Category: Money & Banking

Money and banking drive economic activity by facilitating transactions, savings, and investments. Banks manage financial resources, offer credit, and regulate money supply, ensuring stability and growth in Pakistan’s financial sector.

SBP emphasizes more efforts for taking Pakistan out of FATF grey list

KARACHI: Dr. Reza Baqir, Governor State Bank of Pakistan (SBP) on Monday emphasized on putting more effort against money laundering and terrorist financing to ensure that Pakistan is out of grey list in the next meeting of FATF.

While inaugurating the conference on Anti-Money Laundering (AML)/ Combating Financing of Terrorism (CFT) and Trade-Based Money Laundering (TBML), Dr. Reza Baqir, Governor State Bank stated that significant progress has been made between May and September 2019 to meet the action plan items set by Financial Action Task Force (FATF) in different areas to demonstrate effectiveness of AML safety regime of Pakistan.

There was a major rethink of the approach being taken by the authorities in early to mid 2019. Consequently, a number of steps were taken to significantly strengthen our approach to making progress on these issues.

He however, stressed for the need of putting more effort to make progress on remaining areas to ensure that Pakistan is out of grey list in the next meeting of FATF.

He was speaking to the conference conducted by SBP and Asian Development Bank today at SBP, Karachi in a collaborative effort to mitigate the risks of money laundering and financing of terrorism.

Speaking at the conference, the Governor informed the audience that since the grey-listing, State Bank has arranged many AML/CFT outreach and awareness programs for its regulated entities and stakeholders and that the conference is a useful platform to understand the AML/CFT challenges being faced globally and the best practices followed in mitigating such challenges.

In the context of implementing AML/CFT requirements, the Governor urged the financial sector to make efficient use of technologies for assessment of risks, controls and ongoing monitoring of financial transactions and enhance capacity by continuous training of their employees.

Dr. Baqir emphasized that trade based money laundering poses complex and sophisticated challenges and that SBP inspection teams conducted thematic inspections of banks with respect to export and import of specific goods.

He also referred to State Bank’s framework for managing risks of trade based money laundering and terrorist financing which has been issued to encourage authorized dealers (banks) to effectively manage the trade based money laundering and terrorist financing risks.

Ms. Xiohang Yang, Country Director ADB, and Mr. Mohsin Ali Nathani, President & CEO HABIBMETRO Bank also spoke on the occasion. Ms. Yang stated that ‘AML/CFT is a critical issue for trade finance, which is why ADB’s Trade Finance Program is playing an increasing role in this space. She stated that ADB has a strong commitment to work with Pakistan’s banking sector and the SBP on this issue.

Ms. Yang further stated that the FATF has identified enhanced capacity building/training in AML/CFT as an immediate priority requirement and they are pleased to partner with the SBP and thankful to HABIBMETRO Bank for organizing the same.

Mohsin Ali Nathani, President & CEO HABIBMETRO Bank while addressing the conference added, ‘Enhancement of AML & CFT efforts through increased awareness and strengthened systems, controls and processes is imperative for our country and the banking sector. HABIBMETRO Bank is pleased to organize this conference and bring together relevant stakeholders from the region, regulator and banking sector to re-affirm our collective commitment to mitigating the risks of Money Laundering and Terrorism Financing.’

During the conference several prominent speakers and panelists discussed the requisites and obligations with regard to AML and CFT, including Terrorism Financing Risk Assessments, Transnational Risks in Trade Based Money Laundering (TBML), risks posed by DNFBPs & NPOs and Ultimate Beneficial Ownership.

The conference also included a detailed discussion on the impact of Trade Based Money Laundering and the repercussions of the same for the banking sector especially in the context of grey listing.

The conference was organized by HABIBMETRO Bank and attended by the Deputy Governor State Bank of Pakistan, Country Head Asian Development Bank and international experts in the field of AML/ CFT and trade from the United States, Australia and UAE.

Participants included CEOs and senior management of Banks, DFIs, Microfinance Banks and Exchange Companies and representatives from the SBP, Financial Monitoring Unit (FMU) and Securities & Exchange Commission of Pakistan (SECP).

