Financial Monitoring Unit to collect records of suspicious transasactions

[Naveed Yaseen]

SOHAIL SARFRAZ & QAMAR UZ ZAMAN
ISLAMABAD (September 27 2008): The amended "Anti-Money Laundering Ordinance 2007" would empower the Financial Monitoring Unit (FMU) of the State Bank of Pakistan (SBP) to collect necessary record and information from any person, relating to transaction, for investigating suspicious currency transactions involved in financing of terrorism.

The proposed amendments in the Ordinance has also considerably enhanced penalty on committing offence of money laundering from rupees one million to rupees five million. Through proposed amendments in the Anti-Money Laundering Ordinance 2007, necessary changes have been made to check suspected transactions involved in financing of terrorism. Terrorism would cover all crimes specified in the Anti-Terrorism Act.

A new change has been made in the ordinance so that the reporting entities, including the financial institutions and non-financial businesses and professions, would have to report about the suspected transactions involved in financing of terrorism within seven days to the FMU.

The FMU would only be housed in the SBP to check suspicious banking transactions. A Director General (financial sector specialist) would head the FMU and exercise all powers and functions of the FMU subject to the supervision of the SBP Governor.

The FMU would analyse the Suspicious Transaction Reports and currency transactions report (CTR). The unit may call for record and information from any agency or person in Pakistan (with the exception of income tax information) related to the transaction in question. All such agencies or persons would be required to promptly provide the requested information.

The FMU would co-operate with financial intelligence in other countries and to share and request information subject to the reciprocal agreements to the approved by National Executive Committee. The FMU would recommend to the regulatory authorities of reporting entities to issue regulations as considered necessary in the context of combating money laundering and financing of terrorism in the areas of customer due diligence and ancillary record-keeping.

On considering the suspicious transaction report or the CTR, the FMU may, if deems necessary, convey the matters involving regulatory or administrative action to the concerned regulatory or administrative body for appropriate action.

Any other government agency, autonomous body or regulatory authority may share intelligence or report their suspicions within the meaning of suspicious transaction report or CTR to FMU in normal course of their business and the protection provided would be available to such agency.

The government has also expanded the scope of definition of money laundering to check suspected funding of terrorism. As per revised definition, a person would be guilty of offence or money laundering, if the person acquires converts, possesses, uses or transfers property, knowing or having reason to believe that such property is proceeds of crime.

The person has committed a crime if he conceals or disguises the true nature, origin, location, disposition, movement or ownership of property, knowing or having reason to believe that such property is proceeds of crime; or holds or possesses on behalf of any other person any property knowing or having reason to believe that such property is proceeds of crime, proposed ordinance said.

Under the proposed ordinance, a person, who commits the offence of money laundering, would be punishable with rigorous imprisonment for a term which would not be less than one year, but may extend to 10 years and would also be liable to fine, which may extend to rupees one million and would also be liable to forfeiture of property involved in the money laundering.

Provided that the fine may extend to rupees five million in case of a company and every director, officer or employee of a company found guilty would be liable to punishment. The government would make it mandatory for the National Executive Committee (NEC) to devise strategy for checking financing of terrorism in Pakistan. It would also be empowered to review performance of investigating agencies, FMU and financial institutions, non-financial businesses and professions relating to financing of terrorism.

As per the amended ordinance, the National Executive Committee to combat money laundering and financing of terrorism has also included the Minister for Foreign Affairs; Secretary, Finance; Secretary, Foreign Affairs; Secretary, Narcotics and Secretary Social, to meet regularly to develop, co-ordinate and publish an annual national strategy to fight money laundering and financing of terrorism.

The NEC would also make recommendations to the government for framing a national policy to combat financing of terrorism. The NEC would have the authority to discuss any other issue of national importance relating to financing of terrorism.

About the search of persons, if an investigating officer, has reason to believe (the reason for such belief to be recorded in writing) that any person has secreted about the person or anything under his possession, ownership or control, any record or proceeds of crime which may be useful for or relevant to any proceedings under this ordinance, he may, with the prior permission of the court, search that person and seize such record or property which may be useful for or relevant to any proceedings.

Provided that in case of personal search, prior permission of the court would not be required. In the case of the conviction of a reporting entity, the concerned regulatory authority may also revoke its license or registration or take such other administrative action. The amended ordinance has also changed the definition of the financial institutions. Now, such institutions include any person carrying on any one or more of the following business activities:

-- Acceptance of deposits and other repayable funds from the public.

-- Lending in whatsoever form.

-- Financial leasing, money or value transfer, issuing and managing means of payments, including but not limited to credit and debit cards, cheques, traveller's cheques, money orders, bank drafts and electronic money, financial guarantees and commitments, trading in money market instruments, foreign exchange, exchange, interest rate and index instruments.

-- Transferable securities and commodity futures trading. Participation in shares issues and the provision of services related to such issues, individual and collective portfolio management, safekeeping and administration of cash or liquid securities on behalf of other persons, investing, administering or managing funds or money on behalf of other persons, insurance business transactions, money and currency changing carrying out business as intermediary.

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