Pakistani banks to issue alerts about suspicious transactions

KARACHI – The State Bank of Pakistan (SBP) has directed financial institutions to issue red alerts, which would trigger a thorough verification of transactions and of account holders, for suspicious financial transactions beginning October 31.

With its September 13 directive, the SBP has also asked banks not to open accounts for individuals working with any banned militant organisations.

“The SBP has issued a new set of guidelines for the banks and the development financial institutions (DFIs) to tighten the anti-money laundering, terror financing mechanism and to meet the international requirements of making the banking system more transparent,” Syed Wasimuddin, SBP chief spokesman, told Central Asia Online September 14.

The SBP revised the Anti-Money Laundering and Combating of the Financing of Terrorism Regulations after consulting with key stakeholders, such as the multi-national Financial Action Task Force and the Securities and Exchange Commission of Pakistan (SECP), he said.

“New guidelines for the banks include the direct verification of record from the National Database Registration Authority (NADRA) and public and private sector organisations that support the opening of bank accounts,” Wasimuddin said.

Instructions on bank accounts

The SBP also ordered various measures to help regulate the industry. For example, a walk-in customer who transfers Rs. 1m (US $11,000) or more must show a Computerised National Identity Card (CNIC), he said.

If a customer wants to open a new account, banks will require a passport, CNIC or National Aliens Registration Authority card, Wasimuddin said.

The SBP has also ordered the banks not to open accounts of government departments under individuals’ names, though authorised officials from the government departments would still be able to operate the accounts, he said.

The banks must also physically verify the documents (issued by NADRA and other government agencies) of NGOs and other non-profits that seek to open new accounts, Wasimuddin said.

The banks will maintain records of transactions of NGOs and other non-profit organisations for 10 years to enable scrutiny of transactions of any organisation found guilty of money laundering or terror financing, he added.

The SECP can fine or warn companies if they violate rules.

No terror financing noticed yet

The SBP, SECP, the Federal Investigation Agency and stock exchanges have tightened financial mechanisms to make it difficult to use the system for money laundering or terror financing.

“We gave a June 2012 deadline to the banks, DFIs, and stock exchanges in Karachi, Lahore, Islamabad and registered companies to verify and report the accounts and transactions relating to money laundering and terror financing, but not a single case had been reported so far,” SECP advisor Abdul Rehman Qureshi said.

As part of the crackdown, special agents now frequently visit financial institutions unannounced to check their records, he said.

“We have established a Monitoring Department at SECP that keeps an eye on transactions taking place at the stock markets daily,” Qureshi said.

International accounts

In other banking changes, Pakistani banks will start issuing International Bank Account Numbers (IBANs) to customers beginning in December, Wasimuddin told Central Asia Online.

About 50 countries use IBANs, which make international transactions easier.

“The decision is aimed at enabling companies and major organisations to make international cash transactions in foreign currency in few minutes,” Wasimuddin said. Presently, such transactions take a few days.

“The opening of the IBAN (system) will not only reduce the cost of money transfer, but it would also save time,” said Sirajuddin Aziz, CEO of Habib Metropolitan Bank, calling the decision a landmark in the history of banking in Pakistan.