Transactions equivalent to $500: SBP asks ECs to obtain CNIC copy

In order to further strengthen the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime, State Bank of Pakistan (SBP) has asked Exchange Companies to obtain copy of Computerized National Identity Card (CNIC) or other identification document for all foreign currency transactions equivalent to $500/- or above.
The State Bank on Tuesday made a major amendment in Rules and Regulations of Exchange Companies and announced to reduce the limit of transaction by $2500 to $500 for obtaining identification documents. The SBP through EPD Circular Letter No. 08, has invited attention of Exchange Companies and Exchange Companies of 'B' Category toward instructions contained in Para 9 (i) (c & f) Chapter 3, Para 4 (i) Chapter 6 and Para 12 (i) (c) Chapter 8 of Exchange Companies Manual - 2017.
Previously, according to these Para, for all foreign currency buy or sale transactions equivalent to $2,500/- or above Exchange Company was required to retain copies of identification documents ie, Computerized National Identity Card (CNIC) /National Identity Card for Overseas Pakistanis (NICOP)/ Pakistan Origin Card (POC) / Passport (having valid visa on it or any other proof of legal stay of foreigner).
However, now the SBP has decided to further reduce the foreign currency transaction limit by $2000 to $500 for obtaining identification document. "In order to further strengthen the AML/CFT regime for Exchange Companies, the SBP has decided that henceforth, for all foreign currency buy and sell transactions equivalent to $500/- or above, Exchange Companies and Exchange Companies of 'B' Category will obtain and retain copies of identification documents ie Computerized National Identity Card (CNIC) / National Identity Card for Overseas Pakistanis (NICOP) / Pakistan Origin Card (POC) / Passport (having valid visa on it or any other proof of legal stay of a foreigner in Pakistan)," the circular said.
The SBP has warned that Failure to comply with the above instructions shall attract regulatory action under the relevant provisions of Foreign Exchange Regulation Act, 1947 while all other instructions will remain unchanged. However, President Forex Association of Pakistan Malik Bostan has expressed concern over the amendment to Rules and Regulations of Exchange Companies and said that the SBP has taken this decision without consulting with exchange companies. "We believed, SBP's this move will create panic in the money market, which has hardly stable after few months volatility," he added.
He said that internationally identification is not required for foreign currency transactions up to $10,000/ and earlier same limit was being followed in the Pakistan. However, the SBP gradually reduced it from $10,000 to now $500 for obtaining identification. "We are aware that there are some threats and pressure from the Financial Action Task Force (FATF) for combating money laundering and terrorist financing, however there was no need to reduce the limit from $2500 to $500 for obtaining identification document," he added. He said that FAP will try to talk with SBP's representative to resolve the issue.
"We have also talked with minister finance Miftah Ismail and governor SBP Tariq Bajwa and both were agreed to review the decision", Bostan informed. He said that governor SBP has arranged a meeting of exchange companies with director foreign exchange policy SBP Fazal Mehmood to discuss the issue. The meeting will be held on Wednesday at SBP head office Karachi to devise a mechanism for money market to further strengthen the AML/CFT, he informed.
It may be mention here that as per Rules and Regulations of Exchange Companies, all sale transactions of $35,000/- or above (or equivalent in other currencies) will be conducted by the Exchange Companies through Crossed Cheque/Demand Draft/Pay Order issued from the personal account of the customer and instrument number and issuing bank's name will be mentioned on the transaction receipt along with identification document number of the customer. In addition, State Bank's prior approval is required for all transactions of sale of foreign currencies to the individual customer of $50,000/- or above (or equivalent in other currencies).