Financial Monitoring Unit A Brief Overview Financial Monitoring

Financial Monitoring Unit A Brief Overview

Financial Monitoring Unit � Financial Monitoring Unit is an independent Federal Government entity initially established in October 2007 in terms of section 6 of the Anti Money Laundering Ordinance, 2007 (now AML Act, 2010), with an aim of combating against money laundering and terrorist financing. � The FMU works under the supervision of National Executive Committee and General Committee. Financial Monitoring Unit (FMU)

National Executive Committee (NEC) � National Executive Committee is composed of: Ø Minister for Finance or Advisor to the Prime Minister on Finance/ Concerned Minister Chairman Ø Minister for Foreign Affairs Member Ø Minister for Law and Justice Member Ø Minister for Interior Member Ø Governor SBP Member Ø Chairman SECP Financial Monitoring Unit (FMU) Member

General Committee (GC) � General Committee is composed of: Ø Secretary Finance Chairman Ø Secretary Interior Member Ø Secretary Foreign Affairs Member Ø Secretary Law Member Ø Governor SBP Member Ø Chairman SECP Financial Monitoring Unit (FMU) Member

Powers & Functions of FMU (Core Functions) � To receive Suspicious Transaction Reports (STRs) and Currency Transactions Reports (CTRs) from reporting entities. � To analyze STRs and CTRs and to seek additional information in this respect. � To disseminate STRs to Regulatory Authorities and Law Enforcement Agencies wherever there is an element of Money Laundering or Terrorist Financing. � To maintain database of STRs and CTRs and related information. � DG-FMU may order to freeze assets which are reasonably believed to be involved in money laundering Financial Monitoring Unit (FMU) or financing of terrorism for a maximum period of fifteen

Powers & Functions of FMU (General Functions) � To cooperate with Financial Intelligence Units of other countries. � Represent Pakistan on regional / international forums. � Provide recommendations to the regulatory authorities relating to issuance of regulations in the context of AML/CFT. � To frame regulations in consultation with regulators for ensuring STRs/CTRs. Financial Monitoring Unit (FMU)

FMU Core Functions Receipt Analysis Dissemination Internal & External Databases Reporting Entities Law Enforcement Agencies FMU Other Authorities Information Collection During Analysis Reporting Entities / Persons Financial Monitoring Unit (FMU) Regulatory Bodies

Organogram of Financial Monitoring Unit Strategy & Policy Division Reports, Analysis Dissemination Division Financial Monitoring Unit (FMU) Coordination Division Finance & Administration Division

Strategy and Policy Division �Strategy and Policy Division is mainly responsible for reviewing/framing of laws & regulations relating to the AML/CFT Regime. �Devising the National Strategy for Combating Money Laundering and Terrorism Financing. �Keeping record of NEC / GC meetings and followup actions. �Carry out Study of Best International Practices around the world regarding AML/CFT Framework. Financial Monitoring Unit (FMU)

Reports Analysis & Dissemination Division � This division is performing the core function of receipt, analysis and dissemination of the STRs and CTRs. � Maintaining database of STRs/CTRs. � Seeking Information from FIs, LEAs, Regulators and Others. � Disseminate STRs or CTRs to LEAs/Regulatory authorities. Financial Monitoring Unit (FMU)

Coordination Division � Coordination Division deals primarily with domestic and international cooperation. � It is a contact point of FMU for coordination with APG, FATF and other regional / international bodies. � Coordinates with the domestic stakeholders to collect status of developments in respect of legal, regulatory, law enforcement and international cooperation in the domain of AML/CFT and, accordingly, prepares reports and updates for onward submission at the different forums. � On the other hand, the Division disseminates documents / information being received from regional / international forums regarding international standards, interpretive notes, best practices and other reports & studies, to raise AML/CFT awareness amongst the domestic stakeholders. � Arrange Capacity Building Programs. Financial Monitoring Unit (FMU)

Finance & Administrative Division � Finance & Administrative Division is the integral Division of FMU and responsible for subjects concerning HR, Budget & Finance, procurement, IT and other day‑to-day administrative matters. IT Unit � Provide IT & infrastructure support to FMU. � acquire computer equipment and necessary software / database tools � Maintenance and security of IT systems. � Development of website and electronic reporting. Financial Monitoring Unit (FMU)

