- Central bank says bankers should avoid unnecessary trips; Governor, CEOs discuss trade-based money laundering
The State Bank of Pakistan (SBP) on Monday announced a number of steps to minimise money laundering through banking channels, asking banks to monitor transaction patterns of customers and report suspicious activities, according to a statement issued here by the central bank.
After addressing chief executive officers (CEOs) of commercial banks at the SBP Headquarters here, SBP Governor Ashraf Mahmood Wathra took electronic and print media onboard, saying this was the first time that they have invited media as a follow on to such a meeting with the heads of the banks.
“The reason being 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 the banks’ staff,” he said, adding that somehow this was linked to one particular bank causing panic like situation over the weekend.
The central bank advised the banks to take the following measures to minimise money laundering through banking channels: implement 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; 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 SBP’s attention and/or STRs may be raised; must have more specific guidance, policies and procedures in place to address the overall risks of trade-based money laundering; 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; provide adequate and specific trainings on the financial crime risks prevalent in the trade financing and forex operations to relevant staff. It was stated that SBP/SBP-BSC will support and guide any exercises by banks/financial institutions to achieve this objective.
Governor Wathra said that the State Bank wished to clear the air with these rumours by sharing their conversation with the media. However, the Monday’s meeting was not limited to that issue only but was called to discuss many important issues faced by the economy in general and the financial sector, in particular. A SBP statement said that the main issues discussed during the meeting also pertained to the trade-based money laundering and elaborated that it is well-known fact that trade transactions have the elements of under invoicing and over invoicing which facilitates transfer of value across the borders.
However, primary responsibility in this regard lies with the Pakistan Customs since documents are negotiated and L/Cs are settled through formal banking sector, banks are required to enhance their capacity to process foreign trade transactions with extreme care and diligence. Regarding banking services to unlicensed forex operators, it was stated that illegal forex operators may have accounts with the banks through which they may be conducting illegal remittance business.
It stated that banks are required to enhance their customer due diligence processes so that such relationships could be avoided. In this regards, the banks should monitor the transaction patterns of their customers and report suspicious activities to FMU, it added. The governor reiterated SBP’s resolve that it would 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.
