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  • SBP penalizes HBL with Rs35.62 million for violating regulations

    SBP penalizes HBL with Rs35.62 million for violating regulations

    KARACHI: State Bank of Pakistan (SBP) has imposed an amount of Rs35.62 million as penalty on Habib Bank Limited (HBL) for violating foreign exchange regulation and customers due diligence.

    According to details of significant enforcement action by the SBP during the month of October 2019 issued on Wednesday, the central bank imposed the penalty on the bank.

    The SBP said that monetary penalty was imposed mainly on deficiencies in the areas of foreign trade operations and customers due diligence.

    “The bank has been advised timelines to bring improvement in the system/controls to avoid recurrence of such lapses / violations in future.”

    With the latest penal action the total amount of penalty during first four months (July – October) 2019 increased to Rs1,158.62 million.

    The SBP has taken penal action against three banks for violating procedures in the areas of Know Your Customer (KYC) and Customers Due Diligence (CDD) and imposed fine to the tune of Rs133.32 million during the month of September 2019.

    The SBP imposed penalty of Rs56.61 million on Askari Bank, Rs63.805 million on Meezan Bank Limited and Rs12.906 million on MCB Islamic Bank Limited.

    In addition to penal action, the banks have been advised to strengthen its process related to KYC/CDD, in order to avoid occurrence of similar violations in future.

    The SBP imposed penalty amounting Rs805.1 million on 10 banks for violating anti-money laundering, due diligence of customers and foreign exchange regulations during the month of August 2019.

    The central bank issued details on Friday about action taken by the SBP against banks in order to plug loopholes in the banking system.

    The SBP initiated to make public the action taken by the central bank from July 2019 against commercial banks for violating prevailing rules and regulations and amount of penalty imposed on such banks.

    In the latest release of enforcement measures by the SBP also included action against leading banks including Habib Bank Limited and MCB Bank etc.

    The highest amount of penalty of Rs320.08 million has been imposed on Habib Bank Limited followed by MCB Bank of Rs159.152 million, Dubai Islamic Bank of Rs77.97 million.

    Following of are the significant enforcement actions by SBP during August-2019.

    01. Dubai Islamic Bank dated August 01 & 02, 2019:

    Violations in the areas of AML/CFT, Asset Quality

    Monetary penalty of Rs77.974 million was imposed mainly on deficiencies in the areas of AML/CFT. Moreover the bank has been advised timelines to rectify the operational lapses and improve the control environment to avoid recurrence of such lapses/violations in future.

    02. Habib Bank Limited dated August 02 & 03, 2019:

    Violations in the areas of AML/CFT, Consumer Protection

    Monetary penalty of Rs320.08 million was imposed mainly on deficiencies in the areas of AML/CFT and erroneous deduction of service charges from customers. The bank has been advised timelines to bring improvements in its systems/controls to avoid recurrence of such lapses/violations in future.

    03. MCB Bank Limited dated August 03, 2019:

    Violations in the areas of AML/CFT, Asset Quality

    Monetary penalty of Rs159.152 million was imposed mainly on deficiencies in the areas of AML/CFT. The bank has been advised timelines to improve the KYC/CDD processes and integrate eKYC system with core banking system.

    04. Silkbank Limited dated August 03, 2019:

    Violations in the areas of AML/KYC, Asset Quality

    Monetary penalty of Rs53.879 million was imposed mainly on violations of non-surrendering of unclaimed deposits, non-classification of loans and adjustment lending. Moreover, the bank has been advised timelines to classify advances & create provision there against and conduct

    05. Bank Alfalah Limited dated August 03, 2019

    Violations in the areas of FX Operations

    Monetary penalty of Rs52.795 million was imposed mainly on violations of foreign exchange regulations such as restrictions to remit import advance payments, export documentation and non-submission of documents against advance payments.

    06. Allied Bank Limited dated August 03, 2019

    Violations in the areas of AML/KYC, Asset Quality

    Monetary penalty of Rs32.755 million was imposed on breach of various limits of Equity Investment/related party and deficiencies in customer due diligence process. The bank has been advised timelines to bring equity Investment and exposure to related party group within the prescribed limit and revise KYC/CDD process.