October 29, 2019
Rupee gains four paisas amid dollar demand

KARACHI: The Pak Rupee gained four paisas against dollar on Monday amid higher demand for import and corporate payments.

The rupee ended at Rs155.85 to the dollar from last Friday’s closing of Rs155.89 in interbank foreign exchange market.

Currency experts said that the rupee was under pressure during the day owing to higher demand for the greenback due to past two weekly holidays.

However, supply from workers’ remittances and export receipts helped the rupee to make gain at the end of the day.

The exchange rate in open market however witnessed stable rupee value. The buying and selling of dollar was recorded at Rs155.80/156.10, the same last Friday’s closing, in cash ready market.

October 28, 2019
SBP issues common red flag indicators for trade based money laundering

KARACHI: State Bank of Pakistan (SBP) has issued common red flag indicators for banks to take care in avoiding trade based money laundering and terrorist financing.

Following are the common Red Flag indicators:

i. Obvious over or under/over pricing of goods (significant discrepancies appear between the value of the goods reported on the invoice/EIF/MIF, EFE/MFE, Advance Payment Voucher and the known fair market value of the goods).

ii. The description of goods on the Goods Declaration Form/Transport documents significantly varies from the description declared on EIF/MIF, EFE/MEF or underlying contract.

iii. Significant variation is found between the description of the goods on the bill of lading and the invoice.

iv. There are indications that the description of the goods is disguised.

v. The tenor of the transaction does not commensurate with the nature of the underlying goods – for example perishable goods are traded on terms involving lengthy usance period.

vi. Documents such as a letter of credit is received through unverified channels such as unauthenticated SWIFT message.

vii. The type of goods being shipped appears to be inconsistent with the exporter’s or importer’s regular business activities.

viii. The size of the shipment does not commensurate with the size of the exporter’s or importer’s regular business activities.

ix. The packaging of goods is inconsistent with the commodity or shipping method.

x. The goods are transshipped through one or more countries/jurisdictions for no apparent economic or logistical reason.

xi. The country from which goods are being shipped is designated as “high risk” for money laundering activities.

xii. The transaction involves the receipt of payments from third parties that have no apparent connection with the transaction.

xiii. The method of payment apparently does not commensurate with the risk characteristics of the transaction e.g. the remittance of funds in advance payment for a shipment from a new supplier in a high-risk country.

xiv. The transactions involving consecutive trade discount offered by exporters to the same importer.

xv. The transaction involves repeatedly amended or frequently extended letters of credit.

xvi. An exporter receives advance payment(s) but does not make shipment(s) there against.

xvii. An Importer remits advance payment(s) but does not receive shipment(s) there against.

xviii. The transaction appears to involve use of front or shell companies for the purpose of hiding the true parties involved.

xix. The transaction involves import/export of dual use goods.

xx. The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronics industry.

xxi. Where important details are missing on commercial invoice(s) or mentioned vaguely.

xxii. Where some of the shipping documents are provided in photocopies instead of original against the regularity instructions or against normal business scenarios.

xxiii. Where goods declarations in commercial invoice(s) are not proper, incomplete or otherwise not mentioned at all to conceal the facts.

xxiv. Receipt of proceeds from non-cooperative countries as per FATF list against the shipment made to a third country.

xxv. Where export proceeds are received from unrelated/third party with differing nature of business from that of exporter.

October 28, 2019
Banks disburse Rs26.76 billion business loans to youth

KARACHI: Banks have disbursed an amount of Rs26.76 billion under Prime Minister’s Youth Business Loans (PMYBL) till June 30, 2019 as against the amount of Rs25.13 billion disbursed till June 30, 2019.

The number of borrowers has been increased to 26,679 by end June 2019 as compared with 25,128 borrowers by end June 2018, State Bank of Pakistan (SBP) said on Friday.

The government, being cognizant of the important role played by youth and small businesses in the economic development, introduced Prime Minister’s Youth Business Loans (PMYBL) Scheme in 2013 with the aim of providing youth the opportunities of financial independence through self-employment.

Under the Scheme, small businesses are provided loans up to Rs 2,000,000/- at a service charge of 6 percent p.a.

