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Prevalence of Anti Money laundering in financial


Institutions of Pakistan
____________

A thesis
Presented to
the faculty of
Management Sciences
Bahria University
_______

In Partial Fulfillment
of the Requirements for the
Degree Master in Business Administration
____________
By1
Muhammad Adnan Israr
Registration # 11561



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BAHRIA UNIVERSITY
INSTITUTE OF MANAGEMENT AND COMPUTER SCIENCES
KARACHI

RECOMMENDATION FOR ORAL EXAMINATION

This project/thesis here to attached, entitled, Prevalence of Anti Money laundering in financial
Institutions of Pakistan , prepared and submitted by Muhammad Adnan Israr, in partial
fulfillment of the requirements for the degree MASTER IN BUSINESS ADMINISTRATION, is
hereby recommended for appropriate action.

Date: ____________ _________________
Advisor

Name: __________________
PROJECT/ THESIS COMMITTEE

In partial fulfillment of the requirements for the degree of MASTER IN BUSINESS
ADMINSTRATION, this thesis entitled, Prevalence of Anti Money laundering in financial
Institutions of Pakistan, is hereby recommended for Oral Examination.

___________________________
Examiner

Name: __________________

_____________________ ____________________
Examiner Advisor

Name: _________________ Name: ______________

Date: __________________




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BAHRIA UNIVERSITY

INSTITUTE OF MANAGEMENT AND COMPUTER SCIENCES, KARACHI


Project/Thesis: Prevalence of Anti Money laundering in financial Institutions of Pakistan.

Date: ____________
Time: ____________



PANEL OF ORAL EXAMINERS ACTION
_________________________
___________Examiner

Name: _________________

____________________________ ____________
Examiner

Name: _________________
_____________________________
Advisor

Name: _______________
____________________________
Advisor

Name: _____________
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BAHRIAUNIVERSITY

INSTITUTE OF MANAGEMENT AND COMPUTER SCIENCES, KARACHI

APPROVAL SHEET


This Project/ thesis entitled, Prevalence of Anti Money laundering in financial Institutions of
Pakistan, prepared and submitted by Muhammad Adnan Israr, in partial fulfillment of the
requirements for the degree of MASTER IN BUSINESS ADMINISTRATION has been
examined and recommended for acceptance and approval.


THESIS COMMITTEE


____________________________
Examiner

Name: _________________

___________________ ____________________
Examiner Advisor

Name: ____________ Name: ____________

PANEL OF EXAMINERS
Approved by the Committee on Oral Examination with a Grade of __________
____________________________
Examiner

Name: _______________

____________ ______________
Examiner Advisor

Name: _____________ Name: _____________

____________________________________________
Head of the Department Management Sciences
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\\\\\\







ACKNOWLEDEMENT











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ACKNOWLEDGMENT

With great reverence, I wish to express deep gratitude towards Al-Mighty ALLAH who has
blessed me with all that I have done. I also want to thanks Mrs. Ahsan Rizvi, Department of
Management Sciences, Bahria University, under whose dynamic supervision this report has been
completed.
Hope that the knowledge gained through this Research Report will help in the future
endeavors.

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DEDICATION










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DEDICATION

I would like to dedicate my thesis to my Parents, Teachers and Friends.















