Pakistan amends anti-money laundering, terror financing regulations

ISLAMABAD – Pakistan has amended its anti-money laundering and counter-terrorism financing regulations to effectively curb crimes and strengthen its financial system.

The move comes months after the Financial Action Task Force (FATF) removed Pakistan from its “grey list” after four years in October 2022. 

“The Securities and Exchange Commission of Pakistan (SECP) has introduced important amendments to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Regulations, 2020,” the SECP said in a press release.

“The notified amendments aim to enhance the scope of regulations to effectively combat financial crimes, control money laundering, and combat the financing of terrorism (CFT) while ensuring the integrity of its financial system.”

The SECP said the amendments were an outcome of a self-assessment of its AML/CFT framework conducted by the commission this year. It added that the assessment was made against the criteria used in the FATF Assessment Methodology for assessing Technical Compliance of its AML/CFT regulatory framework.

According to a notification, the amendments empower a “regulated person” or a financial entity, to engage a third party to carry out a series of checks to ensure a customer’s identity, or Customer Due Diligence (CDD) and also verify the identity of beneficial owners.

“Provided that despite the third party reliance, the regulated person shall remain liable for any failure to apply the indicated CDD measures,” the SECP said.

The amendments also make it mandatory for the financial institution to ensure that their foreign branches and majority-owned subsidiaries in countries which do not sufficiently apply the FATF’s recommendations, apply Pakistan’s AML & CFT measures “to the extent that host country laws and regulations permit.”

“If the foreign country does not permit the proper implementation of AML/CFT measures consistent with that of Pakistan requirements, financial groups should apply appropriate additional measures to manage the risks, and inform the Commission when a foreign branch or subsidiary is unable to observe appropriate AML/CFT measures,” it added.

The revised regulations also state that an account will be classified as dormant after three years of inactivity, as opposed to the previous threshold of five years. The amendments also contain regulations for opening a bank account for mentally disabled persons, such as proper verification of the identity documents of the disabled person and their court-appointed managers.