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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has imposed penalties on four companies including brokerage houses for committing serious violations of the anti-money laundering (AML) laws and regulations.

In this connection, the SECP has issued four orders under the AML law.

The SECP has issued four orders against these companies for alleged contraventions of rules 4(1) and 6(1) of the AML/CFT Sanctions Rules, 2020 (the AML Rules) and regulation 31 of the Securities and Exchange Commission of Pakistan (Anti-Money Laundering and Countering Financing of Terrorism) Regulations, 2020 (the Regulations) read with Section 6(A)(2)(h) of the Anti-Money Laundering Act, 2010 (the AML Act).

One of the companies informed that it has limited brokerage business and only do propriety trading through its account. The company’s policy was scrutinized by the inspection team and it was observed that TFS obligations as provided under regulation 25(1) of the AML Regulations were not provided in its AML/ OFT policy. In this regard it is stated that regulations 5(a) and 25(1) of the AML Regulations explicitly require a regulated person to develop policies procedures and controls for screening and monitoring of its clients and beneficial owners, associates of customers to detect any matches or potential matches with the proscribed persons stated mentioned in the SROs, notifications issued by MoFA, NACTA and MOI from time to time.

Although, the respondent had the aforesaid policy in place but it was found by the inspection team to be deficient. By not having an effective policy, the company has contravened the provisions of the regulations 5(a) and 25(1) of the AML Regulations.

In this regard, the company was informed that it is the responsibility of the regulated person to comply with the requirements of AML Regulations. A penalty of Rs200,000 has been imposed on the company.

Under another order, the SECP has imposed a penalty of Rs100,000 on the company. In this case, the SECP has observed that the initial policy submitted to the inspection team was deficient and various clauses of AML Regulations were highlighted which were found to be deficient in the company’s AML/CFT policy. Subsequently, the company updated its policy in September 2021. The company also admitted that the policy was updated subsequent to the inspection period. Therefore, the respondent was found to be in contravention of regulation 5(a) of the AML Regulations. In view of the foregoing and submissions made by the company, contraventions of regulation 5(a) of the AML Regulations have been established. Therefore, in terms of powers conferred under 6(A)(2)(h) of the Act, a penalty of Rs100 000 is hereby imposed on the respondent. The respondent is advised to examine its AML/CFT policy and procedures to ensure that the requirements contained in the AML regulations are met in letter and spirit.

In the third case, the SECP has imposed a penalty of Rs60,000 on the company as the KYC documentation of clients were found to be incomplete. The SECP has advised the company to examine its AML/CFT policy and procedures to ensure that the requirements contained in the AML regulations are met in letter and spirit.

As per another SECP order, the company, by not maintaining an updated and complete database of its all clients/ borrowers and their associated persons, has failed to comply with the requirements of regulations 25(1)(a) of the AML Regulations 2020. Therefore, the SECP has imposed a huge penalty of Rs4,000,000 on the company.

The company has contraventions of regulations 25(1)(a) and 5(a) read with regulation 31 of the Securities and Exchange Commission of Pakistan (Anti Money Laundering and Countering Financing of Terrorism) Regulations, 2020, rules 4(1) and 6(1) of the AML/CFT Sanction Rules, 2020 and Section 6(A)(2)(h) of the Anti-Money Laundering Act, 2010, the SECP order added.

Copyright Business Recorder, 2022

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