Opening & Supervision Of Accounts

1. Opening & supervision of Accounts
Mandatory compliance
of
Know Your Customer. KYC
SBP Prudential Regulations
for
Commercial Banks

2. Opening & supervision of Accounts
What is Money Laundering?
The process of changing the identity of illegally
obtained money so that it appears to have
originated from a legitimate source.

3. Opening & supervision of Accounts
Harmful effects of Money Laundering
Macroeconomic Impact :
Contamination of legal financial transactions.
Sociopolitical impact :
Organized crime infiltrates financial institution , acquires
control of large economic sectors by bribing bureaucrats ,
indeed governments
Crime ownership of organizations corrupts business practices
ethics and social fabrics.
Ultimately they influence the democratic process .
They influence corrupt political groups to de- stabilize
governments that try to check crime .

4. Volume of Laundered Money :
International Monetary Fund ( I.M.F ) has estimated
that aggregate size of money laundering worldwide
somewhere between two and five percent of worlds
GDP ( based on 1996 statistics ).
It is also estimated that about 2 billion pounds are
laundered in London banks and over 500 billions
dollars are laundered in US banks in a year.

5. Opening & supervision of Accounts
Current Classification Of Countries:
The US State Department has published a list of countries classifying them as
High risk ( primary concern),
Medium high and Medium risk , which is as follow :
High Risk
Nigeria
Russia
Turkey
Medium High
India
Israel
Pakistan
U.A.E
Medium Risk
Bahrain
Bulgaria
Czech Republic
Hungry
South Africa
Kuwait
Lebanon
Poland

6. Opening & supervision of Accounts
The Process Money Laundering ?
PLACEMENT
LAYERING
INTEGRATION
Objective:
To Disguise the original ownership, retain
control and legitimize funds.

7. Opening & supervision of Accounts
PLACEMENT
The process of introduction illicit funds from
crime or
drug trafficking
into the
financial system.
(through opening bank accounts)

8. Opening & supervision of Accounts
LAYERING
The process by which the illicit money is
separated from its original (illegal) source
by
the creation of complex series of transfers
designed to hide
the audit trail and provide a degree
of anonymity.

9. Opening & supervision of Accounts
INTEGRATION
Making criminally obtained money
appear legitimate.
To succeed the integration process must
give the laundered proceeds the
appearance of normal business funds
as they re-enter the economy.

10. Opening & supervision of Accounts
The strategy of criminal organizations is to manipulate their
illicit proceeds, usually through the legitimate financial
sector in such a manner as to make those proceeds appear
to have come from a legitimate source.
Thus Money Laundering is a vital component of all financially
motivated crime. More importantly for the international
community, since obfuscating any evidentiary paper or
money trail is a precondition to successful Money
Laundering, such activity will invariably involves trans
border operations including many border crossings in the
course of a single laundry transactions.

11. Opening & supervision of Accounts
Combating / Checks on Money Laundering by
Supernational & Regional Organizations:
UNITED NATIONS
FATF: The Financial Action Task Force
GCC FATF
An Inter-Government Body whose purpose/motive is:
The development and promotion of politics that are
designed to combat money laundering.

12. Opening & supervision of Accounts
FATF MEMBER COUNTRIES
Argentina
Greece
Australia
Hong Kong
Austria
China
Belgium
Iceland
Brazil
Ireland
Canada
Italy
Denmark
Japan
Finland
Luxembourg
France
Mexico
Germany
Netherlands
of America
Newzealand
Norway
Portugal
Singapore
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States

13. Opening & supervision of Accounts
The following modes, inter-alia promote Money Laundering in Pakistan:
Hundi / Hawala
Investment in Real Estate
Smuggling
Shares
Gold/Silver
Baynamee Accounts
Under / Over Invoicing
Kidnapping / Extortion
Carjacking
Drug & Human Trafficking

14. Opening & supervision of Accounts
Anti money laundering steps in
Pakistan

15. Opening & supervision of Accounts
Why is it Important to Fight
Money Laundering?
Reduce the Incentive to Commit Crime and
make the methods of financing more crime
harder.
Avoid Reputational, Legal and Financial
Damage and Risks to Banks and Other
Intermediaries.

16. Opening & supervision of Accounts
SBP Prudential Regulation for opening & supervision of
New & existing accounts by commercial banks
The State bank of Pakistan has taken effective
measures to control and prevent banking
institutions from becoming a conduit for
money laundering & issued regulations
for
Mandatory compliance by
commercial banks

17. Opening & supervision of Accounts
S.B.P Prudential Regulation XI
“ Banks shall make all reasonable efforts to
determine the true identity of every would be
account holder .
Towards this end , banks shall institute
effective procedure and methods for
obtaining proper identification from new
customer .”

