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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.
Mid East Info
30-07-2025
- Business
- Mid East Info
Minister of Economy and Tourism and Governor of Palestine Monetary Authority discuss cooperation in AML/CFT efforts
H.E. Bin Touq briefs Palestinian side on UAE's leading legislative and regulatory framework to combat money laundering H.E. Abdulla bin Touq Al Marri, Minister of Economy and Tourism, met with H.E. Yahya Shunnar, Governor of the Palestine Monetary Authority and Chairman of the National Committee for Anti-Money Laundering, to explore new avenues for enhancing economic and development cooperation, particularly in the area of financial crime prevention systems. The meeting was also attended by H.E. Safia Al Safi, Assistant Undersecretary for the Commercial Control and Governance Sector at the Ministry. During the meeting, both sides reviewed the latest global developments in combating financial crimes and discussed the growing risks that money laundering poses to economic stability and the integrity of financial systems. H.E. Bin Touq highlighted the UAE's pioneering efforts in this area, sharing insights into the country's continuous work to enhance and modernize its legislative and regulatory frameworks. He emphasized that these reforms have played a critical role in bolstering compliance with international laws and standards across the UAE's markets. H.E. Bin Touq emphasized that boosting UAE-Palestine cooperation across economic and developmental domains is a key priority guided by the vision of the UAE's wise leadership. He said: 'The UAE has built a globally recognized and leading model for combating financial crime. Our consistent efforts have bolstered the UAE's global standing as a safe, stable, and competitive economy. As a result, the country has been removed from the Financial Action Task Force (FATF) grey list, and more recently, from the European Parliament's list of high-risk third countries for money laundering and terrorism financing.' He reiterated the Ministry's readiness to share the UAE's expertise to support the efforts of the Palestinian Authority in this critical field. The meeting also reviewed the Ministry's progress in developing the National Economic Register (NER), which now stands as the UAE's largest digital platform for unified and verified commercial license data. The register integrates requirements related to Ultimate Beneficial Ownership (UBO) in line with international standards, and enhances oversight of Designated Non-Financial Businesses and Professions (DNFBPs), including real estate brokers and agents, dealers in precious metals, independent accountants and auditors, and corporate service providers. Both sides reaffirmed their commitment to strengthening cooperation and aligning efforts in sharing global best practices for regulatory and supervisory frameworks to combat money laundering. They further emphasized the importance of specialized training programs aimed at developing skilled human capital capable of proactively detecting and addressing evolving financial crime patterns – an essential step in safeguarding financial integrity and reinforcing confidence in both countries' economic systems.
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
