One of the sections stopped banks completely from allowing customers to use personal accounts for business transactions. Banking industry people say businessmen use personal accounts to avoid government taxation. However, not paying taxes is considered a violation of money laundering laws in other countries. In this backdrop, it remains to be seen how the SBP will deal with the World Bank’s Asia Pacific Group (APG) on money laundering, which earlier in the year praised amendments to M-1 and M-2 regulations. The APG team which visited Pakistan to see efficacy of AML laws had relied heavily on March amendments to prudential regulations to prepare its exhaustive report. Nevertheless, a senior banker told The News that the SBP has a little choice but to do it since Pakistan’s business culture is unique and complicated. The country’s rating is already expected to be degraded when APG reviews Pakistan’s financial system vis-‡-vis AML laws and their implementation in February next. The vital Anti-Money Laundering Amendment Act 2009 is pending in the national assembly for past a few months now. Changes in the AML Ordinance 2007 were necessitated after the financial action task force and APG raised serious concerns.
Amendments were also part of conditionalities under Pakistan’s accelerating transformation programme of Asian Development Bank (ADB). International community has been pushing Pakistan to tighten the AML and terrorist financing regulations. But most of the Pakistani banks, especially the top five largest, have a long way to go in developing concrete internal control systems. Though these banks have seen growing interest of the private sector in recent years, yet the changes have not gone beyond refurbishment of branches. The bank officials who deal with customers are poorly equipped in KYC requirements. The compliance units still are not appropriately functioning in some of other banks.