    07. Sindh Bank Limited dated August 03, 2019

    Violations in the areas of AML/KYC, Asset Quality, FX Operations

    Monetary penalty of Rs15.088 million was imposed mainly on deficiencies in customer due diligence practices, imprudent lending practices, non-classification of loans. Moreover, in view of the strategic deficiencies in Transaction monitoring system & name screening process, the bank has been advised an action plan/timelines for replacement of their existing TMS and acquiring of name screening solution.

    08. Summit Bank Limited dated August 03, 2019

    Violations in the areas of AML/KYC, Asset Quality

    Monetary penalty of Rs13.072 million was imposed mainly on deficiencies in customer due-diligence process, mis-utilization of loans and non classification of loans. The bank has been advised to timely update customer profiles & properly document the reasons of large value transactions.

    09. JS Bank Limited dated August 05, 2019

    Violations in the areas of AML/KYC, Asset Quality, Corporate Governance

    Monetary penalty of Rs70.307 million was imposed mainly on deficiencies in customer due-diligence process, mis-utilization and non classification of loans etc. The bank has been advised timelines to enhance its systems/process for customer risk profiling (CRP), transaction monitoring and identification of Politically Exposed Persons (PEPs).

    10. Habib Metropolitan Bank Limited dated August 19, 2019

    Violations in the areas of FX Operations

    Monetary penalty of Rs10 million was imposed mainly on a violation of foreign exchange regulations relating to splitting of the import advance payments into smaller transactions.

    The SBP imposed penalty of Rs184.64 million upon four commercial banks for violating laws related to Anti-Money Laundering (AML)/Know Your Customer (KYC) during the month of July 2019.

    The central bank on Thursday said that these penalty amount was imposed during the month of July 2019 against banks included: The Bank of Punjab; JS Bank Limited, Bank Al Habib Limited and Soneri Bank.

    The SBP imposed penalty of Rs13.072 million against The Bank of Punjab on July 15, 2019 for violating in areas of foreign exchange operations.

    In addition to penal action, the bank has been advised to improve its internal processes, the SBP said.

    The Bank of Punjab was again penalized with Rs16.119 million on July 18, 2019 for violating in areas of AML/KYC, unclaimed deposits.

    In addition to penal action, the bank has been advised for improvements in the areas of AML/KYC, the central bank added.

    The SBP penalized JS Bank Limited with penalty amount of Rs48.211 million on July 23, 2019 for violating in areas of AML/KYC.

    In addition to penal action, the bank has been advised to conduct a thorough review of relationship accounts, the SBP said.

    The SBP imposed penalty of Rs51.75 million upon Bank Al Habib Limited on July 25, 2019 for violating in areas of AML/KYC, FX Operations.

    In addition to penal action, the bank has been advised to update its systems and processes, and provide appropriate trainings to the concerned officials, the SBP said.

    The SBP imposed penalty of Rs55.48 million upon Soneri Bank Limited on July 25, 2019 for violating in areas of AML/KYC, Asset Quality, FX Operations.

    In addition to penal action, the SBP advised the bank to improve areas of AML/KYC and credit risk monitoring.

  • Overseas Pakistanis send $7.48 billion in four months

    Overseas Pakistanis send $7.48 billion in four months

    KARACHI: Overseas Pakistanis have remitted $7.48 billion during first four months of current fiscal year, which is 1.8 percent lower when compared with $7.62 billion in the corresponding period of the last fiscal year.

    During October 2019, the inflow of workers remittances amounted to US$ 2,000.80 million, which is 14.46 percent higher than September 2019 and 2.88 percent lower than October 2018.

    The country wise details for the month of October 2019 show that inflows from Saudi Arabia, UAE, USA, UK, GCC countries (including Bahrain, Kuwait, Qatar and Oman) and EU countries amounted to US$ 468.18 million, US$ 398.96 million, US$ 322.38 million, US$ 328.69 million, US$ 191.77 million and US$ 60.94 million respectively compared with the inflow of US$ 494.53 million, US$ 419.41 million, US$ 325.19 million, US$ 322.29 million, US$ 200.87 million and US$ 57.42 million respectively in October 2018. Remittances received from Malaysia, Norway, Switzerland, Australia, Canada, Japan and other countries during October 2019 amounted to US$ 229.88 million together as against US$ 240.57 million received in October 2018.

