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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has placed a new regulatory framework for strict Customer Due Diligence (CDD) requirements for account opening of “Mentally Disordered Persons” with the regulated entities under the Anti-Money Laundering laws.

The SECP officials informed media at the SECP headquarters on Tuesday that the SECP has enhanced the scope of regulations to effectively combat financial crimes, control money laundering, and combat the financing of terrorism (CFT) to ensure integrity of its financial system.

The SECP on Tuesday issued SRO 1356 (I)/2023 to amend (Anti Money Laundering and Countering Financing of Terrorism) Regulations, 2020.

The amendments to the SECP AML/CFT Regulations 2020 primarily focus on expanding the regulatory framework to encompass measures specifically tailored for Customer Due Diligence (CDD) requirements related to account opening of mentally disordered person.

Under the revised regulations, an account will be classified as dormant after three years of inactivity, as opposed to the previous threshold of five years.

Furthermore, the updated provisions encompass guidelines regarding the reliance on third parties for CDD, as well as specific requirements applicable to the foreign branches of regulated entities and their subsidiaries.

They said that the SECP has introduced important amendments to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Regulations, 2020. The notified amendments aim to enhance the scope of regulations to effectively combat financial crimes, control money laundering, and combat the financing of terrorism (CFT) while ensuring the integrity of its financial system.

The amendments to the SECP AML/CFT Regulations 2020 are the outcome of the National Risk Assessment 2023, in which SECP conducted a self-assessment of its AML/CFT regulatory framework against the criteria used in the FATF Assessment Methodology for assessing Technical Compliance of its AML/CFT regulatory framework.

The amendments, introduced post stakeholder’s consultation, demonstrate SECP’s commitment to enhancing the country’s regulatory framework and aligning it with international best practices.

In case of mentally disordered person account, the following documents would be required: (i) Copy of applicable valid identity documents of mentally disordered person and court appointed manager under the applicable laws related to mental health; (ii) Certified true copy of court order for appointment of manager for mentally disordered person; (iii) Verification of identity document through bio-metric verifications from the Nadra for both persons i.e. mentally disordered person and the manager appointed by court; (iv) Verification of court order from the concerned court (to be obtained by Regulated Person); (v) Account would be opened in the name of mentally disordered person and the same will be operated by the court appointed manager; (vi) All CDD requirements/formalities should be conducted / completed for both persons; (vii) In case of change of manager by the court, the CDD will be conducted for the new appointed manager by the Regulated Person afresh.

The revised regulations disclosed that the regulated person shall ensure that their foreign branches and majority-owned subsidiaries in countries which do not sufficiently apply the FATF Recommendations, apply AML & CFT measures consistent with Pakistan’s AML/CFT requirements, to the extent that host country laws and regulations permit. If the foreign country does not permit the proper implementation of AML/CFT measures consistent with that of Pakistan requirements, financial groups should apply appropriate additional measures to manage the risks, and inform the Commission when a foreign branch or subsidiary is unable to observe appropriate AML/CFT measures.

Copyright Business Recorder, 2023

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