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Aml CFT Laws
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terrorist financing captured the concern of the United Nations. An appropriate and strong
message was sent out by the United Nations and an evolving strategy was formulated.
Even before 9/11, the United Nations had embodied the money laundering aspect in its 1988
United Nations convention against the Illicit Traffic in Narcotics Drugs and Psychotropic
Substances, the United Nations Convention against Transnational Organized Crime and
United Nations Convention against Corruption and the International Convention for the
Suppression of the Financing of Terrorism.
After 9/11, enough evidence was available that established the links between terrorism,
transnational organized crime, the international drug trade and money laundering. In
September 2001, the United Nations Security Council unanimously adopted wide-ranging
anti-terrorism Resolution No 1373. This resolution in essence is the backbone of international
response to counter terrorism and terrorist financing. Another important international
development in combating money laundering was the establishment of Financial Action Task
Force (FATF) in the year 1989. This is an inter-governmental policy making body, comprised
of over 30 countries, that has a ministerial mandate to establish international standards for
combating money laundering and terrorist financing.
The primary functions of FATF are: It sets international standards to combat money
laundering and terrorist financing; assessing and monitoring compliance with the FATF
standards; conducting typologies studies of money laundering and terrorist financing
methods, trends and techniques; responding to new and emerging threats, such as
proliferation financing.
Initially FATF had given 40 recommendations to counter money laundering. After 9/11, FATF
gave another 9 recommendation to counter terrorist financing. Collectively these
recommendations prescribed the measures to be adopted by the member states and other
jurisdiction to counter money laundering and terrorist financing. Some of these key measures
include: Introduction of legal and regulatory regimes to check money laundering; following
Customer Due Diligence (CDC) /Know Your Customer (KYC); proper record keeping;
reporting of suspicious transactions; establishment of competent authorities, their powers and
resources; freezing of funds and confiscation of terrorist assets; and establishment of asset
forfeiture fund.
Over 180 jurisdictions including Pakistan have joined FATF or an FATF style regional body
to implement the FATF standards and having their anti-money laundering/counter terrorist
financing (CFT) systems assessed. Some of these regional bodies are: Asia Pacific Group on
Money Laundering (Pakistan is a member of this group); Caribbean Financial Action Task
Force; Eurasian Group; Eastern and Southern Africa Anti Money Laundering Group; The
Council of Europe Committee of Experts on the Evaluation of Anti Money Laundering
Measures and the Financing of Terrorism; The Financial Action Task Force on Money
Laundering in South America; Inter-Governmental Action Group against money laundering
in West Africa; Middle East and North Africa Financial Action task Force.
Anti-Money Laundering Act, 2010 is one of the measures taken by the government of
Pakistan to fulfill its international obligations. This law has provided the basic legal
framework to counter money laundering and terrorist financing. The legal structure is similar
to the one prevailing in different countries. A powerful Financial Monitoring Unit (FMU) has
been established under section 6 of the Act. National Executive Committee to combat money
laundering has been established under section 5 of the Act. This is a high powered body that
comprises of four federal ministers, Governor State Bank of Pakistan, Chairman Securities
and Exchange Commission of Pakistan and Chairman National Accountability Bureau.
The role of this committee is to develop a national strategy to fight money laundering,
determine offences that may be considered as predicate offences, making recommendations
to the federal government for effective implementation of the Act, issue directions to the
agencies involved in the implementation and administration of the Act and take measures for
development of investigating agencies.
Offences under the Act have been made non-bailable and non-cognizable. Provisions have
been made in sections 26 and 29 of the Act for seeking mutual assistance of other states as
well as for reciprocal arrangements for processes and assistance for transfer of accused
persons. Mandatory disclosure requirements have been placed on the directors, officers,
employees and agents of reporting entities, financial institutions and non-financial business
or profession.