  • SBP amends instructions related to acquisition of services from abroad

    SBP amends instructions related to acquisition of services from abroad

    KARACHI: State Bank of Pakistan (SBP) on Tuesday issued amendment to instructions regarding acquisition of services from abroad by Pakistani firms.

    Referring Para 11, Chapter 14 of the Foreign Exchange Manual, 2019, the central bank said that prior permission of is required by the persons or firms in Pakistan who wish to acquire the services of agents abroad, for any purpose, other than export of goods from Pakistan, whether on regular basis or otherwise.

    In order to bring more clarity on the subject instructions and to facilitate the stakeholders, it has been decided to replace the aforesaid Para with following instructions:

    “Para 11 – Acquisition of Services from Abroad:

    Prior permission of Foreign Exchange Operations Department (FEOD), SBP-BSC, is required from foreign exchange perspective, by the firms or companies in Pakistan, intending to acquire any type of service in Pakistan from abroad for any purpose; excluding those services for which specific foreign exchange related instructions are issued by SBP.

    However, as an exception to the above para i, such services can be acquired from abroad without prior permission of FEOD, if total value, of a specific service to be acquired from abroad, does not exceed USD 10,000/- (or equivalent in other currencies), OR in case of recurring payments, the underlying service agreement/ letter of engagement, etc. is not more than five consecutive years and remittance(s) does not exceed USD 10,000/- (or equivalent in other currencies) for each year.

    The ADs are allowed to effect remittance in such cases, based on the documents mentioned at v below, after fulfilling their responsibilities mentioned at xiii below, and subject to meeting all other requirements.

    Moreover, acquisition of services of agents abroad for export of goods from Pakistan will not require prior permission of FEOD.

    All applications, seeking prior permission, acknowledgement of service agreement/ letter of engagement, etc. and designation of authorized dealer for effecting all related remittances in future, shall be submitted to the Director, FEOD, SBP-BSC, through an authorized dealer which the applicant wishes to be designated.

    Following documents will be submitted by the applicant to AD along with the application:

    Copy of draft service agreement/ letter of engagement, etc. covering all necessary clauses of names/ addresses of both parties, complete scope of services, duration, total contract price, terms of payment, schedule of remittances, milestones to achieve, arbitration, and likewise; provided that any late payment surcharge/ mark-up is not agreed therein,

    Documentary proof from the applicant for being active tax filer,

    Economic rationale justifying the acquisition of the required services from abroad, from applicant’s business perspective along with potential benefits for country,

    NOC or certificate from related regulatory body (if exist) for acquiring the requisite specific services from abroad, e.g. Pakistan Telecommunication Authority (PTA), Pakistan Engineering Council (PEC), Pakistan Software Export Board (PSEB), Pakistan Council of Architects & Town Planners (PCATP), etc.

    Justification i.e. valid and cogent arguments with related evidences, for acquiring the specific services from abroad, instead of acquiring from the local sources,

    In case the applicant is a financial institution or a bank or an authorized dealer itself, then the required documentation will also include copy of internal approval from the appropriate approving authority for the underlying arrangement of services from abroad, duly supported by the relevant regulatory framework (if applicable).
    AD will forward all the above mentioned documents to FEOD, along with its analysis, rationale/justification and specific recommendation supporting its customer’s (applicant’s) request, seeking prior permission for acquiring services from abroad and acknowledgement of the underlying agreement/ letter of engagement, etc.

    In the case where underlying service agreement/ letter of engagement, etc. requires payment (fully or partly) in advance:

    The amount of advance payment will be repatriated, if the provision of services is not initiated, within 120 days from the date of its remittance. An undertaking by the applicant shall also be submitted with the application, in this regard.

