Notice to impose sanctions for noncompliance to AML/CFT

SHOW CAUSE Notice to impose sanctions for noncompliance to AML/CFT obligations under AMLA, 2010

Please refer to the above.

Subject: Delay in submission of Off-site Monitoring Questionnaire and implementation regarding provisions of AntiMoney Laundering Act, 2010 (AMLA, 2010) read with SRO 924(I)/2020 and 950(I)/2020
Dear DNFBP,
Whereas, a questionnaire was sent to you for timely submission under the AMLA, 2010 but you failed to submit the
same despite reminders. You are hereby provided the last opportunity to submit the same within 03 days of this notice.
Any default may draw you to the high risk and sanctions may be imposed immediately. Following contravention has
been made by you:
(i) Failure to get registered as DNFBP
(ii) Delay in submission of Offsite Monitoring Questionnaire
(iii) Non-implementation of rules and regulations issued vide SRO-924(I)/2020
You are hereby warned to implement all the legal provisions/obligations as mentioned in AMLA, 2010 read with SROxxx(I)/2020. In future, your compliance will be checked through on-site inspections by our inspection teams against the
aforementioned legal provisions at your business premises. Any default may entail imposition of sanctions as
mentioned in SRO-950(I)/2020. FBR website has ample and ready material available to guide you at each and every
step. In case of further query, the office of the undersigned may be contacted during office hours or on 051-9107099, on
email help.dnfbp.fbr@gmail.com and may visit the undersigned.
Thanking for your cooperation.
Regards

What You Should Do:

1. Review the Notice Thoroughly

• Understand the Allegations: The notice should specify what aspects of the AMLA, 2010 you or your business have violated. It could involve failure to:
  • Implement effective Customer Due Diligence (CDD) procedures.
  • Report suspicious transactions or file Suspicious Activity Reports (SARs).
  • Maintain adequate records of financial transactions.
  • Adopt internal controls to prevent money laundering or terrorist financing.
• Check the Timeline: The notice will indicate the deadline for addressing the non-compliance and responding to FBR’s allegations. Failing to meet these deadlines can result in additional penalties or sanctions.

2. Understand the AMLA, 2010 Obligations

• Familiarize yourself with the specific obligations under the AMLA, 2010 that apply to your business. These typically include:
  • Customer Identification and Verification: You must verify the identity of your clients and keep records of the verification process.
  • Risk Assessment: You must conduct risk assessments of your clients and business activities to identify potential money laundering or terrorist financing risks.
  • Record Keeping: Retain records of transactions and customer details for a specific period (usually five years).
  • Reporting Suspicious Transactions: You must report any transactions that appear suspicious or irregular to the Financial Monitoring Unit (FMU), which is responsible for analyzing financial transactions to identify potential money laundering or terrorist financing activities.
  • Employee Training: Ensure that employees are trained on AML/CFT regulations and how to recognize suspicious activities.

3. Assess Your Compliance History

• Review Internal Procedures: Look at your company’s AML/CFT policies and practices. Are they in place and being followed? Consider the following:
  • Do you have a designated AML Compliance Officer?
  • Are your KYC (Know Your Customer) procedures being followed effectively?
  • Are transactions properly monitored for unusual activities, and are suspicious transactions being reported?
• Audit Your Records: Check if you have maintained all required records, including:
  • Transaction details.
  • Customer identity verification documents.
  • Internal AML reports and training materials.

4. Consult an AML Expert or Legal Advisor

• Get Expert Guidance: Since this notice involves legal and regulatory compliance, it’s essential to consult an AML compliance expert, chartered accountant, or lawyer who specializes in financial regulations. They can guide you in addressing the issues raised in the notice.
• Assess Possible Penalties: A legal advisor can help assess the potential penalties or sanctions you may face and the best course of action to mitigate them.

5. Respond to the Notice

• Prepare Your Response: If the notice outlines specific violations, you need to respond to FBR with explanations, corrective actions, and any relevant evidence. This might include:
  • A statement outlining any mistakes or misunderstandings regarding your compliance.
  • Documentation showing that you are now in compliance or have taken corrective steps.
  • Any additional training, record updates, or systems you have implemented to ensure future compliance.
• Take Corrective Measures: If there were lapses in your AML/CFT practices, show that you’ve addressed them. For example:
  • Updating or enhancing your KYC policies and due diligence procedures.
  • Implementing stronger transaction monitoring systems.
  • Conducting staff training on AML/CFT.
  • Improving record-keeping procedures.

6. Submit Evidence of Compliance (if applicable)

• Provide Proof: If you have already taken corrective actions or are now fully compliant with AML/CFT obligations, provide FBR with documentation such as:
  • Revised AML/CFT policies.
  • Evidence of employee AML/CFT training.
  • Transaction monitoring records.
  • Reports to the Financial Monitoring Unit (FMU) for suspicious transactions.
• Document Everything: Keep a copy of all submissions made to FBR, including emails, forms, or any other documents sent in response to the notice.

7. Potential Outcomes

• Mitigation of Penalties: If you have taken corrective action, FBR may reduce or waive the sanctions.
• Fines and Penalties: If FBR determines that there were significant compliance failures, you may be subject to fines, penalties, or sanctions. Penalties under AMLA, 2010 can range from monetary fines to restrictions on business operations.
• Further Legal Action: In cases of serious non-compliance or fraudulent activity, FBR may take more severe actions, including criminal investigations or revocation of your license to operate.

8. Prevent Future Violations

• Strengthen Your AML/CFT Program: After responding to the notice, take steps to improve your internal controls to ensure that you comply with AML/CFT obligations in the future. This includes:
  • Regularly updating your AML/CFT policies.
  • Conducting regular internal audits to check compliance.
  • Keeping up with any changes in AML/CFT laws and regulations.
• Ongoing Staff Training: Regular training on detecting and reporting suspicious transactions is essential to maintaining compliance.

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Conclusion:

Non-compliance with AML/CFT regulations can lead to serious consequences, including sanctions, fines, and reputational damage. If you’ve received a notice from FBR regarding AMLA, 2010 non-compliance, you must act promptly and carefully. Review the notice, assess your compliance history, consult an expert, and take corrective action to address any violations. A well-prepared and transparent response can help mitigate penalties and prevent further issues.