Pakistan to finalise new anti-money laundering law

ISLAMABAD: Pakistan is fine-tuning a new law to join forces with the international community to combat money laundering and terrorist financing in line with a recommendation of a global financial watchdog, a top official said on Thursday.

Khalida Habib, head of the Securities and Exchange Commission of Pakistan (SECP) said formulation of Mutual Legal Assistance (MLA) Act is in final stages, which was one of the recommendations of the Financial Action Taskforce (FATF).

“This draft [Act] is expected to be placed before the parliament soon for its rectification,” Habib told media.

Habib said the country would be in a position to do information sharing at the international level after the enactment of law.

In June, the FATF placed the country on the grey list of the countries after detecting the deficiencies in anti-money laundering and combating of terrorist financing standards. The country has to comply with the FATF’s recommended actions to avert being placed on the blacklist.

The SECP’s official further said the draft of National Risk Assessment is also in final stages and would be submitted to the National Executive Committee soon and later it would be shared with the FATF in January next year.

Habib said the government is committed to implement all the FATF recommendations.

“By September 2019, we have to implement 27 action plans given by the FATF,” she said. “January is our first deadline, in which we have to report this risk assessment.”

Habib said the SECP’s anti-money laundering regime aims at to protect the financial system and the economy from the threats of money laundering and terror financing.

The FATF recommendations require Pakistan to implement anti-money laundering and combating the financing of terrorism actions, criminalise the practices, freeze terrorist assets, and slap financial sanctions. The country is also required to introduce preventive measures in financial institutions and designate non-financial businesses.

The SECP’s official said FATF placed Pakistan under its International Co-operation Review Group’s review to monitor the country’s progress against the agreed action plan that would be completed by September next year.

She said two parallel FATF monitoring processes are currently underway. The first is mutual evaluation by Asia Pacific Group against FATF 40 recommendations and the second is FATF’s action plan in which 27 actions are to be followed. The FATF’s action plan has identified four key areas, including deficiencies in the supervision AML/CFT regime (financial institution and non-profit organisation), cross-border illicit movement of currency by terrorist groups and progress on terrorism financing investigation and prosecution by law enforcement agencies.

Last month, the Asia Pacific Group, a part of FATF, assessed the country’s compliance status with regards to technical compliance as well as its effectiveness. Timeline for completion of the evaluation process is July 2019.

Habib said the financial institutions are required to report suspicious transaction, currency transactions and fulfill record keeping requirements. They are also required to provide details of safe harbor provision. They should establish AML/CFT policies and procedures and provide know-your-customer for all new and existing customers.

Waseem Ahmad Khan, additional director Corporatization and Compliance Department of SECP said the beneficial owners are natural persons who ultimately own or control a customer and/or the natural person on whose behalf a transaction is being conducted.

“(Beneficial owners) also include those persons who exercise ultimate effective control over a legal person or arrangement,” Khan said.

He added that the legal persons can also take the form of offshore companies as any shareholder can form a company or its permit under bearer share certificates and many other factors.

“The FATF recommendation requires countries to take measures to prevent the misuse of legal persons for ML/TF purposes, and ensure that there is adequate, accurate and timely information available with the companies on the ultimate (actual) beneficial ownership and control of legal persons that can be accessed in a timely manner by competent authorities,” he said.

Moreover, the SECP also issued a circular that requires companies having legal persons as members or shareholders to take reasonable measures to obtain and maintain up-to-date information relating to their ultimate beneficial owners in a register of ultimate beneficial ownership.