The writer is a lawyer
faisalzamanadv@yahoo.com
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Any investigation office who exercises powers under the Act but acts
without the permission of the court is liable to punishment under the
Act.33 For the purposes of this act, NAB, FIA, ANF or any other law
enforcement agency specified by the Federal Government are the
investigation and prosecution agencies.33A
Tipping of and confidentiality requirements have been defined in the
law.34 The offences falling within the purview of the Act have been
defined.35 The Act is not
applicable in relation to fiscal offences36 except, import prohibitions
act of smuggling, mis-declarations, and fiscal frauds under the
Customs Act, 1969.36A
Specified offences falling within the scope of Pakistan Panel Code,
1860, The Arms Act, 1878, The foreigners Act, 1946, The Copyright
Ordinance, 1965, Securities and Exchange Act, 1969, The Emigration
Ordinance, 1979, The Control of Narcotic Act, 1997, National
Accountability Ordinance 1999, and The Registered Designs
Ordinance, 2000 have been made predicate offences under the Act. 37
The contravention of the provisions of AMLA, if committed by a
company or person engaged with the company who, at the time the
contravention was made, was associated with the company, shall be
deemed to be guilty and shall be punished. 38
For making or submitting STR, and CTR, FMU is the only designated
agency.39 The Director General of FMU can direct an NFBP to submit
STRs or CTRs.40 The
Director General FMU is authorized to freeze a suspected property
on the compliant of a financial institution or NFBP for a period of 15
days.41
The following are examples of potential suspicious transactions for
both money laundering and terrorist financing. The lists of situations
given below are intended mainly as a means of highlighting the basic
ways in which money may be laundered.42
1.
Transactions which do not make economic sense.43
2.
Transactions inconsistent with the customers business. 44
3.
Transactions involving large amounts of cash.45
4.
Transactions involving structuring to avoid reporting or
identification requirement. Transactions involving forcing
Associates
Partner Azimuddin
Karachi
Pakistan).
______________________________________________________
_________
*
1.
2.
LL.B (Punjab) MPA (USC) LL.M (TJSL) JSD (CAN) (TJSL), Managing Partner
Azimuddin Law Associates Karachi Pakistan.
See Notification No. SRO 83 (KE) 2007 dated 4.10.2007: The text of the aforesaid
Notification reads as under:In exercise of the powers conferred by sub-section (3) of section 1 of the Anti-Money
Laundering Ordinance 2007 (XLV of 2007), the Federal Government is pleased to
appoint the 4th day of October, 2007, as the date on which the said Ordinance shall
come into force.
AMLO was issued as a presidential ordinance in exercise of the extraordinary powers
assumed by the president pursuant to the Proclamation of Emergency of 3 rd November
2007. According to Article 89 of the Constitution of Pakistan 1973, all ordinances must be
introduced in the National Assembly as a bill and are automatically repealed at the
expiration of a period of four months from their promulgation. By virtue of the Constitution
(Amendment) Order (2007), the President amended the Constitution and Article 270AAA
was introduced. This amendment validated all the ordinances issued under the
Proclamation of Emergency notwithstanding anything contained in the Constitution. It
also provided that such ordinances shall continue in force until altered or repealed or
amended by the competent authority. The Constitutionality of the Constitution
(Amendment) Order 2007 was challenged and the Supreme Court in the case of Tika
Iqbal Muhammad Khan vs General Pervez Musharraf, PLD 2008 SC 178 upheld the
constitutionality of the Order including Article 270AAA. However, in the case of Sind High
Court Bar Association v Federation of Pakistan: PLD 2009 SC 879, the judgment given in
Tika Iqbal Muhammad Khans case was declared unconstitutional as a result whereof
Article 270AAA stood deleted from the Constitution and consequently the Ordinance
issued by the then Government of Pakistan were declared to remain operative within the
framework of Article 89 and 128 of the Constitution, i.e; the Ordinance were to be
validated by the parliament within the specified period. However, keeping in view the
extraordinary circumstances, these laws were given a temporary lease of life up to
31.7.2009 by the Supreme Court through its judgment passed in the Sind High Court Bar
Association supra, and there after the government was directed to get these laws
validated from the parliament within a period of 4 months. As a consequence Constitution
18th Amendment Act, 2010 was passed which authenticated actions of President Pervez
Musharraf taken during 12-10-1999 through 31-10-2003 under Article 270AA(2) of the
Constitution, all subsequent law/ordinances did lost their authority after 31-11-2009.
Consequently, the government enacted the Anti-Money Laundering Act, 2010 and the
new law came into force with effect from March 27, 2010.
3.
The Anti-Money Laundering Act, 2010 came into force on March 27, 2010, see
Notification no. F9(4)/2010-Leqis dated 27-3-210.
4.
See Notification No. SRO 02 (KE) 2009. Under Section 46 of AMLA, the existing rules
have been validated.
5.
Section 2(1)(a), the Anti-Money Laundering Act, 2010: "Attachment" means
prohibition of transfer, conversion, disposition or movement of property by an order
issued under section 8.
6.