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TABLE OF CONTENTS









Table of Content
_Toc385139093ABSTRACT .................................................................................................................. 12
CHAPTER 1 ........................................................................................................................................... 14
BACKGROUND & STATEMENT ...................................................................................................... 14
OF PROBLEM ....................................................................................................................................... 15
1. INTRODUCTION .......................................................................................................................... 15
1.1. BACKGROUND OF THE RESEARCH .................................................................................... 15
1.1.1. DEFINITION OF MONEY LAUNDERING ......................................................................... 16
1.1.2. THE SCALE OF THE PROBLEM ........................................................................................ 16
1.1.3. ORIGIN OF MONEY LAUNDERING .................................................................................. 17
1.1.4. BACK GROUND HISTORY ................................................................................................. 17
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1.1.5. PROCESS OF MONEY LAUNDERING .............................................................................. 17
1.1.5.1. PLACEMENT ..................................................................................................................... 18
1.1.5.2. LAYERING ........................................................................................................................ 18
1.1.5.3. INTERGRATION ............................................................................................................... 18
1.2. PROBLEM STATEMENT ......................................................................................................... 19
1.3. OBJECTIVE OF THE RESEARCH ........................................................................................... 19
1.4. LIMITATION ............................................................................................................................. 19
1.6. SCOPE ........................................................................................................................................ 19
1.7. ASSUMPTIONS ......................................................................................................................... 20
CHAPTER 2 ........................................................................................................................................... 21
LITERATURE REVIEW & ................................................................................................................... 21
STUDIES ................................................................................................................................................ 21
2. LITERATURE REVIEWS ............................................................................................................. 21
2.1. THE BANKING SECTOR ......................................................................................................... 22
2.1.1. SMURFING/ STRUCTURING .............................................................................................. 22
2.1.2. SHELL COMPANIES ............................................................................................................ 23
2.1.3. TELEPHONIC TRANSFER ................................................................................................... 23
2.1.4. MONEY EXCHANGER ........................................................................................................ 23
2.1.5. REMITTANCES ..................................................................................................................... 23
2.1.6. HUNDI .................................................................................................................................... 23
2.2. MONEY LAUNDERING IN PAKISTAN ................................................................................. 24
2.2.1. METHODS USE IN PAKISTAN FOR MONEY LAUNDERING ....................................... 24
2.2.1.1. FORMAL METHODS ........................................................................................................ 24
2.2.1.2. NON FORMAL METHOD ................................................................................................ 24
2.2.1.3. PRIZE BONDS ................................................................................................................... 25
2.2.1.4. REAL ESTAE SCHAMES ................................................................................................. 25
2.2.1.5. RETAIL BUSINESSES/HOTELS BUSINESSES ............................................................. 25
2.3. BANK FACE LOSSES BY MONEY LAUNDERING ............................................................. 25
CHAPTER 3 ........................................................................................................................................... 25
RESEARCH METHODOLOGY & PROCEDURE ............................................................................. 26
3. RESEARCH METHODOLOY & PROCEDURE .......................................................................... 26
3.1. RESEARCH DESIGN ................................................................................................................ 26
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3.2. PROCEDURE ............................................................................................................................. 26
3.2.1. STAGE 1 ................................................................................................................................. 27
3.2.2. STAGE 2 ................................................................................................................................. 27
3.2.3. STAGE 3 ................................................................................................................................. 27
3.3. DATA COLLECTION METHOD ............................................................................................. 27
3.4. POPULATION ........................................................................................................................... 27
3.5. SAMPLING ................................................................................................................................ 27
3.6. MEASUREMENT ...................................................................................................................... 28
3.7. TIME FRAME ............................................................................................................................ 28
CHAPTER 4 ........................................................................................................................................... 28
PRESENTATION ANALYSIS & .......................................................................................................... 28
FINDINGS ............................................................................................................................................. 29
4. RESULT ANALYSIS AND FINDINGS ....................................................................................... 29
4.1. INTERVIEW ANALYSIS .......................................................................................................... 29
4.1.1. INTERNAL ARRANGEMENT TO CHECK MONEY LAUNDERING ............................. 29
4.1.1.1. AUTOMATED SYSTEM OF PRODUCING REPORTS .................................................. 29
4.1.1.2. TRAINING ......................................................................................................................... 30
4.1.1.3. RECORD KEEPING .......................................................................................................... 30
4.1.1.4. DORMANT ACCOUNTS .................................................................................................. 30
4.1.1.5. REMITTANCES ................................................................................................................. 30
4.1.1.6. CASH TRANSACTIONS ................................................................................................... 31
4.2. DIFFERENT IMPACT OF MONEY LAUNDERING .............................................................. 31
4.2.1. SOCIAL IMPACT OF MONEY LAUNDERING ................................................................. 31
4.2.2. MACRO ECONOMIC IMPACT OF MONEY LAUNDERING ........................................... 31
4.3. LAW RELATING TO MONEY LAUNDERING ..................................................................... 32
4.4. ANALYSIS OF QUESTIONNAIRE .......................................................................................... 33
CHAPTER 5 ........................................................................................................................................... 36
CONCLUSION& ................................................................................................................................... 37
RECOMMENDATION ......................................................................................................................... 37
5. CONCLUSION AND RECOMMENDATIONS ............................................................................ 37
5.1. CONCLUSION ........................................................................................................................... 37

