Latest news with #DNFBPs
Express Tribune
4 days ago
- Business
- Express Tribune
Gaps in anti-laundering efforts: IMF
The International Monetary Fund (IMF) has observed that Pakistan is not effectively using data on the ultimate real owners of companies, creating hurdles in disrupting corruption-related laundering schemes and checking front companies from securing government contracts. The global lender's draft report on the Governance and Corruption Diagnostic Assessment revealed major flaws in the effective implementation of the country's beneficial ownership regime. The IMF found "little evidence of routine coordination" between the Securities and Exchange Commission of Pakistan (SECP) and investigation agencies for exchanging and using beneficial ownership data in financial investigations. However, Pakistani authorities disagreed with the IMF's findings, stating that agencies were using beneficial ownership data, except in the case of Designated Non-Financial Businesses and Persons (DNFBPs). Pakistan tightened its beneficial ownership rules about eight years ago as part of Financial Action Task Force (FATF) conditions. However, as in many other cases, implementation remains far below the desired goals. The IMF stated that effective use of beneficial ownership information in financial investigations requires regular exchanges between the SECP, the State Bank of Pakistan (SBP), the Federal Board of Revenue (FBR), commercial banks, money service providers, and investigation agencies. The IMF's diagnostic mission recommended that Pakistan institutionalise a multi-agency working group to review beneficial ownership data in support of corruption investigations. The IMF noted that Pakistan's beneficial ownership framework is an important foundational tool, but weaknesses in registry implementation, verification, enforcement, and inter-agency access reduce its impact. "Addressing these challenges will be essential to ensuring that beneficial ownership transparency plays a meaningful role in the identification and disruption of corruption-related laundering schemes," the global lender observed. It added that access to accurate and timely beneficial ownership data is essential not only for detecting illicit financial flows but also for uncovering conflicts of interest in public procurement, particularly when public officials or their close associates have undisclosed stakes in bidding firms. Pakistani authorities said that, as part of effective inter-agency coordination, the SECP has provided direct access to its beneficial ownership database to investigation agencies. They said the Financial Monitoring Unit (FMU) was regularly using the data to analyse suspicious transactions. In 2018, the SECP directed companies to collect information about their real owners to address FATF concerns about transparency in company ownership structures. The directions had been given to uncover layers of secrecy hiding ultimate beneficial owners. All companies with legal persons as members or shareholders are required to obtain and maintain information from their members and shareholders about the ultimate beneficial owners. The minimum information required includes the owner's full name, father's or husband's name, NIC/NICOP/passport number, nationality, country of origin, email address, usual residential address, the date on which the name was entered into the register, and the date and reason the person ceased to be the beneficial owner. Section 453 of the Companies Act 2017 also requires every company officer to endeavour to prevent fraud and offences of money laundering, including predicated offences under the Anti-Money Laundering Act 2010, in relation to the company's affairs. However, the IMF found serious gaps in the implementation of these laws and rules, hindering the disruption of illicit money flows. Global bodies agree that collusive practices can only be mitigated by exposing front companies used to siphon public funds and by supporting fair competition in government contracting. The IMF said that ensuring contracting authorities, integrity bodies, and investigative agencies can effectively access and cross-reference beneficial ownership data with procurement records is critical to advancing governance reform and restoring public trust. The effectiveness of financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) in detecting and reporting corruption-linked transactions remains limited, the IMF stated. Pakistan's legal and regulatory framework requires reporting entities — including banks, money service businesses, and DNFBPs — to implement risk-based customer due diligence, conduct enhanced due diligence on politically exposed persons (PEPs), and file suspicious transaction reports (STRs). However, implementation is uneven and often inadequate in addressing high-risk areas associated with corruption. Pakistani authorities said some state agencies were actively using the SECP's online beneficial ownership database to enrich financial intelligence. The FMU continues to advocate improved access to beneficial ownership data for key stakeholders and stronger implementation of anti-money laundering obligations by reporting entities through targeted guidance, training, and inter-agency collaboration. Financial institutions have made notable progress in applying risk-based customer due diligence and conducting enhanced due diligence on politically exposed persons (PEPs). However, challenges remain, particularly in the DNFBP sector, where the level of technical capacity, compliance culture, and supervisory coverage vary, according to Pakistani authorities.