    The designated AD will be responsible to obtain Confirmation from applicant in the form of ‘Certificate of Commencement of Services’ and subsequently the ‘Certificate of Completion of Services acquired from abroad’ duly notarized on Stamp Paper of appropriate value as per the legal requirement.

    In case the provision of services is not initiated and the amount of advance payment is not repatriated, within 120 days (from the date of remittance of advance payment), OR the services are not completely rendered within the time period as stipulated in service agreement/ letter of engagement, etc.; the designated AD will report all such cases to FEOD, SBP-BSC on the 10th day of following month as per prescribed format (Appendix V-145). FEOD, SBP-BSC may initiate regulatory action against the remitter through Foreign Exchange Adjudication Department, SBP-BSC, under Foreign Exchange Regulations Act, 1947.

    The designated AD will ensure that no further remittances under the acknowledged service agreement/ letter of engagement, etc. will be effected until the issue of advance payment is resolved.

    In case prior permission is granted and the underlying service agreement/ letter of engagement, etc. is acknowledged, FEOD, SBP-BSC shall not be construed as a party thereto. Further, adherence to all laws, rules and regulations shall be responsibility of the parties to the service agreement/ letter of engagement, etc.

    Once prior permission is granted, the concerned AD is designated and underlying service agreement/ letter of engagement, etc. is acknowledged by FEOD, the designated AD may allow remittances or establish letter of credit available for payments, on production of beneficiary’s service invoices/bills duly certified by the applicant in Pakistan, in accordance with underlying acknowledged service agreement/ letter of engagement, etc. All the matters related to such letters of credit (types, opening, extension, amendment, time frame, method of payments, etc.) shall be dealt as per the relevant provisions of Chapter 13 (Imports) of the Foreign Exchange Manual, 2019.

    The designated AD will obtain copy of underlying acknowledged service agreement/ letter of engagement, etc. duly signed and stamped, before making any payment/ remittance in favor of the service provider.

    In case the agreement is not executed within 60 days, from the date of its acknowledgement, the Authorized Dealer will report its status to FEOD.

    Any subsequent amendment in the underlying acknowledged service agreement/ letter of engagement, etc. will require prior permission of FEOD.

    While processing the transaction, Authorized Dealer shall be responsible to:

    Take all possible measures to verify the bona fides of the applicant and genuineness of transaction and to exercise due diligence for all submissions of the applicant.

    Ensure compliance with AML/CFT laws, regulations and guidelines while effecting outward remittances, as per the service agreement/ letter of engagement, etc.

    Ensure that the payment, being made is in accordance with the underlying service agreement/ letter of engagement, etc.

    Ensure to obtain ‘Certificate of Completion of Services acquired from abroad’ duly notarized on the Stamp Paper of appropriate value as per the legal requirement, before effecting remittance. However, in case of advance payment, ‘Certificate of Commencement of Services’ shall be obtained within 120 days of its remittance, and ‘‘Certificate of Completion of Services’ shall be obtained that the services have been completely acquired within the time period stipulated under the service agreement/ letter of engagement, etc.

    Ensure repatriation of advance payment, in case the provision of services is not initiated within 120 days from the date of its remittance, or the services are not completely rendered within the time period as stipulated in the acknowledged service agreement/ letter of engagement, etc.

    Deduct all applicable taxes (if any) while effecting each outward remittance as per the service agreement/ letter of engagement, etc.

    Enforce each of the terms and conditions/ instructions of FEOD, SBP-BSC including follow-up, where applicable.

    Maintain applicant wise documents, including record of remittance(s) effected by ADs.

    Incomplete requests shall not be considered.”

    Instructions of this Circular shall come into force with immediate effect. However, for the service agreements/ letter of engagement, etc., which have already been signed, the same will be required to be acknowledged at FEOD, SBP-BSC, within 6 months (from the date of this Circular) or before the remittance/ payment becomes due, thereunder; whichever is earlier.

    The banks have been advised to bring the same to the notice of all their constituents, ensuring meticulous compliance of the above instructions.

  • SBP facilitates manufacturers in import advance payment

    SBP facilitates manufacturers in import advance payment

    KARACHI: State Bank of Pakistan (SBP) has facilitated manufacturing sector in advance import payment by making changes to regulatory regime.

