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A Brief Overview Financial Monitoring Unit. Financial Monitoring Unit (FMU) Financial Monitoring Unit is an independent Federal Government entity initially.

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Presentation on theme: "A Brief Overview Financial Monitoring Unit. Financial Monitoring Unit (FMU) Financial Monitoring Unit is an independent Federal Government entity initially."— Presentation transcript:

1 A Brief Overview Financial Monitoring Unit

2 Financial Monitoring Unit (FMU) 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.

3 National Executive Committee (NEC) Financial Monitoring Unit (FMU) National Executive Committee is composed of: Minister for Finance or Advisor to the Prime Minister on Finance/ Concerned Minister Chairman Minister for Foreign Affairs Member Minister for Law and Justice Member Minister for Interior Member Governor SBP Member Chairman SECP Member Chairman NAB Member Director-General FMU Member & Secretary of NEC Any other member to be nominated by Federal Government

4 General Committee (GC) Financial Monitoring Unit (FMU) General Committee is composed of: Secretary Finance Chairman Secretary Interior Member Secretary Foreign Affairs Member Secretary Law Member Governor SBP Member Chairman SECP Member Director-General, FCIW, NAB Member Director-General FMU Member & Secretary of GC Any other member to be nominated by Federal Government

5 Powers & Functions of FMU (Core Functions) Financial Monitoring Unit (FMU) 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 or financing of terrorism for a maximum period of fifteen days.

6 Powers & Functions of FMU (General Functions) Financial Monitoring Unit (FMU) 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.

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

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

9 Strategy and Policy Division Financial Monitoring Unit (FMU) 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 follow-up actions. Carry out Study of Best International Practices around the world regarding AML/CFT Framework.

10 Reports Analysis & Dissemination Division Financial Monitoring Unit (FMU) 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.

11 Coordination Division Financial Monitoring Unit (FMU) 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.

12 Finance & Administrative Division Financial Monitoring Unit (FMU) 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.

13 Reporting Entities Financial Monitoring Unit (FMU) 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.

14 Role of Reporting Entities 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)

15 Law Enforcement Agencies (LEAs/ Regulators Financial Monitoring Unit (FMU) 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).

16 Financial Monitoring Unit (FMU) Role of Law Enforcement Agencies 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 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 Trainings required LEAs need to develop capacity to investigate ML/TF offences.

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

18 Thresholds of STRs/CTRs Financial Monitoring Unit (FMU) 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.

19 STR may generate if: Financial Monitoring Unit (FMU) 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 – (a) involves funds derived from illegal activities or is 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:

20 STR Analysis– Risk Based Approach Financial Monitoring Unit (FMU) 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.

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

22 Electronic Data Capturing System (EDCS) Financial Monitoring Unit (FMU) 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.


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