Search Results for: regulations

What are the Simplified Due Diligence measure?

The SDD measures may include but are not limited to: 1. Adjusting the timing of CDD where the product or transaction sought has features that limit its use for ML/TF purposes, e.g. i. Verifying the customer’s or beneficial owner’s identity during the establishment of the business relationship; or ii. Verifying the customer’s or beneficial owner’s identity once transactions exceed a defined threshold or once a reasonable time limit has lapsed. Regulated person must make sure that: a) this does not result in a de facto exemption from CDD, that is, firms must ensure that the customer’s or beneficial owner’s identity will ultimately be verified; b) the threshold or time limit is set at a reasonably low level (although, with regard to terrorist financing, RP should note that a low threshold alone may not be enough to reduce risk); c) they have systems in place to detect when the threshold or time limit has been reached; and d) they do not defer CDD or delay obtaining re...

In case of Co-Insurance/Banc assurance, the leading company has direct access to customers, how should the reporting entity exercise the CDD procedures?

Under section 12 of the SECP AML/CFT Regulation, 2018 the Regulated person may rely on a third party to conduct CDD on its behalf. However, it must satisfy itself that third party is regulated and has measures in place for compliance with CDD and record-keeping requirements in line with the regulations. However, the ultimate responsibility for CDD measures remains with the regulated persons relying on the third party....

What is the mechanism for obtaining UBO information by a company, having legal person(s) as its members, from ultimate beneficial owners?

Following procedure is to be followed to ensure compliance with the requirements to obtain and maintain ultimate beneficial ownership information. 1) In respect of members of a company, say Company X, who are natural persons and hold not less than 10% ownership or controlling rights in it, no information would be required to be entered in the register of UBO because their particulars would already being maintained and recorded in the register of members of Company X under section 119 of the Act read with regulation 19 of the Regulations. 2) Company X will circulate the letter requiring ultimate beneficial ownership information from those members who: (i) are legal persons, i.e. other than natural persons or individuals, and (ii) have not less than 10% ownership or controlling stake in Company X; 3) A Company Y which is a member of Company X and in receipt of the above letter from Company X will then; (i) in respect of its members who are natural persons and hold not less th...

What is the purpose behind the requirement to maintain ultimate beneficial ownership information by the companies?

The requirement to maintain UBO information is aimed at determining the true owners of a company. Under normal circumstances, a company’s corporate ownership structure comprises a few individuals or natural persons holding shares in the share capital of the company, called as shareholders or members. The particulars of such members are already required to be maintained in a ‘register of members’ under section 119 of the Companies Act, 2017. Detailed particulars to be maintained in the said register are specified in terms of regulation 19 of the Companies (General Provisions & Forms) Regulations, 2018 (the “Regulations”). However, there might be certain cases where legal persons or corporate entities are appearing as members of the company in which case the required particulars as to the true owners, being the ultimate shareholders, would not be available. Information about the actual (ultimate) owners and shareholders is the most significant information for a large num...

How should the regulated person respond to discrepancies (such as credit blocks, follow-up periodicity etc.) that may arise during on-going monitoring?

SECP AML/CFT Regulations and guidelines are reproduced below which may be referred to for guidance: SECP AML/CFT Regulations, 2018 Section 6 – Customer Due Diligence: (11) “where regulated person is not able to satisfactorily complete required CDD measures, account shall not be opened or existing business relationship shall be terminated and consideration shall be given if the circumstances are suspicious so as to warrant the filing of an STR in relation to the customer”. SECP AML/CFT Guidelines section 9(b) (iii) and (iv) – Existing Customers: iii. An RP is entitled to rely on the identification and verification steps that it has already undertaken, unless it has doubts about the veracity of that information. Examples of situations that might lead an institution to have such doubts could be where there is a suspicion of money laundering in relation to that customer, or where there is a material change in the way that the customer’s account is operated, which is not con...

What are the KYC requirements for investors with long term banking relationships?

Section 12 of the SECP AML/CFT Regulations, 2018 provides detailed guidance on third party reliance. It may be noted that notwithstanding long term banking relationships and the investment of funds through banking channel the responsibility for ongoing monitoring of customers and reliance on third parties ultimately remains with the regulated person, including generation of STRs....

What is the closure mechanism for discrepant accounts?

Under SECP AML/CFT Guidelines 2018, section 9(b) (iv) – Existing Customers: iv. Where an RP is unable to complete and comply with CDD requirements as specified in the Regulations, it shall not open the account, commence a business relationship, or perform the transaction. If the business relationship has already been established, the RP shall terminate the relationship. Additionally, the RP shall consider making a STR to the FMU. The customer should be is provided with fair opportunity to remove the discrepancies and in cases, where he is unable to comply with the relevant CDD measures, the business relationship should be terminated....

How to identify and verify the beneficiaries in case of trusts as required under Regulation (7)2 of SECP AML/CFT Regulations 2018?

In the case of “Trusts”, the regulated person should obtain: a) Whether the Trust is a Public Trust or Private Trust; b) Trust Deed whereby the Trust has been created; c) Details of Settlor (this will also be available in the Trust Deed); d) Objects of the trust (this will also be available in the Trust Deed); e) Trustee of the trust (whether trustee is associated person of the settlor); f) Description of each class or type of beneficiary (this information may also be checked from Trust Deed); g) Details of any possibility of influence of any other person on trustee regarding management and control of trust property; h) In the case of “Private Trust” if the beneficiary of a trust is also the beneficial owner of the trust, identification and verification of the beneficiary is required otherwise the name and CNIC of each beneficiary of a trust should be obtained. (verification of this information is not required). For this purpose, the regulated person may obtain a dec...

Organizational Structure

Policy Board Appointed by the federal government, it guides the SECP in matters relating to its functions and approves the annual budget. It has nine members, five from the public sector and four from private sector. Currently, the Federal finance secretary serves as Chairman. Commission It is a collegiate body with collective responsibility. Operational and executive authority of the Commission is vested in the Chairman who is the Commission's CEO. He is assisted by Commissioners. Audit Oversight Board The SECP is in the process of developing an independent authority, i.e. Audit Oversight Board of Pakistan for the oversight of auditors of public interest companies to ensure adequate audit oversight. Appellate Bench It adjudicates the grievances of the parties aggrieved form the orders passed by a Commissioner or any authorized officer. It operates as per Securities and Exchange Commission of Pakistan (Appellate Bench Procedure) Rules, 2003. The administrative functions of the Appella...