Robustness of banks' systems, controls: SBP extends timeline for first review

KARACHI: The State Bank of Pakistan (SBP) has granted extension of six months for the first review of the robustness of banks' systems and controls, with respect to compliance with the provisions of "Framework for Managing Risks of Trade Based Money Laundering and Terrorist Financing".

As per the SBP's instruction issued in October 2019, Internal Audit Departments of Authorized Dealers (ADs) will periodically review (at least once in two years) the robustness of bank's system and controls with respect to compliance with the provisions of Framework for Managing Risks of Trade Based Money Laundering and Terrorist Financing.

Accordingly, the audit report prepared by the Internal Audit Department will be submitted to the risk management committee of the bank's Board of Directors for review and taking necessary action in accordance with the recommendations of the report.

As per previous directives, ADs are responsible to place, inter alia, the first review of the robustness of bank's system and controls, with respect to compliance with the provisions of this framework, before the risk management committee of the board, not later than December 31, 2020.

However, in view of the representation from the banking industry amidst ongoing challenges due to COVID-19 outbreak, the SBP has decided to extend this deadline by six month and now the ADs can mail first review up to June 30, 2021.

The SBP has advised the ADs to bring the fresh instructions to the knowledge of all their constituents, for meticulous compliance. While, all other instructions related to this framework will remain unchanged.

The State Bank developed a comprehensive Framework for Managing Risks of Trade Based Money Laundering and Terrorist Financing in October last year to strengthen trade related Anti Money Laundering/Combating Financing of Terrorism (AML/CFT) regime and restrict possible misuse of banking channel.

Accordingly, ADs were advised to upgrade their systems and controls and bring policies and procedures in line with the requirements of the framework to ensure meticulous compliance with the provisions with immediate effect.

ADs were also asked to educate their clients about their obligation of ensuring including correct declaration of particulars on the prescribed forms, utilization of foreign exchange for the exact purpose for which it is acquired by them and repatriation of foreign exchange that represents the full export value of goods.

Copyright Business Recorder, 2020