Financial institutions are required to identify the ultimate beneficial owner, who is a natural person, of all legal persons and legal arrangements before offering their services to them
JUN 22, 2018: The government on Wednesday adopted new regulations to fight money laundering and terror financing and to comply with Financial Action Task Force’s (FATF) guidelines, a global financial watchdog that recently placed Pakistan on its gray list for its inability to choke money laundering and terror financing.
FATF meeting is being held from June 24 thru 29 in Paris. Pakistan’s fate for falling into category of grey list or not will be taken during this plenary meeting.
Securities and Exchange Commission of Pakistan, or SECP’s “Anti-Money Laundering and Countering Financing of Terrorism Regulations, 2018” is a framework designed to comply with FATF’s recommendations that are critical for the country to remain a member of the Asia Pacific Group, an FATF body that overlooks Asian countries.
SECP’s order will void earlier notifications that demanded a separate requirement for anti-money laundering (AML) and countering financial of terrorism (CFT) for financial institutions.
The SECP on Wednesday provided a single set of regulations for all the securities brokers, insurance companies, non-banking finance companies and modarabas with the aim to harmonize the AML and CFT regime.
“In order to ensure that criminals are not able to hide their identity through use of complex ownership structure of companies, partnerships, trusts or other similar forms, the financial institutions are required to identify the ultimate beneficial owner, who is a natural person, of all legal persons and legal arrangements before offering their services to them,” read the SECP statement.
Earlier this month, the National Security Committee (NSC) reaffirmed its commitment to cooperate with the international watchdog tasked with countering illicit financing for addressing shortcomings in the country’s anti-money laundering and counter-terror financing regimes.
The directive issued by the national security entity said the newly adopted law will help to identify criminals and militant elements that hide behind the “complex ownership structure of companies or other similar forms.”
FATF’s Gray List
Earlier this year, United States along with France, Britain and Germany reached out to FATF and introduced a motion alleging Pakistan had failed to comply with the global watchdog’s guidelines on terror financing and anti-money laundering regulations.
The FATF carries out an in-depth study of the financial system of a country – known as “mutual evaluation” – as part of the process.
In February, during a meeting of FATF member countries in Paris, it was decided to place Pakistan on FATF’s grey list to pressure Pakistan to take more concrete steps against terror financing and money laundering.
Iran and North Korea are on the dreaded blacklist.
Lisa Curtis, a United States National Security Council official, visited Islamabad after the FATF decision and said: “There has been a longstanding concern about the ongoing deficiencies in Pakistan’s implementation of its anti-money laundering/counterterrorism finance regime.”
Pakistan also previously remained on FATF’s watch list from 2012 to 2015.