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ABSTRACT
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ABSTRACT
The basic objective of this research is to identify and discuss the methods of money laundering used in
Pakistan. Money laundering by using banking channels is not a new thing in Pakistan, after 9/11, the
consequences of money laundering have seen internationally, especially with perspective of Pakistan,
being a Muslim country. In all over the world, the importance of money laundering have seen in last
decade, therefore all banks from all over the work must have develop a confidential unit name is
compliance, who continuously looking and working on the customer suspicious activities through
banking channels.
Pakistan also in the category of high risk jurisdiction, due to fail to implement FTAF recommendations
and tighten the AML/CFT policies through parliament. Pakistan needs to enact AML/CFT act through
parliament.
There are diverse ways that are in practice for money laundering in commercial banks similar to
placement, layering, and integration. The money laundering on one hand creates the social problem like
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concentration of wealth in few hands and on the other hand, from commercial banks point of view it
results in the unbalanced increase in deposit of the banks. The phenomenon of money laundering was not
so much famous before the 9/11. The incidence of 9/11 opened the eyes of financial institutions and the
regulatory bodies specially in the USA because before 9/11 there were many shell banks (fugue banks)
which used to transact with huge funds without any source of origin of these funds, which resulted in the
disaster like 9/11.Money laundering exists in Pakistan, and money launders normally using banking
channels and hundi, hawala system to launder money from one place to other place, detail analysis have
done in this research.
All banks must be focus on KYC process at the time of account opening and ongoing basis; Know your
customer is very crucial part to prevent banks from money laundering.
In this study, researcher define the process of money laundering, and how it works and how Pakistani
banking channels is being used for money laundering, researcher also describe the facts and figures of
money laundering and its impact on country, as a social and as a political. Researcher conducted
interviews, fills up questionnaires from different bankers, reviewed prior history and then researched to
conclude this research with recommendations.
Key words: Money laundering, FATA, AML/CFT, KYC





CHAPTER 1
BACKGROUND & STATEMENT
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OF PROBLEM










1. INTRODUCTION
1.1. BACKGROUND OF THE RESEARCH
The basic purpose of this research is to find out the process and techniques of money laundering used in
Pakistan with perspective of International arena. In this research we will cover all areas of money
laundering with the help of Banking systems and process in Pakistan. In this research we will also discuss
Pakistan Standing in International prevent money laundering and terrorist financing. After 9/11 the
department of compliance to safeguard banks from money laundering was established and working
efficiently day by day. Pakistan not so far away to stop terrorist financing.SBP AML Regulations quite
enough to strengthen the financial institution from money laundering, but the money launders knows
more ways to convert black money into white money.
Pakistan also passed an ordinance of money laundering AMLO 2007, in which SPB clearly mentioned
thats every step of ML fall in predicate offences. Normally Financial institution is being used by Money
launders as a channel to convert ill-gotten money to legal money. There are many processes to convert
back money into white money.
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There are many ways in practice for money launders to hide true source of income, normally three
processes in banking sectors is being used for money laundering, start with placement, they layering and
finally integration. The money launder on one hand creates intense social issues, like compiling wealth in
few people.
The Phenomenon of money ML was not quite famous before incident of 9/11. Incident of 9/1, opened
eyes of every one, especially for regulatory bodies and financial institutions in USA or outside of the
USA, because before this incident, there were many shell banks or shell financial institutions which were
used to transact hue amount of funds without any source of origin, resulted terrorists finance begins.
After incident of 9/11, there are definite rules and regulations were established at international level to
safeguard money laundering like Money Laundering Act 1986 USA, Criminal of terrorism Act UK.
Money laundering and financial crimes strategy Act 1998, USA.
The SBP took many steps to control the money laundering in banking sectors. In this regard, The SBP has
provided Anti Money Laundering regulations. In the last point, researcher concluded this research that the
money laundering is present in various ways and it is affecting the financial system in Pakistan.
Approximately USD $ 1 billion yearly money laundering arises in Pakistan. In the last researcher
suggested that the Pakistan banks or regulatory authority should take necessary actions to prevent
Pakistani baking systems from money laundering.
1.1.1. DEFINITION OF MONEY LAUNDERING
Money laundering is basically the concept of converting black money into white money (FATF
Recommendations), Money launderers do to hide true source of funds, Money laundering is basically use
to hide illicit money from its true source.
The conversion of illicit money into legal money is called money laundering. Money launders usually use
banking channels to hide the true source of money.
Money laundering is the process by which hue amount of funds earned by illegally i.e drug trafficking,
terrorist activities or other offenses define by FATF, is given the appearance of having originated from a
legitimate source.
1.1.2. THE SCALE OF THE PROBLEM
In the decade of 1990s, the money laundering was estimated through drug trade by IMF approximately
8% of the world trade equivalent to 2-5 % Global GDP and exceeding $ 100 billion on annual basis. In
2006, IMF estimate money laundering annually amount between 800 to 2 trillion US Dollars in todays
term.
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Many financial institutions were fined due to engaged in the money laundering activities or due to week
process of anti money laundering. In 2004, Riggs Bank of Washington also fined and engaged in the
scandal of money laundering. They were failed to conduct due diligence of huge amount of fund flows
into accounts. They faced $25million of penalty. In 2005, ABN AMRO penalties $ 80million for giving
chance of individuals from Russia and other nations to move more than $ 32billion to shell companies in
USA.
1.1.3. ORIGIN OF MONEY LAUNDERING
The origination of money laundering is United States; it comes from Mafia Ownership of launders in the
United States, Gangsters, were earning hue amount of cash through gambling, prostitution, extortion, and
then they need to show illegitimate of money as a legitimate source of money. For this conversion, they
were used banking channels.
1.1.4. BACK GROUND HISTORY
In 1920, the term money laundering was emerged, when US Gangster needs to hide their illicit money.
They tried to find a way to hid true source of their income.
In 1980, Money Laundering arises as a crime, essentially, within drug trafficking, terrorism, and high
jacking was also the main reason of money laundering and creates the awareness of the commercial banks
and developed nation regarding the issue of money laundering.
The Process of money ML was not quite famous before incident of 9/11. Incident of 9/11, opened eyes of
every one, especially for regulatory bodies and financial institutions in USA or outside of the USA,
because before this incident, there were many shell banks or shell financial institutions which were used
to transact hue amount of funds without any source of origin, resulted terrorists finance begins.
1.1.5. PROCESS OF MONEY LAUNDERING
There are three stages or process of money laundering.
Placement
Layering
Integrating