Express Tribune
11-08-2025
- Business
- Express Tribune
IMF flags gaps in Pak corruption detection
The identification of politically exposed persons remained uneven and there were insufficient corruption-specific red-flags that could detect misuse of the public office in Pakistan, according to initial findings by a corruption diagnostic assessment mission of the International Monetary Fund (IMF). The IMF has shared the draft observations along with recommendations with the government, giving Islamabad an opportunity to review these before the Governance and Corruption Diagnostic Assessment report is released by the end of this month, sources told The Express Tribune. "The effectiveness of the politically exposed persons' identification remains uneven across sectors due to limited access to comprehensive data, absence of automated screening tools in smaller institutions, and a lack of corruption-specific red flag indicators that would help detect misuse of public office, stated the draft report. The lender has recommended issuing new guidelines by learning from the best global practices to identify the misuse of the public office and check any corruption in the government contracts. Pakistan committed to the IMF in September last year that it would fully publish the report once it is completed. Under the $7 billion deal, the IMF had dispatched the Governance and Corruption Diagnostic Assessment Mission to Pakistan this year, which met with about three-dozen government and state institutions. On the request of Pakistan, the IMF had extended the deadline to publish the report from July to the end of August this year. The politically exposed persons include the head of the state, the head of the government, politicians, bureaucrats, judiciary, military officials, and senior executives of the state-owned enterprises, ambassadors and the members of parliament. There are special checks for the opening and operations of bank accounts of the politically exposed persons. Whereas the report has identified some major gaps, it has also acknowledged the efforts that the Pakistani authorities made to put in place a basic structure to minimise the chances of corruption and the misuse of the public office by politically exposed persons. The draft report states that the identification of the politically exposed persons is guided by regulatory requirements issued by the State Bank of Pakistan (SBP), the Securities and Exchange Commission of Pakistan (SECP), and the Federal Board of Revenue (FBR) for their respective supervised entities. It added that the Financial Institutions and Designated Non-Financial Businesses and Persons (DNFBPs) are required to apply enhanced due diligence measures before dealing with the politically exposed persons. The enhanced scrutiny measures include obtaining senior management approval, establishing the source of wealth, and conducting ongoing monitoring. But smaller institutions do not effectively apply these safeguards, observed the special mission in its draft. The draft stated that the institutions are largely responsible for developing their own internal systems to identify and manage the risks beyond the official lists given by the regulators. The draft report further stated that reporting institutions to the regulators often lacked clarity on corruption-specific typologies and risk indicators. Sources said that the IMF was of the view that despite the specious transaction report guidelines and the red-flag indicators for various sectors and typologies, reporting institutions have limited access to typologies that reflect common methods of laundering corruption proceeds. As part of the safeguards, the FBR had also established an online platform through which financial institutions can screen customers against official lists of federal public officials, including senior civil servants serving in grade 17 to 22 and members of parliament. The sources said that the IMF has referred to some best international practices adopted by countries like Canada and Colombia, which helped mitigate chances of corruption through better detection of cases. Canada has published red flag indicators for transactions involving government contracts, municipal procurement, and politically exposed persons' related behaviour, use of corporate entities or consultants in public sector schemes, and layered payments, rapid contract turnover, and unexplained wealth accumulation in low-salary public roles. Likewise, Colombia's financial intelligence unit developed sectoral indicators targeting healthcare procurement during Covid pandemic, SOE-linked laundering via construction firms and extractive industries, and payments routed through regional entities to avoid detection. The sources said that Pakistan could benefit from issuing specific guidance on identifying unusual financial behaviour linked to the politically exposed persons and state contracts. The spokesman of the Ministry of Finance did not respond to the questions whether the consultations on the IMF findings have been completed and would the report be published by end of this month. The sources said that the Ministry of Finance had given last Friday a deadline to the various departments to respond to the IMF's observations and recommendations. Some of the entities have accepted a few observations while others have sought revisions by disagreeing with the IMF's findings. The sources said that due to the cumbersome process involved in going through every recommendation, there is a possibility that the government may take longer than required time to publish the document.