Reporting Entities Banks, DFIs & Exchange Companies: These are regulated by State Bank of Pakistan. These entities include Commercial Banks, Islamic Banks, MFBs, DFIs and Exchange companies. Non Banking Entities: These are regulated by Securities Exchange Commission of Pakistan (SECP). The broad categories are NBFCs, Investment Banks, Leasing Companies, Assets Management Companies, Modarabas, Insurance companies, Stock Exchanges and Brokerage Houses etc. Financial Monitoring Unit (FMU)

Role of Reporting Entities q q q The reporting entities are required to have system in place to capture STR and CTR; The reporting entities are required to file STR and CTR with FMU within prescribed period. Confidentiality is to be ensured (NO TIPPING-OFF) The reporting entity to maintain all records of STR/CTR reported by them for at least five years. Focus on High Risk Customers, Products, Delivery Channels, etc Explicit protection has been provided to FMU, reporting entities and their officers from legal proceedings against them for filing STR or providing information under the AML Act Financial Monitoring Unit (FMU)

Law Enforcement Agencies (LEAs/ Regulators At Present, Law Enforcement Agencies designated under AMLA 2010 includes: � National Accountability Bureau (Corruption Cases), � Anti Narcotics Force (Drugs Related Cases), � Intelligence & Investigation – FBR (Smuggling), � Federal Investigation Agency (Other predicate crimes). � Likewise Regulators include SBP (banking institutions) and SECP (non banking institutions). Financial Monitoring Unit (FMU)

Role of Law Enforcement Agencies q q After dissemination of STR by FMU, the Investigation Agency evaluates the financial intelligence report of FMU The LEA can exercise the powers of search, seizure, attachment, arrest, etc. as given to them in the AML Act, 2010 read with AML rules 2008. The financial intelligence report is confidential and is not supposed to be disclosed in further proceedings. Capacity constraints in interpreting the financial intelligence and converting it into successful investigation Ø Trainings required Ø LEAs need to develop capacity to investigate ML/TF offences. Financial Monitoring Unit (FMU)

FOREIGN FIUs REGULATORY AGENCIES LAW ENFORCEMENT AGENCIES • State Bank of Pakistan • Securities & Exchange Commission of Pakistan FINANCIAL MONITORING UNIT • National Accountability Bureau • Anti Narcotics Force • Intelligence & Investigation – FBR • Federal Investigation Agency REPORTING INSTITUTIONS Banks: • Commercial banks • Islamic banks • MFBs • DFIs • Exchange Companies Non-Banking Financial Companies: • Investment Banks • Leasing Companies • Assets Management Companies, • Modarabas, • Insurance companies, • Stock Exchanges • Brokerage Houses etc. Financial Monitoring Unit (FMU) Others: • Law Enforcement Agencies • Government agencies • Regulators , etc.

Thresholds of STRs/CTRs �Under AMLA, 2010, every financial institution is required to file the STR with FMU in 7 days after forming suspicion of funds being laundered or related to terrorist financing. STRs do not have any threshold. �CTRs are reported with FMU in 7 days having a threshold of Exceeding PKR 2. 5 Million per transaction. Financial Monitoring Unit (FMU)

STR may generate if: The financial institution and reporting entity knows, suspects, or has reason to suspect that the transaction or a pattern of transactions of which the transaction is a part – derived funds involves (a) intended or conducted in order to hide or disguise proceeds of crime; (b) is designed to evade any requirements of AMLA 2010 (c) has no apparent lawful purpose after examining the available facts including the background and possible purpose of the transaction; (d) involves financing of terrorism: Financial Monitoring Unit (FMU)

STR Analysis– Risk Based Approach FMU has framed a risk-based procedure for analyzing Suspicious Transactions Reports (STRs). It includes - Identification of High, Medium and Low risk STRs - The STRs with the greater risk or cases more prone to ML and TF risk receive higher attention and are processed on priority. Financial Monitoring Unit (FMU)

Process of STR Analysis Reporting Entity Receipt of STR Data Capturing Unit Preliminary Analysis Archived Preliminary Analysis Detailed Analysis Conclusion/ Approval Refer Back for Review Dissemination LEAs Financial Monitoring Unit (FMU) Regulator s Archived After Detail Analysis

Electronic Data Capturing System (EDCS) � FMU has introduced Electronic Data Capturing System to receive STRs and CTRs electronically from financial Institutions. � With EDCS, the reporting entities are submitting STR/CTR in much lesser time compared to sending STR/CTR physically/manually. � EDCS also provides basic analysis tools as well as work flow diary to record the status of STRs. � Besides, we are also in a process of procuring sophisticated Analytical Software. Financial Monitoring Unit (FMU)