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1.1.5.1.PLACEMENT
Placement is first stage of the money laundering; this is the initial point when the money launders place
their criminal money into banks.
1.1.5.2.LAYERING
After placement of criminal fund in the bank, money launders creates the complex networks of
transactions among different banks and same banks but different branches and transfer money from one
bank to other bank, that hide the true source of fund and difficult to trace.
1.1.5.3.INTERGRATION
Integration is the third stages of the money laundering in which money launders, buy luxury goods i.e
luxury cars, watches, gold, diamonds etc, through illicit money and integrate illegitimate money in the
economy of the country.
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1.2. PROBLEM STATEMENT
The basic purpose and objective of this research is to prevalence of money laundering and its
consequences in banking industry in Pakistan. This research will find out the process of money
laundering and terrorist financing by using banking channel.
1.3. OBJECTIVE OF THE RESEARCH
The main objective of this research is to comprehend the problem that arises due to money laundering, i.e
unbalanced growth in the deposit in banking industry. Following are the some objective that will address
in this research:
To understand the money laundering process and its implication.
To find out the risk that associated with money laundering.
To find out the current trend of money laundering.
To highlights the laws and regulations to prevent banks from money laundering.
To highlights the level of satisfaction of Pakistani regulations to prevent money laundering.
1.4. LIMITATION
The topic is very broad and controversial, and banks are restricted to disclose polices and procedures to
control the money laundering. This research is based on secondary as well as primary source like
interviews and questionnaires thats why its not easy for research to conduct interview from all
AML/CFT Analyst, MLRO or CCO of the financial institutions, randomly interviews being conducted to
analyze the current trend of money laundering in Pakistan, and its perspective as well as the role of
compliance in the banking sectors to control the money laundering.
1.5. JUSTIFICATION
This research study will beneficial for the researcher as well as bankers to analyze the money laundering
and its impact on the banking industry. Bankers will analyze the banking channels and banking that
money launders is using
1.6. SCOPE
Due to lack of time, research frame work only limited to Karachi, and sampling also have done
through telephonic conversation with the branches outside of the Karachi.
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Sample size is only limited to banking sectors. Money laundering though other financial
institution does not part of this research.
1.7. ASSUMPTIONS
This research only focus pattern, methods and techniques of money laundering and its impact on
banks instead of actual amount of money launders through banking channels.
No specific name of any bank would be disclose in this research for money laundering
No Specific name of any group disclose in this research, who are involved in Money Laundering
by using Banks.