IOL News
26-05-2025
- Business
- IOL News
Trustworthy: another immediate 'deadline' for trust and company service providers (TCSPs)
South Africa faces a critical deadline to address its greylisting by the FATF, with significant implications for trust and company service providers. This article outlines the necessary compliance measures and the consequences of non-compliance. Image: File photo. More than two years ago, South Africa was found to have insufficiently addressed money laundering and terrorist financing, leading to its greylisting by the Financial Action Task Force (FATF). This greylisting has significant economic and reputational consequences for any country, prompting South Africa to set a deadline of January 2025 to fulfil all requirements for removal from the greylist. Unfortunately, two action items remain unresolved following the latest plenary meetings in France in February 2025. One item requires South Africa to demonstrate a sustained increase in the investigations and prosecutions of serious and complex money laundering, particularly those involving professional money laundering networks/enablers and third-party money laundering, aligned with its risk profile. Additionally, South Africa must show a sustained increase in the effective identification, investigation, and prosecution of the full spectrum of terrorist financing activities, consistent with its risk profile. As a result of missing the deadline, we have now entered our first four-month rolling review cycle (from March to June 2025) with the FATF. In a media statement, Treasury committed to addressing both outstanding action items by June 2025 to facilitate our exit from the greylist by October 2025. With the next reporting deadline approaching, it is unsurprising that we are experiencing increased compliance sanctions from the Financial Intelligence Centre (FIC) and the Financial Sector Conduct Authority (FSCA), aimed at demonstrating to the FATF that sufficient action is being taken against non-compliance. This serves as a stern warning to all TCSPs to comply immediately with the aspects discussed below, at least before the end of May 2025, which will allow the FIC to prepare for the next FATF review in June 2025. Guidance from fines already issued Several Designated Non-Financial Businesses and Professions (DNFBPs), a relatively new category of persons and entities obligated to comply with the FIC Act, have already faced administrative sanctions for non-compliance. The FIC included TCSPs in this new category of 'accountable institutions', as, due to the unique nature of the services they offer, they are vulnerable to abuse by entities seeking to misuse corporate structures to facilitate the movement of illicit funds. These sanctions arose from failures to adhere to FIC directives and the provisions of the FIC Act, such as submitting Risk and Compliance Returns (RCRs) and developing and implementing a Risk Management and Compliance Programme (RMCP). Some published examples include Capital Point Properties (for failing to develop and implement an RMCP, scrutinise clients against the targeted financial sanctions list, and comply with Directive 6, which requires certain accountable institutions to file an RCR), Alpha Trust (for non-compliance with Directive 6, requiring the submission of an RCR), KR Inc (for failing to comply with Directives 1, 2, and 4 regarding registration details on the goAML system, non-compliance with Directive 6, which mandates certain accountable institutions to file an RCR, and for sharing login credentials), the life insurers Sanlam Life and Fedgroup Life (for weaknesses in their money laundering control measures), and most recently Ninety One Fund Managers SA (for having a 'technically deficient' and poorly implemented RMCP, particularly in risk-rating its clients, among other shortcomings of the FIC Act). This list should guide trust and company service providers who have not yet complied with their 'new' obligations to comply immediately, some of which are discussed below. Register with the FIC as 'Accountable Institution' If you or your business qualifies as an 'accountable institution', you are obligated to register with the FIC. Failing to do so does not imply that you will be exempt from oversight. Non-registration will result in sanctions imposed by the FIC. The FIC statistics clearly indicate that many TCSP 'accountable institutions' have not yet registered, including accountants, attorneys, financial advisors, and other service providers offering the envisaged services as a business. Since the FIC's net is quite wide, any service provider dealing with companies and trusts should verify the