    The SBP on Tuesday invited attention of banks to instructions issued vide EPD Circular Letter No. 01 of 2019 dated January 01, 2019 whereby import advance payment up to USD 10,000 per invoice was allowed for importers cum exporters for import of raw materials and spare parts for their own use only.

    In order to facilitate the manufacturing sector, the above instructions have been modified.

    “Henceforth, Authorized Dealers are allowed to effect advance payment up to USD 10,000, or equivalent thereof, per invoice on behalf of manufacturing concerns for import of raw materials and spare parts for their own use only.”

    Authorized Dealers are advised to ensure meticulous compliance of above and other applicable regulatory instructions including those of Para 6 Chapter 2 of FE Manual, which require Authorized Dealers, among others, to satisfy themselves that the transactions will not involve and is not designed for the purpose of contravention or evasion of any of the provisions of the Foreign Exchange Regulations Act, 1947 or of any rules, directions or orders made thereunder.

  • Pakistan’s foreign exchange reserves increase to $15.518 billion

    Pakistan’s foreign exchange reserves increase to $15.518 billion

    KARACHI: The liquid foreign exchange reserves of Pakistan have increased by $428 million to $15.518 billion by week ended November 01, 2019, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves were at $15.089 billion by week ended October 25, 2019.

    The reserves held by SBP increased by $443 million to $8.357 billion by week ended November 01, 2019 as compared with $7.914 billion in the preceding week.

    The reserves held by commercial banks decreased by $15 million to $7.16 billion by week ended November 01, 2019 as compared with $7.715 billion a week ago.

  • FBR to get real-time data of financial transactions

    FBR to get real-time data of financial transactions

    ISLAMABAD: Federal Board of Revenue (FBR) will get real-time data of financial transactions of the banking system by end of this year.

    According to the minutes of the meeting chaired by the prime minister last month, it is decided that Ministry of Law and Justice in consultation with State Bank of Pakistan (SBP) to propose necessary amendments in banking laws/ regulations for ensuring real-time data sharing of financial transactions with the Federal Board of Revenue (FBR).

    The law division and SBP have been tasked to finalize the proposal by December 31, 2019.

    The meeting considered the adoption of Computerized National Identity Card (CNIC) as common identifier.

    The meeting discussed that data consolidation and documentation of economy is a key responsibility of all public and private sector organizations such as financial institutions, utility companies etc.

    CNIC, as common identifier needs to be adopted by all public and private sector entities for documentation of economy and real time sharing of transactions data with the FBR.

    In the same context commercial utility connections have still not been brought into the tax net with rampant tax evasion in vogue.

    The meeting decided that CNIC would be adopted as common identifier by June 30, 2020 akin to social security number in western countries for all business transactions.

    It is also decided that the Ministry of Law and Justice in consultation with SBP to propose necessary amendments in Banking Laws / Regulations for ensuring real-time data sharing of financial transactions with the FBR.

    The meeting decided that by November 30, 2019 the commercial electricity and gas connections must be brought into the tax net immediately.

    The FBR has been given task to bring all commercial electricity and gas connections into the tax net.

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  • SBP suggests FBR to shift tax payments to electronic channels

    SBP suggests FBR to shift tax payments to electronic channels

    KARACHI: State Bank of Pakistan (SBP) has recommended the Federal Board of Revenue (FBR) to shift the collection of tax payments to electronic channels and enable taxpayers to use transaction accounts provided by any Payment Service Provider (PSP) to pay their taxes.

    The SBP suggested this in its National Payment System Strategy (NPSS) launched on Friday.

    The SBP said that private business entities are responsible for paying the vast majority of tax payments to the government.

    The process for filing tax returns has been automated and appears to be working relatively well.

    The process for making tax payments is neither automated nor electronic. Further, as mentioned earlier in 2018, SBP worked with FBR, Pakistan Customs and the government to leverage on the interface developed by Pakistan Revenue Automation Private Limited (PRAL).

