ISLAMABAD: The government has constituted a five-member supervisory board to ensure independent oversight of implementation of National Savings Schemes (AML& CFT) Rules 2019 to comply with the requirements of the Financial Action Task Force (FATF).
The FATF Plenary and Joint Working Group meetings are scheduled for February 16-21 in Paris to decide Pakistan’s possible exclusion from the grey list.
In a notification issued here, the ministry of finance announced formation of the five-member board “to provide independent oversight of implementation of these rules and take necessary enforcement actions against violations thereof”. It said the board had been constituted “in pursuance of Section-9 Chapter-III of National Savings Schemes, AML & CFT Rules”.
The supervisory board is headed by the additional finance secretary (budget) and comprises State Bank of Pakistan Director Syed Jahangir Shah, Additional Director of the Securities and Exchange Commission of Pakistan Tanzila Nisar Mirza, Financial Monitoring Unit Director Adnan Imran and a joint secretary of the ministry of finance.
Step taken to comply with FATF requirements
Last week, the government announced that it was initiating screening of entire customers’ base of more than seven million involving almost Rs4.038 trillion investments in the National Savings to identify and block financial transactions of terrorist organisations and their members, particularly those named by the United Nations. The move also aims to stop flow of any ill-gotten money into the country’s the financial system and to safeguard investors from the menace of money laundering and terror financing as required by the FATF and its regional Asia Pacific Group (APG).
The APG in its recently published mutual evaluation report had pointed out a number of deficiencies on the part of Central Directorate of National Savings (CDNS) which has negatively affected the overall grading of different FATF recommendations. The FATF wants Pakistan to trace and identify the owners of these investments in the NSS.
On Saturday last, the finance division promulgated the National Savings Schemes Anti-Money Laundering & Combating the Financing of Terrorism Rules, 2019, and set to motion the process of engaging an AML-CFT compliant bank, through competitive bidding, to meet the FATF requirement and conduct training of CDNS employees.
Accordingly, an expression of interest, in consultation with the SBP, has been sought from interested banks to conduct KYC (know your customer) training of the employees and meet other FATF requirements.
This would include biometric verification of new and existing clients of the CDNS and screening of potential clients in UN Proscribed Person List.
According to the finance ministry, the CDNS is one of the longstanding institutions in the country with a legacy of more than 140 years and has always been a symbol of unshakable trust of the public.
National Savings play a pivotal role to inculcate the culture of savings, facilitate financial inclusion and extending social security net to the deserving sections of the society. Around 33 per cent of CDNS deposits are in welfare schemes, which attribute around 2pc incremental rate of profit over and above other regular savings schemes.
The NSS provides risk free and competitive avenue to all segments of the society, especially senior citizens, pensioners, widows, physically challenged persons and family members of martyrs. On the other hand, it also provides a non-inflationary and cost effective borrowing to the government to bridge the overall fiscal deficit which ultimately reduces dependency on external borrowing.
About 19pc of domestic debt consist of the NSS, while these deposits are equal to 28pc total deposit of scheduled banks.
One of the main challenges to the CDNS was its manual operations and lack of use of information technology. However, since 2009 it has completed automation of 223 National Savings Centres (NSCs) or 60pc of total 376 centres. Automation of remaining 153 is currently in progress.
The APG had recently pointed out a number of deficiencies on the part of the CDNS in terms of compliance to FATF recommendations, which has negatively affected the overall grading of different recommendations, specially the recommendation 10, 11, 12 and 15. The finance ministry said the government and the CDNS were aggressively working on mitigating those deficiencies to comply with FATF standards as all banks were now FATF compliant in terms of risk assessment, KYC and other mitigation measures.
Under the new rules, the NSS centre or its third party shall adopt counter measures to enhance due diligence proportionate to the risks to the business relationship and transactions with natural and legal persons, belonging to such countries for which this is called on to do so by FATF and independently of any call by the FATF to do so.
The NSS and all its officers and employees would have to comply with the provisions of the AML Act and the rules and regulations for reporting of Suspicious Transaction Reports and Cash Transaction Reports in the context of money laundering and financing of terrorism. They would also implement internal controls for meeting the obligations specified by the AML Act and the relevant rules and regulations.
The controlling office in their respective jurisdiction would be bound to make use of technology and upgrade their systems and procedures in accordance with the nature of risks of money laundering and terrorism financing. They would report all suspicious transactions, including attempted transactions, to the FMU, regardless of the amount of the transaction.
Published in Dawn, January 27th, 2020
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