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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has directed the Institute of Chartered Accountants of Pakistan (ICAP) and Institute of Cost and Management Accountants of Pakistan (ICMAP) to make it mandatory for their accountant members to adopt a risk-based approach for monitoring of their clients/customers (reporting entities) for checking any suspicious activity of money laundering.

The SECP has issued SRO 919 (I)/2020 to notify the "Oversight Regulations for Self Regulatory Bodies of Accountants, 2020".

The "Oversight Regulations for Self Regulatory Bodies of Accountants, 2020" are first of its kind of regulations which are issued for the "Chartered Accountants" and "Management Consultants".

According to the SECP, the "Self-Regulatory Bodies or "SRB" (ICAP/ICMAP) shall identify, assess and understand the money laundering/terrorist financing risks to which that SRB's reporting entities are subject and adopt a risk-based approach to the exercise of its supervisory functions as informed by the national risk assessments and the risk assessment carried out by the SRB itself.

Every SRB shall under AML Act, introduce regulations pertaining to risk assessment, mitigation and applications of a risk- based approach; customer due diligence requirements; including but not limited to requirements to identify and verify customers, beneficial owners and requirements to conduct ongoing monitoring; requirements to apply enhanced customer due diligence measures, including with respect to politically exposed persons; internal controls requirements; training and capacity building requirements; duty to co-operate with competent authorities; targeted financial sanction (TFS) requirements; risk assessment and mitigating requirement for new products, practices and technologies; requirements on reliance on third parties; record-keeping requirements and countermeasures requirements, new regulations said.

Every SRB shall appoint a person to monitor and manage the its compliance with its duties under the Act and Regulations made there under, who shall cooperate with authorities and ensure that the SRB responds to any request from any AML/CFT regulatory authority about any reporting entity; keep and maintain a record in writing of the actions it has taken in the course of performing its functions; monitor and supervise compliance with the requirements of the regulations including ensuring that reporting entities have adequate policies, controls and procedures to implement those requirements in line with the ML/TF risks;

Each SRB shall conduct ongoing outreach to reporting entities to promote a clear understanding of their AML/CFT and TFS obligations and ML/TF risks, rules said.

The functions of Oversight Body (SECP) revealed that the Oversight Body may require any information provided under this regulation to be provided in such form as it may reasonably require. Where the oversight body requires information to be provided or documents to be produced, the notice must set out the reasons why the authority requires the information to be provided or the documents produced, unless the SRB is not permitted to disclose this information, regulations stated.

The Oversight Body shall monitor the SRB's compliance with its powers and functions. The Oversight Body has the authority to order an examination or investigation into the SRB's activities as set out.

The Oversight Body can appoint a skilled Person to investigate the matter and the Oversight Body can impose charges on SRB for expenses incurred by the Oversight Body in relation to an appointment of skilled person.

Any SRB who contravenes or fails to comply with any provision of these regulations shall be liable to a sanction in accordance with the AML/CFT Sanctions Rules, 2020 issued under the AML Act and imposed by the Oversight Body according to sub-section (c) of section 6Cof the AML Act, SECP added.

Copyright Business Recorder, 2020