    The FBR is urged to give high priority to shifting the collection of tax payments to electronic channels and enable tax payers to use transaction accounts provided by any regulated PSP to pay their taxes.

    Specific comment and recommendation is as follows:

    Shift the collection of tax payments to electronic channels and enable tax payers to use any transaction account provided by any regulated PSP to pay their taxes.

    The SBP said that two types of taxes — sales and income taxes — account for the bulk of the revenue collected by the Pakistani government, 70 percent of the total. The sales tax, which is a value-added tax (VAT), is the top revenue generator.

    The income tax, also known as the direct tax, generates nearly as much in tax revenue as the sales tax. Notably, at this point, virtually all individual income tax payers are employees of firms with five or more employees, whose employers withhold and submit their (the employees’) tax payments on their behalf.

    The FBR is responsible for the collection, processing and recording of virtually all tax revenue collected in the country. The other is the NBP, which together with the SBP, are the only entities in Pakistan that can collect tax payments from the public on the behalf of the federal government.

    PRAL has aggressively pursued the modernization of tax collection starting with the automation of tax processing and, most recently, the establishment of an efficient and user-friendly means for individuals and entities to file their taxes electronically. Last year SBP worked with FBR, Pakistan Customs and GoP to leverage on the interface developed by PRAL. Taxpayers can electronically generate PSID of the goods declaration through the WeBOC system of Pakistan Customs.

    Non-Tax Revenue Payments to the Government– B2G & P2G

    However, other non-tax collections for both federal and provincial governments of non-tax revenue (including fees and fines) is the most decentralized and varied of all the revenue collection processes. Each government agency or entity is on its own when devising means to transition from cash to electronic collection of the payment of fines and fees, and manual to electronic recording and reconciliation of the payments.

    Government transition to and use of electronic means to disburse and collect funds serves a variety of purposes. However, the use of electronic payments by the government is a necessary but not a sufficient condition to achieve these positive outcomes.

    The achievement of the efficiency, cost and transparency gains to the government depends, in part, on the degree of cooperation and coordination of approaches across government agencies and levels of government, and the degree to which government payment processing is fully automated and integrated with the national payment system.

    Factors outside the control of the government payment management authorities also can constrain or support the achievement of the potential gains to the government.

    The Government of Pakistan has made significant progress in transition to electronic payments, however, several additional measures could be taken to enhance the benefits of the transition.
    Recommendations

    • Foster adoption of electronic payments by all government entities: Encourage and support an acceleration of transition to electronic payments by all government entities at all levels of government

    • Provide/offer technical assistance to government entities: Support the transition to electronic payments throughout the government, including exempted government agencies and other levels of government, by providing technical assistance.

    • Address infrastructure weakness: Fill the gap in the nation’s payment infrastructure by adding ACH functionality

    • Consider the potential role of shared government payment platform(s): Explore the possibility of developing a shared government payment platform(s) to achieve efficiency across all government agencies and levels of government, and provide a range of options with regards to means of payment collection and distribution

    • Enhance quality and reach of payment points of access: Explore options to expand the availability and enhance the reliability of payment access points to facilitate the use of transaction accounts made available to G2P recipients and electronic P2G and B2G payments

    • Focus on payment product design: Prioritize payment product design when developing mechanisms to deliver or collect payments from individuals and business entities

    • Offer payment options: Strive to offer individuals and business entities flexibility and choice with regards to the transaction account and payment instrument they will use to receive payments from and/or make payments to the government

    • Avoid use of single purpose accounts and instruments: When necessary offer a payment instrument coupled with a government payment program, avoid single purpose instruments and those that offer only limited interoperability with other retail payment instruments and services

    Detailed Recommendations by Payment Program Type

    Government Salary Payments

    The key strength of government salary payment programs is success of the AGPR in transitioning the employees whose salaries they pay via electronic payments; the weaknesses include the relative lack of progress in transitioning most of the government employees, all of whom are paid via other government salary payment programs. Specific comments and recommendation are as follows:

    • Consider allowing government / SBP employees to deposit their salaries directly into Branchless Banking accounts

    • The SBP should address the absence of automated clearinghouse (ACH) functionality in the financial system as soon as possible