18. SBP Prudential Regulation XII
Before extending their services , banks shall make reasonable
efforts to determine the
True identity of their customers .
Particular care should be taken to identity the ownership of
accounts , especially in respect of those using
lockers / safe – custody facilities .
Effective procedure should be instituted for obtaining and
verifying identification of new customers .
An explicit policy should be devised to ensure that significant
transaction are not conducted with customers who fail to
provide satisfactory evidence of their identity .

19. Prudential Regulation XII
Specific procedure should be established for
ascertaining a customer’s
Status and source(s) of earnings ,
for
monitoring of accounts on a regular basis , and
for
checking identities and bona fides of remitters and
beneficiaries , for retaining internal record of
transactions for future reference.

20. Prudential Regulation XI
Transactions, which are out of character with
normal operations in the account involving
usually large deposits , withdrawals or
transfers should be viewed with suspicion
and properly investigated .

21. Opening & supervision of Accounts
The bank will determine the true identity of the customers to
ensure that banking business is conducted in conformity with
high ethical standards and adhere to banking laws and
regulations and will seek to determine any client relationship
where the client’s conduct gives the Bank reasonable cause to
believe or suspect involves in illegal activities .

Extreme caution will be exercised to minimized the risk of
bank services being abused for the purpose of laundering funds
associated with drug and gun trafficking terrorism and other
crimes/ illegal trades .

22. Opening & supervision of Accounts
Individual Accounts
Documents / papers to be obtained
Attested photo copy of NIC of the customer
(copy should be compared with original card ).
In case of salaried person
attested copy of his / her service card ,
or
any other acceptable evidence of service .
but not limited to certificate of employer .

23. Opening & supervision of Accounts
Illiterate Persons
Required documents / papers
A passport size photograph of new account holder
besides taking his right and left thumb impression
on specimen signature card
alongwith
the Account opening form

24. Opening & supervision of Accounts
Partnership Accounts
Required documents / papers
Partners NIC’s attested copies.
Copy of registered partnership deed duly signed.
Attested copy of registration certificate ,Registrar of Firms
Authority letter , in original in favor of person authorize to
operate the account

25. Opening & supervision of Accounts
Joint stock companies
Required documents / papers
Certified copies of :
Resolution of board of directors for opening of account specifying the
person(s) authorize to operate the company account .
Memorandum of article of association.
Certificate of incorporation .
Certificate of commencement of business.
Attested photo copies of identity cards of all directors .

26. Opening & supervision of Accounts
Accounts of Executors/Administrators
Required documents / papers
Attested copies of NIC of executors /Administrators
Certified copies of letter of Administration or Probate.

27. Opening & supervision of Accounts
Trusts Accounts
Required documents / papers
Attested photocopy of certificate of registration /
Attested copies of NIC of all trusties .
Certified copies of instrument of Trust

28. Opening & supervision of Accounts
Account in name of Association Clubs , and Societies
Required documents / papers
Certified copies of :
Certificate of registration
By –laws rules and regulations
Resolution of board of Governing Body /Executive committee for opening
of account specifying the person(s) authorize to operate the company
account .
Undertaking signed by all the authorized persons on behalf of he institution
stating that when any change take place in the persons authorize to
operate
on the account , the banker will be informed immediately.

29. Opening & supervision of Accounts
SBP Prudential Regulation No. XIII
All terms and conditions of operation of an account shall be
duly made known to the opener of account at the time of
opening an account .
The terms and conditions must be elaborately documented
in account opening form / application and must be signed by
the prospective depositor/ account holder to signify having
been read and understood .

30. Opening & supervision of Accounts

Introduction
SBP Prudential Regulation xi
Customer of same branch & Customer of same bank but another
branch
After proper verification of signatures
Customer of other banks
After complete verification of signatures and other particulars from
that bank
Introduction by employees of bank is also acceptable

31. Opening & supervision of Accounts
SBP Prudential Regulation xi c
Satisfactory evidence from branch manager should
be placed by banks in respect of
True identity of beneficial owners of all accounts
opened .
Real party in interest or controlling person / entity of
all accounts

32. Opening & supervision of Accounts
SBP Prudential Regulation xi d
Customer due diligence is an on going process for
prudent banking practices there for
Update customer information and records, if any at
reasonable intervals .
Monitor and check unusually large cash
transactions , especially those which are out of
character /inconsistent with history , pattern etc.

33. Opening & supervision of Accounts
SBP Prudential Regulation xi e
Enhance due diligence should be applied
To high - risk customers such as those belonging to countries
where KYC and money laundering regulations are lax , those
with links to offshore tax havens , customer in cash based
business in high value items , and high net worth customers
with no clearly identified source of income etc .
When the Customer has been refused banking facilities by
other banks .