Charities (i)  Certified copies of:

(a) Registration documents/certificate.

(b) By-laws/Rules & Regulations.

(ii) Resolution of the Governing Body/Executive Committee, if it is the ultimate governing body, for opening of account and authorising the person(s) to operate the account.

(iii)Attested photocopies of valid CNICs of the authorised person(s) and members of Governing Body/Executive Committee, if it is the ultimate governing body.

(iv) Any other documents as deeme necessary including its annual accounts/ financial statements or disclosures in any form which may help to ascertain the detail of its activities, sources and usage of funds in order to assess the risk profile of the prospective customer.

3. The State Bank places great significance on the continuous training of banks' staff especially relating to AML/ CFT. In this regard, the progress made by Banks/ DFIs has also been encouraging, yet the relevant training combined with optimum use of technology is becoming inevitable due to ever changing nature of methods and trends in illicit activities.

It is also important to test the capability and knowledge of the relevant staff on periodic basis. The online trainings and AML/ CFT

Tests of varying nature are available in the market which offer an opportunity for Banks/ DFIs to equip their staff with relevant skills as per respective roles and responsibilities within the institution.

Such Training Programmes and Tests can either be purchased or developed by Banks/ DFIs themselves. As the periodic training of the front end staff is crucial, which is the first point of contact with

customers, Banks/ DFIs are advised to either purchase or internally develop comprehensive AML/ CFT Computer-based/ Online Training Programmes and Tests.

In this respect, a plan to acquire/ develop such a Training Programme and Tests along with clear timelines for implementation should

be furnished to Director, BPRD latest by April 15, 2012.

4. Banks/ DFIs should note that the subject regulations are binding instructions issued under Banking Companies Ordinance, 1962 and any non-compliance shall be dealt with appropriate action under the relevant law.