    • The AGPR may want to consider allowing employees to deposit their salaries directly into a Branchless Banking account

    • Other exempted federal government agencies and provincial / district / local governments could be strongly encouraged to transition to electronic salary payments

    • Collaboration across the government on transition to electronic salary payments could both encourage and support the transition of a broader range of government salary payment

    • Greater emphasis on the accessibility of access points, their convenience and reliability will be important to efforts to foster the use of the transaction accounts to which salaries are deposited

    Government Employee Pension Payments

    The transition of government pension payments to electronic channels lags well behind that of salary payments. AGPR continues to pay pension payments in cash and require that pensioners use NBP as their pension disbursement agent. Government pensions paid by other government entities, such as the military, and by other levels of government, such as the provincial governments, are no further along in pension payments to electronic channels then they are in transitioning salary payments. Specific comments and recommendation are as follows:

    • Collaborate within the government to identify critical payment instruments and account features for government pensioners

    • Develop and provide guidance on protecting pensioners from financial fraud and abuse associated with their pension payments, including payment stream lending

    Social Benefit Payments

    Both BISP and EOBI, are now in the process of transitioning to a new electronic payment program. However, neither program appears to include design elements to leverage the payment programs to foster financial inclusion and, in specific, enhance access and use of transaction accounts.

    Together, these two programs – the BISP and EOBI — account for G2P payments to more recipients than all the other G2P programs combined. In addition, these social benefit programs reach some of the poorest residents of Pakistan. As such, they can play an important role in advancing inclusion in the country. In this regard, it is notable that transaction account ownership and use is considered a critical step toward broader financial inclusion. Specific comments and recommendation are as follows:

    • Consider means to mitigate the impact of biometric payment cards and the related need to upgrade ATMs and POS devices with fingerprint readers, and provide convenient locations where BISP recipients can conduct electronic payments with their BISP cards

    • Consider means to strengthen the impact of electronic social benefit payments on financial inclusion, by focusing on the design features of the transaction accounts and payment instruments made available to the recipients via the payment program

    • Consider allowing recipients to choose from amongst the PSPs, the type of transaction account they would like to use to receive their payment

    • Collaboration across government agencies and PPMs could reduce the cost and enhance the quality of each social benefit payment program

    Government to Business Payments

    Paper instruments, cash and cheques, remain the primary means of payment by the government to business entities. The absence of ACH functionality in Pakistan is believed to be the primary hurdle to shifting these payments to electronic instruments, including direct deposit. Specific comments and recommendation are as follows:

    • Once ACH functionality is available, support efforts of government agencies and levels of government to shift payments to business entities to electronic channels

    • Encourage government agencies/levels of government to adopt electronic G2B payment processing systems that enable business entities to choose the transaction account to which they want their funds deposited

    Government Tax Revenue Collection

    Private business entities are responsible for paying the vast majority of tax payments to the government. The process for filing tax returns has been automated and appears to be working relatively well. The process for making tax payments is neither automated nor electronic. Further, as mentioned earlier in 2018, SBP worked with FBR, Pakistan Customs and GoP to leverage on the interface developed by PRAL.

    The FBR is urged to give high priority to shifting the collection of tax payments to electronic channels and enable tax payers to use transaction accounts provided by any regulated PSP to pay their taxes. Specific comment and recommendation is as follows:

    • Shift the collection of tax payments to electronic channels and enable tax payers to use any transaction account provided by any regulated PSP to pay their taxes.

    Government Non-Tax Revenue Collection

    Non-tax revenues are collected by a wide variety of government entities. Many of these entities are likely to lack the technical knowledge, staff resources, and payment policy expertise to develop or select payment collection mechanisms that are efficient, meet their needs and meet the needs of those making the payments. Specific comment and recommendation is as follows:

    • Explore means to provide technical assistance to government entities that collect non-tax payments from the public and business entities

    • Foster collaboration across the relevant government entities to facilitate the efforts of each to develop appropriate payment collection mechanisms

    • Consider offering workshops to

  • SBP issues regulations for banks to open accounts of retail merchants

    SBP issues regulations for banks to open accounts of retail merchants

    KARACHI: State Bank of Pakistan (SBP) on Friday launched rules and regulations for allowing banks to open bank accounts for retail merchants on soft conditions.