Id. Section 2(1)(c). "CTR" means report on currency transactions exceeding
such amount as may be specified by the National Executive Committee by notification in the
official gazette.
7.
Id. See Section 2(1)(f), "financial institution" includes any institution carrying. on any
one or more of the following activities, namely:i) acceptance of deposits and other repayable funds ,from the public;
ii) lending in whatsoever form;
iii) financial leasing;
iv) money or value transfer;
v) issuing and managing means of payments including but not limited to credit and debit
cards, cheques, travelers cheques, money orders. bank drafts and electronic money;
vi) financial guarantees and commitments;
vii) trading in(a) money market instruments;
(b) foreign exchange;
(c) exchange, interest rate and index instruments;
(d) transferable securities; and
(e) commodity futures trading;
viii) participation in shares issues and the provision of services related to such issues;
ix) individual and collective portfolio management;
x) safekeeping and administration of cash or liquid securities on behalf of other persons;
xi) investing, administering or managing funds or money on behalf of other persons;
xii) insurance business transactions;
xiii) money and currency changing; and
xiv) carrying out business as intermediary.
8.
Id. See Section 2(1)(i). "Foreign serious offence" means an offence i.
against the law of a foreign State stated in a certificate issued by, or on behalf of,
the government of that foreign State; and
ii.
which, had it occurred in Pakistan, would have constituted a predicate offence.
9.
Id. See Section 2(1)(h). "FMU" means the Financial Monitoring Unit established under
section 6.
10.
11.
12.
13.
14.
15.
16.
17.
Id. See Section 2(1)(n). "Non-financial business and professions means real estate
agents, jewelers, dealers in precious metals, precious stones, lawyers, notaries and other
legal professionals, accountants, trust and company service providers and such other
non-financial businesses and professions as may be notified by the Federal Government.
Id. See Section 2(1)(0). "Offence of money laundering" has the meaning as defined in
section 3.
Id. See Section 2(1)(p). "Person" means an individual, a firm, an entity, an association
or a body of individuals, whether incorporated or not, a company and every other juridical
person.
Id. See Section 2(1)(q). "Proceeds of crime" means any property derived or obtained
directly or indirectly by" any person from the commission of a predicate offence or a
foreign serious offence.
Id. See Section 2(1)(r). "Property" means property or assets of any description, whether
corporeal or incorporeal, movable or immovable, tangible or intangible, and includes
deeds and instruments evidencing title to, or interest in, such property or assets,
including cash and monetary instruments, wherever located.
Id. See Section 2(1)(y). "Suspicious Transactions Report" means the report on
suspicious accounts transactions specified under section 7.
Id. See Section 2(1)(z). "Transfer" means sale, lease, purchase, mortgage, pledge, gift,
loan, or any other form of transfer of right, title, possession or lien.
Id. See Section 2(1)(s). "Predicate offence" means an offence specified in the Schedule
to this Act.
18.
Id. See Section 6 of the Act read with Notification No. SRO 84(KE)/2007 dated
4.10.2007.
19.
Id. See Section 6(4).
20.
Id. See clause (K) of Section 2.
20A.
Id. See Section 7, as per FE Circular No. 1 dated 6.1.2012. The State Bank of Pakistan
(SBP) has directed all the exchange companies (EC) to meticulously follow the
requirements of Anti-Money Laundering (AML), Countering Financing of Terrorism (CFT)
regime by submitting Suspicious Transaction Reports (STRs) and Currency Transaction
Reports (CTRs) manually or electronically as per Section 7 of AML Act, 2010, directly to
the Financial Monitoring Unit (FMU). Section 33 of the AML Act 2010, inter alia,
specifically provides for criminal sanctions on failure to file required reports and for
providing false information. In case any EC is found to be in violation of legal
requirements, a simultaneous regulatory action shall be initiated against concerned EC
and officials involved as per rules, which may result, among others, in suspension,
cancellation of licenses of the concerned company.
21.
Id. See Section 7.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
FBR has moved list of recommendations and it is now up to government and parliament to amend AntiMoney Laundering Act 2010
ISLAMABAD: The Federal Board of Revenue (FBR) has moved a list of amendments to
include fiscal offences in the Anti-Money Laundering Act 2010.
Money obtained from certain crimes, such as extortion, insider trading, drug trafficking,
illegal gambling and tax evasion is dirty. It needs to be cleaned to appear to have
derived from non-criminal activities so that banks and other financial institutions will
deal with it without suspicion. Money can be laundered by many methods, which vary in
complexity and sophistication.
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