types of activities they perform against the qualifying criteria set forth by the FIC. Schedule 1 (item 2) to the FIC Act and Public Compliance Communication 6A (PCC 6A) provide practical guidance on this topic. Submit RCR The FIC realised that DNFBPs, as a new 'accountable institution' type, are unaware of the money laundering and terrorist financing risks they face, making this sector and South Africa vulnerable to exploitation by criminals. Therefore, they developed the RCR to address this gap. The FIC believes that RCRs are integral to ensuring that businesses understand how they can be used for laundering proceeds acquired through criminal activities. According to the FIC, 'Filing a RCR is thus central to ensuring that businesses survive and are robust in the fight against financial crime.' The RCR is a questionnaire that assists businesses in identifying the risks they face from money laundering and terrorist financing abuse. The FIC uses its risk and compliance assessment analysis tool to evaluate the RCRs it receives, identifying DNFBPs at higher risk of money laundering and terrorist financing. Directive 6 was issued on March 31, 2023, obligating TCSPs to submit an RCR to the FIC by May 31, 2023. Directive 6 requires legal practitioners, estate agents, trust service providers, company service providers, and casinos to complete and submit their RCRs online via the FIC's website. The deadline for these submissions was May 31, 2023. For those TCSPS who have not yet submitted the RCR, they must do so immediately on the FIC portal. Non-compliance will be dealt with harshly, as they are quoted as saying, 'It is inevitable that the longer the non-compliance persists, the harsher the financial penalties will become.' Submit RMCP All 'accountable institutions', including trust and company service providers, must implement an RMCP. This structured framework of policies, procedures, and controls is designed to identify, assess, and mitigate risks, ensuring that an organisation adheres to relevant laws, regulations, and internal policies. The FIC requires 'accountable institutions' to indicate client types along with the degree of risk for money laundering, terrorist financing, and proliferation financing. This assists TCSPs in applying varying degrees of verification during onboarding and ongoing relationships. The RMCP helps TCSPs understand their business environments while implementing risk mitigation measures and controls to protect their businesses. The risk-based approach includes identifying various client types, determining what additional measures must be in place, and outlining what training their teams need to deal with such behaviours. The RMCP must be documented, kept updated, and implemented. Staff should understand the RMCP, as they are the ones at the coalface of the business. On March 4, 2025, the FIC issued a notification requesting all 'accountable institutions' supervised by it to submit a copy of the documentation describing their RMCP to the FIC on or before the close of business on Wednesday, 12 March 2025, in terms of section 42(4)(a) of the FIC Act 38 of 2001. The FIC advised that failure to comply with this request by March 12, 2025, would constitute non-compliance and might lead to administrative sanctions being imposed, including a financial penalty in terms of section 45C of the FIC Act. TCSPs who have not met the deadline to submit their RMCPs as per the above notification are urged to do so immediately to avoid further penalties. The FIC reminded accountable institutions that non-submission of the RMCP constitutes non-compliance with the FIC Act. The FIC, however, warns 'accountable institutions' not to merely submit a deficient RMCP and assume that will tick the compliance box. The FIC warned that the RMCP will be tested against legislative requirements through inspections and compliance monitoring. Therefore, TCSPs should ensure that the required attention is given when compiling the RMCP. The FIC confirmed in a media statement on May 7, 2025, that 'RMCPs are fundamental to protecting accountable institutions and ultimately, the integrity of our financial system.' The FIC reiterated that 'Accountable institutions who are in default must immediately submit their outstanding RMCPs electronically to the FIC on the goAML platform.' Communication from FIC on goAML goAML is an integrated software solution that the FIC uses for registration, reporting, data collection, analysis, case management, and secure communications. It is essentially the FIC's preferred IT platform for handling its daily operations. 