Total number of applications received by the Executing Agencies (EAs) under PMYBL Scheme as of June 30, 2019 stood at 101,938. Of the total applications received so far under the scheme, 88 percent were from male applicants.

Moreover, since launch of the scheme, number of sanctioned applications stood at 33,145 as on June 30, 2019, while cumulative disbursements of Rs 26,760 million had been made to 26,679 beneficiaries till June 30, 2019.

The SBP said that small businesses have potential to revitalize economic activity by creating employment opportunities, reducing poverty and providing economic linkages and services to the corporate sector.

The growth of small businesses and their access to formal finance is imperative for the development of economy.

However, despite their strong potential, the small businesses, particularly of young entrepreneurs, have traditionally remained credit constrained due to high risk perception of banks towards them.

The government introduced Prime Minister’s Youth Business Loans (PMYBL) Scheme in 2013 for providing the opportunities of financial independence to youth through self-employment.

Under the scheme, unemployed youth are extended loans upto Rs 2,000,000/- at a service charge of 6 percent p.a. for setting up new business or strengthening existing business.

The rate of return for lending banks is one year KIBOR+500 bps. Difference of banks’ rate and borrowers’ rate is being absorbed by the federal government in the form of subsidy.

As a further incentive to the banks, GOP also shares 5 percent of credit losses of total outstanding loan portfolio of the banks under the scheme.

Currently, eighteen banks are participating in the scheme, of which three are public sector banks (NBP, FWBL and Sindh Bank Limited) while the remaining fifteen are private sector banks.

October 25, 2019
Meezan Bank declares net profit of Rs11 billion for nine months

KARACHI: Meezan Bank has declared around Rs11 billion net profit (profit after tax) for the 11-month period ended September 30, 2019. The Board of Directors of Meezan Bank Limited, in its meeting, held October 24, 2019 approved the condensed interim unconsolidated financial statements of the bank and its consolidated financial statements for the nine months period ended September 30, 2019, a statement said on Friday.
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October 25, 2019
Rupee ends unchanged in interbank

KARACHI: The Pak Rupee ended unchanged against dollar on Friday amid lackluster demand for import and corporate payments.

The rupee ended Rs155.89 to the dollar, the same previous day’s level, in interbank foreign exchange market.

The market was initiated in the range of Rs155.88 and Rs155.89. The market recorded day high of Rs155.89 and low of Rs155.86 and closed at Rs155.89.

Currency experts said that the rupee was remained stable in foreign currency market ahead of weekly holidays.

The exchange rate in open market was also witnessed stable rupee value. The buying and selling of dollar was recorded at Rs155.80/Rs156.10, the same previous day’s level, in cash ready market.

October 25, 2019
SBP facilitates overseas Pakistanis in biometric verification

KARACHI: State Bank of Pakistan (SBP) has facilitated overseas Pakistanis in their biometric verification for operating bank accounts.

In a statement on Thursday, the SBP said that realizing difficulties being faced by overseas Pakistan in operating their bank accounts due to non-biometric verification of their accounts, State Bank of Pakistan has issued detailed instructions on the alternate arrangement to facilitate their biometric verification.

It may be mentioned here that as per alternate arrangement, overseas Pakistanis may approach their respective banks through email/surface mail and provide identity documents like valid Passport, Visa, CNIC and NICOP (National Identity Card for Overseas Pakistanis) as an alternative arrangement for biometric verification for operating their bank accounts as usual.

The arrangement has been made in line with State Bank’s continuous monitoring of the progress of the banking industry with respect to biometric verification; and it has been reiterated to banks for extending their fullest cooperation to their overseas customers.

October 24, 2019
Rupee ends unchanged in thin trading

KARACHI – The Pakistani rupee remained stable against the US dollar on Thursday, closing unchanged in a session marked by subdued trading activity in the interbank market.
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October 24, 2019

SBP gives deadline to banks for IFRS-9 implementation

KARACHI: State Bank of Pakistan (SBP) on Wednesday directed banks to implement International Financial Reporting Standard on Financial Instruments i.e. IFRS 9 from January 01, 2021.

The International Accounting Standards Board (IASB) issued International Financial Reporting Standard on Financial Instruments i.e. IFRS 9 effective from January 1, 2018.

