Under the Anti-Money Laundering Act, the Federal Board of Revenue is responsible for ensuring that designated non-financial businesses and professions (DNFBPs) including real estate agents, dealers in precious metals and stones, and FBR-supervised accountants comply with anti-money laundering and counter financing of terrorism obligations. Financial institutions, lawyers, law firms, notaries and non-FBR-supervised accountants are supervised by other competent authorities and self-regulatory bodies.
Anti-Money Laundering (AML) – Why Does It Matter?
Money laundering is the process used to disguise the source of money or assets derived from criminal activity. Pakistan’s Anti-Money Laundering regime is in place to ensure that crime does not pay and to protect the integrity of the domestic and international financial systems.
Counter Terrorist Financing (CFT) – Why Does It Matter?
Terrorist financing involves the use of funds that may be licit or illicit in origin and using these funds to support terrorist activity. Though terrorist financing transactions are usually smaller in value than those associated with money laundering, terrorist financing can result in tragic losses of life. Pakistan’s counter terrorist financing system works to protect the public, in concert with the regimes for United Nations and Pakistani targeted financial sanctions.
Pakistan’s Designated Non-Financial Businesses and Professions (DNFBPs)
Pakistan’s Anti-Money Laundering Act now includes obligations that apply to DNFBPs. This includes lawyers and law firms, notaries, other legal professionals, accountants and accounting firms, when they provide certain services to client, real estate agents including brokers and dealers, builders and developers, housing authorities, as well as dealers in precious metals and stones including jewellers when conducting cash transactions over 2 million rupees. The accounting and legal sectors are also subject to AML/CFT, rules when they provide trust and company services for clients.
Understanding Money Laundering and Terrorist Financing Risk in DNFBPs
The key to an effective AML/CFT system is a good understanding of risk. Each DNFBP must assess and document its risks by looking at its customers, business types, delivery channels and geographic exposure, and keep this understanding up to date. This allows for resources to be targeted towards those areas that present the greatest risk for money laundering and terrorist financing abuse, in order to mitigate these risks.
DNFBP Obligations: Preventive Measures and Internal Controls
Successfully implementing and executing a comprehensive compliance program of preventive measures and internal controls will help to protect a DNFBP from being used by criminals and will ensure that the DNFBP meets its obligations under Pakistani law.
What to Expect Under Pakistan’s New AML/CFT Supervisory Regime
Each DNFBP sector has a dedicated supervisor or set of supervisors to monitor and encourage compliance with AML/CFT obligations. This includes compliance inspections to assess how well DNFBPs are meeting their AML/CFT obligations.