Seminar calls for greater transparency in banking

Staff Report

LAHORE: Banks which open accounts without knowing the depositors’ identities, and offshore accounts maintained by companies without the disclosure of the main sponsor are safe heavens for illegal wealth, predominantly acquired through drug trafficking.

A UK-based International Lawyer, Khawar Qureshi, dealing with money laundering cases, said this on Monday while addressing a seminar on ‘Countering Money Laundering’ held at the Lahore University of Management Sciences (LUMS) and organised by the Anti-Money Laundering Cell of the Securities and Exchange Commission of Pakistan (SECP). He said that recent amendments to British law made it mandatory for banks to disclose every suspicious money transaction. The banks failing to do so were penalized. Strict imposition of this law had resulted in an increase in the number of disclosures, from 20,000 last year to 100,000 this year.

Mr Qureshi said that UK law mandates that every professional including accountants, bankers and solicitor is bound to report suspicious money transactions. He urged Pakistanis to implement an anti-money laundering law.

A lawyer, Mohammad Abdul Rehman, who assisted in drafting a Pakistan anti money laundering law, stressed the need to engage stakeholders in the process, particularly representatives from financial institutions. He said that the team that deliberated the draft law included only one banker. It was imperative to engage more bankers in the process since money laundering was mostly done through banks. Mr Rehman said that care must be taken to formulate anti-money laundering legislation, keeping in mind the development status of Pakistan, which still has a fragile financial system. He said that the new law should not disturb the relative stability of the system brought about by four years of banking reforms.

Mr Rehman said that an anti money laundering law would not work as long as the Pakistani economy remained undocumented. Declaring a transaction suspicious would be a very sensitive matter for banks. Before imposing such a law a prudent and meaningful relationship would have to be established between investigating agencies like National Accountability Bureau (NAB), Federal Investigating Agency (FIA) and Anti Narcotics Force (ANF), he added. He said that special courts as well as executive and judicial orders would remain ineffective till the judges were taught about financial and accounting systems.

One senior banker, Salman Ali Sheikh, was highly critical of the proposed law. He said that the proponents of this law failed to understand that most of the money laundering in Pakistan had escaped the banking system. He claimed that only 45,000 out of 28 million banking accounts had deposits of over Rs 1 million. He said that illegal money in Pakistan was invested in ‘unnamed properties’, and even legal properties were registered at half their actual price while the other half was paid under the table. He said that smuggling and under-invoicing were other avenues for illegal money. He warned that the implementation of the anti-money laundering law would pose serious problems and that regulators did not have the institutional capacity to cope with the expected load of suspicious accounts.

The SECP chairman, Tariq Hasan said that the commission was fully aware of its responsibilities and had established an anti-money laundering cell even before the formulation of the anti-money laundering law. He said that the law would be vetted by the federal government and that the institutional capacity of regulators would be kept in mind while enacting the law. He proposed that all 40 points approved internationally to curb money laundering should be incorporated in stages keeping in view the environment in Pakistan.

Mr Hasan later told reporters that the Commodity Exchange Commission would be operative next year. He said that it was up to the stakeholders to bring in commodities of their choice for trading in the exchange.

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