Directive to submit foreign travel policy: SBP asks banks to do more to combat money laundering

The State Bank of Pakistan (SBP) Monday asked banks to submit their foreign travel policy in 90 days and take additional measures to combat trade-based money laundering. During a meeting with heads of banks, the SBP directed banks to put more specific guidance, policies and procedures in place to address the overall risks of trade-based money laundering. The meeting was also attended by Deputy Governor SBP and other high officials.
After meeting with CEOs/presidents of commercial banks, addressing a press conference at the SBP head office in the presence of all heads of commercial banks Monday, Governor SBP Ashraf Mehmood Wathra said there have been so many rumours for the last few days regarding one important measure taken by the State Bank over unnecessary foreign travel of banks' staff and somehow this was linked to one particular bank causing panic like situation over the weekend. He said the SBP wished to clear the air filled with these rumours and meeting with CEOs of banks was also not limited to the issue only but was called to discuss many important issues faced by economy in general and the financial sector, in particular.
Wathra said during the meeting with commercial banks, some decisions relating to banks' travel policy, trade-based money laundering, banking services to unlicensed forex operators and money laundering through banking channels, have been finalised. He said it is a well-known fact that trade transactions have the elements of under-invoicing and over-invoicing which facilitates transfer of value across the borders and primary responsibility in this regard lies with Pakistan Customs, however, since documents are negotiated and Letter of Credits are settled through formal banking channels, banks are required to enhance their capacity to process foreign trade transactions with extreme care and diligence. He said illegal forex operators may have accounts with banks through which they may be conducting illegal remittance business. Therefore, banks are required to enhance their customer due diligence processes so that such relationships could be avoided. In addition, banks should monitor the transaction patterns of their customers and report suspicious activities to FMU, he added.
During the meeting, banks asked to minimise money laundering through banking channels by some additional measures including implementation of an in-house system to detect differences between the values declared in the documents and prevailing market prices. In addition, banks need to set out escalation procedures to manage transactions where significant differences in prices are identified, he added. Banks have also been asked to perform additional due diligence when international trade transactions involve any related parties and the banks must put in place subjective and objective controls to identify related parties trade transactions. In such cases if there are deviations, these should be brought to SBP's attention and/or STRs may be raised. The SBP asked banks to put more specific guidance, policies and procedures in place to address the overall risks of trade-based money laundering.
Banks should also ensure that their transaction monitoring processes and systems are robust to flag suspicious transactions. Such transactions are properly investigated and escalated. Regular compliance checks, especially transactions that were not escalated, should be performed for quality assurance purposes, the governor SBP directed.
Ensuring the SBP support, he asked commercial banks to provide adequate and specific trainings on the financial crime risks prevalent in the trade financing and forex operations to relevant staff. "SBP/SBP-BSC will support and guide any exercises by banks/financial institutions to achieve this objective," he added. Governor SBP said that the SBP will continue to encourage banks to send their staff abroad for advanced trainings, technology acquisition and occasional board of directors meetings or to manage their overseas networks. "We will give banks 90 days to submit their foreign travel policy," he added. The State Bank for the first time took media on-board after meeting with CEOs of commercial banks.