'Accountable institutions' were strongly urged by the FIC to consult and monitor the FIC goAML message board daily (under their Org ID profile as registered with the FIC) to immediately attend to outstanding RMCP and other requests from the FIC. Conclusion South Africa's greylisting signalled that the country's effectiveness in combating financial crimes, such as money laundering and terror financing, was below international standards. This resulted in increased scrutiny from international regulators, along with reputational and economic damages. It is understandable that the government is implementing measures to convince the FATF that sufficient actions are being taken for the country to exit the greylist. If South Africa is not delisted by October 2025, it will be required to continue reporting to the FATF Africa Joint Group every four months until all action items are addressed. This situation would not bode well for the country. The RCRs and RMCPs are critical documentary evidence that the FIC must demonstrate to convince the FATF that the country has a sufficient handle on money laundering and terrorist financing. TCSPs, therefore, have no choice but to comply and visit goAML as a daily routine to stay out of trouble. * Van der Spuy is a Chartered Accountant with a Masters's degree in tax and a registered Fiduciary Practitioner of South Africa®, a Chartered Tax Adviser, a Trust and Estate Practitioner (TEP), and the founder of Trusteeze®, the provider of a digital trust solution. PERSONAL FINANCE
The Citizen
16-05-2025
- Business
- The Citizen
FIC takes a bigger stick to lawyers and estate agents over grey list
These are the two sectors holding up SA's exit from the grey list. The good news is that SA has addressed 20 of the 22 issues that got it onto the list. Foreigners used expensive property to wash their dirty money, but some estate agents 'are now so wrapped up in red tape' that criminals may slip through the net. Picture: AdobeStock The Financial Intelligence Centre (FIC) is carrying out hundreds of inspections and issuing sanctions against estate agents and law offices over their failure to submit risk and compliance reports. SA was placed on the Financial Action Task Force (FATF) grey list in early 2023 for lapses in taking the necessary action to combat money laundering and terrorist financing, with estate agents and legal practitioners identified as two of the higher-risk categories. There is a fear that lawyer and estate agent trust accounts could be used to launder criminal proceeds or finance terrorism. There has been an improvement in compliance rates to around 70% from the 52% for legal practitioners and 42% for estate agents announced in February 2024, but this is still not where it needs to be to remove SA from the grey list. In response to queries from Moneyweb, the FIC says it conducted 165 inspections on estate agents and 242 on legal practitioners over the 2025 financial year. This resulted in sanctions being issued against 87 estate agents and 83 legal practitioners. ALSO READ: Financial Intelligence Centre: Lawyers and estate agents keeping SA on grey list 'South Africa has largely addressed 20 of the 22 action items outlined by the Financial Action Task Force in its action plan for the country. The country's efforts continue to drive South Africa's exit from the grey list,' says the FIC in an emailed response. Other high-risk sectors include high value goods dealers, such as those dealing in precious stones, precious metals and Krugerrands, and trust service providers (such as accountants). These are 'designated non-financial businesses and professions' or DNFBPs that are not traditional financial institutions but are considered to be at risk of being used for money laundering and terrorist financing. These bodies are required to submit regular risk and compliance reports to the FIC to help it monitor and control money laundering and terrorism financing. ALSO READ: Prudential authority fines Absa R10 million for FICA non-compliance SA inching its way off the list In January, it was announced that SA had largely complied with 20 of the 22 issues that got it placed on the grey list in 2023 and was expected to be fully compliant with the FATF requirements by October 2025. National Treasury undertook to ensure that anti-money laundering and counter-terrorism financing supervisors implement follow-up remedial actions 'and that effective, proportionate and dissuasive sanctions are being applied'. The FATF found SA's laws against terrorism financing and money laundering were largely sufficient, but their enforcement was weak. In February this year, the South Gauteng High Court issued a freezing order against two individuals and two entities based on reasonable