IFRS 9 has introduced an expected credit loss approach, which bring major changes in the way the financial institutions (FIs) will assess the impairments of financial instruments.

The banking industry has been representing to the State Bank of Pakistan(SBP) about the difficulties being faced in the implementation of this Standard and has been requesting to defer its implementation till December 31, 2020.

Keeping in view of the importance of the Standard, the SBP advised the banking industry to carry out a quantitative impact assessment of IFRS 9 on their financials along with the assessment of their readiness of its implementation.

In view of the impact assessment and stakeholders’ representation, it has been decided that the effective date of IFRS 9 implementation is January 1, 2021 for banks/DFIs/MFBs.

Meanwhile, they are advised to ensure meticulous compliance of the following instructions:

(a) Prepare separate pro forma Statement of Financial Position, Profit and Loss Account, Statement of Comprehensive Income and Statement of Changes in Equity based on the requirements of IFRS 9 along with the detailed notes on Advances, Investments, Provisions, Write offs and any other notes which may have material impact. The FIs are required to prepare aforesaid financials for the year-end 2019 and submit the same to BPRD-SBP within the time mentioned in the below table. These financial statements should also comply with the requirements stated in the Annexure-I of the Circular.

(b) Perform parallel run of IFRS 9 implementation starting from Jan 1, 2020 to test the IFRS 9 outcomes. The FIs shall submit quarterly reports on the status of IFRS 9 implementation to the SBP, after review by the Board Committee responsible for oversight of the IFRS 9 implementation. Such reports should be submitted to the SBP within 14 working days of the Board of Directors (BOD) meeting at which the financial statements are approved.

(c) Review internal systems and procedures and put in place required governance structures, processes and systems for implementation of the Standard before the effective date of IFRS 9 implementation.

(d) The BOD of FIs are required to play an active role in the oversight of the implementation process of IFRS 9 either by establishing a separate subcommittee for this purpose or assigning the same to an existing subcommittee. The BOD are required to discuss the progress of IFRS 9 implementation in their periodic meetings. The specific responsibilities of the BOD for the implementation of IFRS 9 are mentioned in Annexure-II of the Circular.

(e) Form a management level IFRS 9 Project Steering Committee, which will be responsible for managing the implementation process of IFRS 9, as mentioned in Annexure-II of the Circular. The Project Steering Committee should at least include the members from the Risk Management, Finance and IT departments.

(f) The process of implementing IFRS 9 is required to be completed within the following time period:

Sr#	Particulars	Timeline
1.	Forming of a Board Committee and a Project Steering Committee	Jan 31, 2020
2.	Preparation of IFRS 9 compatible pro forma Financial Statements for year-ended 2019	Apr 30, 2020
3.	Parallel Run of IFRS 9	Periods beginning Jan 1, 2020
4.	Directors Review Reports for Parallel Run Periods	Within 14 working days from BOD meeting
5.	Effective Date of IFRS 9 implementation	Jan 1, 2021

All banks/DFIs/MFBs are advised to ensure that the transition to IFRS 9 will be achieved in a planned manner and within the timeline stipulated above. Any violation of these instructions may attract punitive actions under the relevant provisions of the Banking Companies Ordinance 1962.

October 23, 2019

Rupee ends flat in range bound activity

KARACHI: The Pak Rupee ended flat against dollar on Wednesday in range bound trading activity.

The rupee ended Rs155.89 to the dollar from previous day’s closing of Rs155.88 in interbank foreign exchange market.

The foreign currency market was initiated in the range of Rs155.88 and Rs155.90. The market recorded day high of Rs155.93 and low of Rs155.89 and closed at Rs155.89.

Currency experts said that flat demand for import and corporate payments helped the rupee to maintain the levels.

The exchange rate in open market witnessed stable rupee value. The buying and selling of dollar was recorded at Rs155.50/Rs156.00, the same previous day’s level, in cash ready market.

October 23, 2019

Category: Money & Banking

Dr. Baqir emphasized that trade based money laundering poses complex and sophisticated challenges and that SBP inspection teams conducted thematic inspections of banks with respect to export and import of specific goods.