    According to objectives of regulations issued by the central bank, to outline minimum due diligence requirements for on-boarding merchants based on simplified due diligence process.

    Further, to facilitate in on-boarding merchants at various financial services access points and channels. To promote digital collection of payments from the sale of goods and services.

    The SBP said that these regulations are applicable on Banks/MFBs, which may on-board individuals and self-employed merchants as per their institutional risk assessment framework.

    The SBP said that banks/Microfinance Banks (MFBs) shall formulate merchant on-boarding policy in line with these regulations and duly approved the same from their board.

    These regulations are not applicable on existing onboarding process of full-fledged merchants and Banks/MFBs shall onboard full-fledged merchants as per applicable laws and regulations.

    The SBP said that banks/MFBs may offer these merchants accounts as Current, Savings or in any other remunerative category in Pak Rupees to individual and self-employed merchants only.

    The banks/MFBs shall ensure that one CNIC holder can open only one merchant Account in a
    Bank/MFB. The Banks/MFBs shall ensure that Merchant Accounts are only used for digital collection of payments against the provision of legitimate goods and services.

    In order to open on-board merchant accounts, banks/MFBs shall collect following information in manual or digital form from merchants at the time of account opening:

    i. Name of the merchant
    ii. Valid CNIC number of the merchant
    iii. Mobile number of the merchant
    iv. Any other two information fields that are not present on CNIC such as place of birth and mother’s maiden name etc.
    v. Address
    vi. Merchant Type (by Profession)
    vii. Expected per month turnover

    Banks/MFBs shall activate Merchant Accounts after fulfilling following KYC/CDD requirements of merchant:

    i. Perform Biometric Verification or Verisys from NADRA. In case of NADRA Verisys, Biometric Verification shall be mandatory at the time of first cash out or within three months of opening of these accounts, whichever is earlier. These accounts shall be deactivated if Biometric Verification is not carried out within three months of opening of accounts.

    ii. Ensure Pre-screening of merchants’ particulars against lists of entities and individuals designated by the United Nations Security Council (UNSC), lists of entities and individuals proscribed under the Schedule-I and Schedule IV of the Anti-Terrorism Act, 1997, respectively, and any other applicable sanctions lists.

    iii. Conduct Call Back Confirmation or generate One-Time Password (OTP) for verification from merchants.

    iv. Carry out full or Enhanced Due Diligence of merchant as per Banks/MFBs own risk assessment, in light of applicable laws and regulations (if applicable).

    v. Acceptance of terms and conditions of account provided in English and/or Urdu language by the merchant.

    The SBP also notified following transactions limits for the accounts:

    a) Banks/MFBs shall place following maximum transaction limits on merchant accounts:

    i. Rs. 50,000 per month without Biometric Verification

    ii. Rs. 500,000 per month with Biometric Verification

    b) The above Transaction limits will be separately applied on Debit and Credit transactions.

    c) Banks/MFBs may place lower transaction limits keeping in view their institutional risk assessment and high-risk geographical locations of merchants.

    Merchant Account Balance

    a) Banks/MFBs shall ensure that merchant accounts balance shall not exceed the following limits at any point of time:

    i. Rs. 50,000 without Biometric Verification

    ii. Rs. 500,000 with Biometric Verification

  • Pakistan’s forex weekly reserves decrease

    Pakistan’s forex weekly reserves decrease

    KARACHI: Pakistan’s total liquid foreign exchange reserves decrease by $96 million to $15.089 billion by week ended October 25, 2019 as compared with $15.186 billion a week ago, State Bank of Pakistan (SBP) said on Thursday.

    The reserves held by the SBP increased by $22 million to $7.914 billion by week ended October 25, 2019 as compared with $7.892 billion a week ago.

    The reserves held by commercial banks, however, fell by 118 million to $7.175 billion by week ended October 25, 2019 as compared with $7.293 billion a week ago.