grounds of suspicion that they had been involved in committing an act of terrorism under the Protection of Constitutional Democracy Against Terrorist and Related Activities Act. Christopher Malan, executive manager for compliance and prevention at the FIC, commented in April that SA had not fully complied with its FATF commitments due to non-financial businesses and practitioners' understanding of their own risk and compliance situation. Estate agents hit back last year, saying that while they supported efforts to improve compliance rates, the FIC appeared to be operating on incorrect data, with many estate agents ceasing to operate without advising the FIC. ALSO READ: FSCA fines Ninety One Fund Managers R3 million for Fica non-compliance The grey list makes it more difficult for SA companies to access overseas capital and imposes higher due diligence standards when dealing with foreign businesses and banks. Research and advisory group Krutham (formerly Intellidex) estimated that this could cost the economy 1% of GDP a year in an optimistic scenario, and 2-3% in a more pessimistic one. Some of the criticism being directed at lawyers and estate agents could be directed at banks, which enabled the flow of billions of rands during state capture. Some estate agents argue that they are now so wrapped up in red tape that criminals are able to slip through the net. Research by Open Secrets revealed a pattern of money laundering by politically connected individuals from Mozambique, the Democratic Republic of Congo and Equatorial Guinea where expensive properties, often bought with public funds, were being purchased in affluent suburbs in Cape Town and Johannesburg. This article was republished from Moneyweb. Read the original here.
Zawya
21-04-2025
- Business
- Zawya
Ministry of Economy inks MoUs with key national entities to boost cooperation in combating money laundering and financial crimes
Abu Dhabi: The Ministry of Economy signed a series of MoUs with several competent national authorities in the field of anti-money laundering and countering terrorism financing, including the Economic Security Centre of Dubai (ESCD) and the Dubai Land Department (DLD). The agreements aim to strengthen national efforts in developing the regulatory infrastructure, enhancing integrity and transparency systems, and improving mechanisms to combat financial crimes in accordance with international best practices. The MoUs also facilitate the exchange of data and information, while supporting the Ministry's supervisory role under the relevant national legislation. The signing ceremony was held on the sidelines of the 'Role of the Designated Non-Financial Businesses and Professions (DNFBPs) Sector in Combating Financial Crimes" summit, which took place recently in Dubai. It was attended by H.E. Abdulla bin Touq Al Marri, Minister of Economy; H.E. Abdulla Sultan bin Awad Al Nuaimi, Minister of Justice; and H.E. Ahmed Al Sayegh, Minister of State. The MoUs were signed by H.E. Abdulla Ahmed Al Saleh, Undersecretary of the Ministry of Economy; H.E. Safeya Hashem Al Safi, Assistant Undersecretary for the Commercial Control and Governance Sector; H.E. Faisal Yousef bin Selaitin, CEO of the Economic Security Center of Dubai; and H.E. Majid Saqr Al Marri, CEO of the Real Estate Registration Sector at the Dubai Land Department, along with other government officials. The initiative is part of continuing efforts to strengthen institutional integration and partnerships to improve monitoring and compliance systems and facilitate the exchange of data among signatories, in support of their shared objectives to counter financial crimes in the UAE. The MoUs establish clearly defined frameworks for technical cooperation, capacity building, and knowledge exchange, as well as secure data sharing mechanisms that ensure confidentiality and compliance with relevant legal and regulatory frameworks. Representatives of the signatory entities affirmed the importance of enhancing national efforts to address the challenges of money laundering, terrorism financing, and the proliferation of weapons, through a sustainable and institutional approach. They emphasized that such efforts support the UAE's readiness for the upcoming mutual evaluation, help ensure high levels of legislative and regulatory compliance and improve efficiencies in addressing cross-border financial crimes. These measures also contribute to achieving sustainable economic growth and improving the country's ranking in global competitiveness indices. The representatives reiterated their full commitment to supporting initiatives that protect the national economy and strengthen financial security.
