KARACHI - State Bank of Pakistan (SBP) Governor Ashraf
Mahmood Wathra discussed important issues facing the economy and the financial
sector with presidents of commercial banks here on Monday.
Discussing key issues at the meeting such as trade-based money
laundering, Wathra said it was a well-known fact that trade transactions had
the elements of under invoicing and over invoicing that facilitated transfer of
value across the borders. Primary responsibility in this regard lies with the
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, he said.
The other issue was banking services to unlicensed forex operators. He said that illegal forex operators might have accounts with banks through which they might be conducting illegal remittance business. Banks are required to enhance their customer due diligence processes so that such relationships can be avoided. In this regard, banks should monitor the transaction patterns of their customers and report suspicious activities to the FMU, he said.
The SBP governor said that banks should take the measures to
minimise money laundering through banking channels. They should 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 and perform additional due diligence when international
trade transactions involve any related parties. He said that banks must put in
place subjective and objective controls to identify related parties’ trade
transactions. In such cases, if there are deviations, these should be brought
to SBP’s attention and/or STRs may be raised, he said.
The banks must have more specific guidance, policies and procedures in place to address the overall risks of trade-based money laundering and 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, he said.
Also, the commercial banks should provide adequate and specific training to their staff on financial crime risks prevalent in the trade financing and forex operations. SBP/SBP-BSC will support and guide any exercises by banks/financial institutions to achieve this objective, he said.
The SBP governor said this was the first time that “we have invited the media to follow up to such a meeting with the presidents and CEOs of 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,” said the governor. “Somehow this was linked to one particular bank causing a panic-like situation over the weekend,” he said. He said that SBP wished to clear the air with these rumours by sharing the discussion at the meeting with the media.
At the end, Wathra reiterated SBP’s resolve to 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.
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