Karachi, October 26, 2023 – The State Bank of Pakistan (SBP) has taken a significant step to combat money laundering and terrorist financing by making biometric verification mandatory for all branchless banking (BB) transactions.
In a notification issued by the SBP, this measure is aimed at bolstering controls to safeguard the financial system.
The SBP’s directive advises banks and Microfinance Banks (MFBs) offering branchless banking services (Authorized Financial Institutions) to undertake the following actions:
Biometric Verification for All Cash Transactions: Starting from January 31, 2024, all Authorized Financial Institutions must conduct biometric verification (BV) of account and wallet holders for all ‘cash-in’ and ‘cash-out’ transactions at branchless banking agents’ locations. This requirement is in addition to the BV already specified for certain transactions and customer types in a prior circular.
Deployment of BV Devices: To facilitate the implementation of the new BV requirement, institutions are encouraged to prioritize the deployment of new biometric verification devices at agents’ locations, with a focus on high Terrorist Financing (TF) risk areas. This deployment will then extend to other areas across the country.
Technology Upgrades: Banks and MFBs are directed to take all necessary measures and controls, including the upgrade of hardware and software, to ensure compliance with the new BV requirements.
Strengthened Transaction Monitoring: Automated Transaction Monitoring Systems (ATMS) must be reinforced to capture all branchless banking transactions, including those carried out at agents’ locations. The system should have the capability to flag suspicious, unusual, or out-of-pattern transactions and identify accounts with a notably high number of transactions. Any flagged activities should be subject to further assessment and reported as Suspicious Transaction Reports (STRs) under the Anti-Money Laundering (AML) Act of 2010. Additionally, the ATMS should be capable of reconstructing individual branchless banking transactions to facilitate the gathering of necessary evidence for potential criminal investigations under relevant laws.
Internal Risk Assessment Reports: Authorized Financial Institutions are instructed to ensure comprehensive coverage of branchless banking operations in their Internal Risk Assessment Reports (IRARs) as required by the SBP’s Anti-Money Laundering (AML), Counter Financing of Terrorism (CFT), and Countering Proliferation Financing (CPF) Regulations.
The SBP’s move to make biometric verification mandatory for branchless banking transactions underscores its commitment to enhancing the integrity of the financial system and curbing illicit financial activities. This step is expected to contribute to a more secure and transparent financial environment in Pakistan, aligning with global efforts to combat money laundering and terrorist financing. Stakeholders in the banking sector are urged to promptly implement these measures to ensure compliance and strengthen the country’s financial safeguards.
For the latest updates and further details, please refer to the State Bank of Pakistan’s official notifications and regulatory guidelines.
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