The State Bank of Pakistan (SBP) has asked all banks to take all necessary measures to curb money laundering including training their staff and provision of in-house facilities.
Rejecting the rumours regarding United Bank Limited (UBL) on Monday, Governor State Bank of Pakistan (SBP) Ashraf Mahmood Wathra said that there is nothing like the situation in the bank and the confusion is a result of one important measure taken by the SBP over unnecessary foreign travelling of the bank’s staff. He said, “somehow this was linked to one particular bank, (UBL), causing a panic like situation over the weekend.
Governor SBP claimed, “SBP wished to clear the air with these rumours by sharing our conversation with the media.” On last Friday, there were rumours in the banking industry that President UBL is being removed from his post and Sima Kamal, former HBL’s retail banking head, has been appointed as the new CEO of the bank.
SBP, for the first time, took electronic and print media onboard after Governor SBP addressed the CEOs of commercial banks at SBP headquarters I.I Chundrigar Road, Karachi.
The governor went on to add that today’s meeting, however, was not limited to this issue only but was called to discuss many important issues faced by the economy in general and the financial sector, in particular.
Following are the main issues discussed during the meeting.
Trade Based Money Laundering: The governor said that it was a well-known fact that trade transactions have the elements of under invoicing and over invoicing, which facilitates the transfer of value across the borders. Primary responsibility in this regard lies with Pakistan Customs, however, since documents are negotiated and L/Cs are settled through the formal banking sector, banks are required to enhance their capacity to process foreign trade transactions with extreme care and diligence.
Banking services to unlicensed forex operators: he said that illegal forex operators may have accounts with banks through which they may be conducting an illegal remittance business. Banks are required to enhance their due diligence processes so that such relationships could be avoided. In this regard, banks should monitor the transaction patterns of their customers and report suspicious activities to FMU.
To minimise money laundering through banking channels, the SBP directed all the banks to implement an in-house system to detect differences between the values declared in the documents and the prevailing market prices.
In addition, banks need to set out escalation procedures to manage transactions where significant differences in prices are identified. He further directed the banks to perform additional due diligence when international trade transactions involve any related parties.
The banks must put in place subjective and objective controls to identify related parties’ trade transactions. In such cases, if there are deviations then these should be brought to SBPs attention and/or STRs may be raised.
He further stated that it was necessary to have more policies and procedures put in place to address the overall risks of trade-based money laundering. The banks should 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 on transactions that were not escalated, should be performed for quality assurance purposes.
The banks should provide adequate and specific training on 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.
In the end, the governor reiterated SBP’s resolve that it will continue to encourage banks to send their staff abroad for advanced training, 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,” said the governor.