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CHAPTER 2
LITERATURE REVIEW &
STUDIES









2. LITERATURE REVIEWS
The basic purpose of this research is to find out the process and techniques of money laundering used in
Pakistan with perspective of International arena. In this research we will cover all areas of money
laundering with the help of Banking systems and process in Pakistan. In this research we will also discuss
Pakistan Standing in International prevent money laundering and terrorist financing. After 9/11 the
department of compliance to safeguard banks from money laundering was established and working
efficiently day by day. Pakistan not so far away to stop terrorist financing.SBP AML Regulations quite
enough to strengthen the financial institution from money laundering, but the money launders knows
more ways to convert black money into white money.
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Pakistan also passed an ordinance of money laundering AMLO 2007, in which SPB clearly mentioned
thats every step of ML fall in predicate offences. Normally Financial institution is being used by Money
launders as a channel to convert ill-gotten money to legal money. There are many processes to convert
back money into white money.
There are many ways in practice for money launders to hide true source of income, normally three
processes in banking sectors is being used for money laundering, start with placement, they layering and
finally integration. The money launder on one hand creates intense social issues, like compiling wealth in
few people.
The Phenomenon of money ML was not quite famous before incident of 9/11. Incident of 9/1, opened
eyes of every one, especially for regulatory bodies and financial institutions in USA or outside of the
USA, because before this incident, there were many shell banks or shell financial institutions which were
used to transact hue amount of funds without any source of origin, resulted terrorists finance begins.
After incident of 9/11, there are definite rules and regulations were established at international level to
safeguard money laundering like Money Laundering Act 1986 USA, Criminal of terrorism Act UK.
Money laundering and financial crimes strategy Act 1998, USA.
The SBP took many steps to control the money laundering in banking sectors. In this regard, The SBP has
provided Anti Money Laundering regulations. In the last point, researcher concluded this research that the
money laundering is present in various ways and it is affecting the financial system in Pakistan.
Approximately USD $ 1 billion yearly money laundering arises in Pakistan. In the last researcher
suggested that the Pakistan banks or regulatory authority should take necessary actions to prevent
Pakistani baking systems from money laundering.
2.1. THE BANKING SECTOR
Banking sectors s one of the important part of the money laundering, illicit money is being deposited in
their bank accounts followed by withdrawal in different modes like transfers, online and cash withdrawal
etc. Despite of using banking channels, money launders have some issue they have some arguments i.e
banks report to regulatory authorities like FIU, FIA or other law and enforcement agencies, after
withdrawal or deposits huge cash. There are many ways of money laundering. Followings are the terms
that familiarize term money laundering.
2.1.1. SMURFING/ STRUCTURING
Structuring or Smurfing is the techniques that usually money launderers are using. Smurfing or
structuring means breakup of large amount of fund into small numbers that avoiding the threshold of
reporting CTR (Currency transaction reporting) that is $ 10,000 and above, money launders deposits cash
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in structured form followed by withdrawal in transfer form into different accounts or wire transfer
through remittances.
2.1.2. SHELL COMPANIES
Shell companies also playing a very vital role in money laundering. It is being used in both banking and
non banking sectors. In shell companies, there is no physical place of the business. All transactions are
conducting by professionals on the behalf of beneficial owner. Through the Shell banking, we can not
identify the true beneficial owner of the fund. It is taken by highly professionals, lawyers, accountants,
thats why the real beneficial owner is remain hidden. These professional manage secrecy of the
transactions, they helps for placement of funds and in the last stages integration stage by using fund in
other countries.
2.1.3. TELEPHONIC TRANSFER
Telephonic transfers are very common techniques for money laundering and main tool for all stages
because this is very quick transactions methods. It is very difficult for law and enforcement agencies to
trace quickly.
2.1.4. MONEY EXCHANGER
Money exchange companies are main source of money laundering, they are dealing in cash, and cash
mode of transactions one of the suspicious mode and way of money laundering. They are dealing in
different currencies. A wide range of currencies they are offered along with small denomination banks
notes to larger ones and replacing techniques like money orders, etc.
2.1.5. REMITTANCES
Remittance is very important tool of money laundering. In remittances, there is less regulatory
requirement than institutions and banks, which provide corresponding service. Money launderers are
using this method to launder money from one country to other country.
2.1.6. HUNDI
Hundi or Hawala system one of the important process of money laundering, in which a group involved in
money laundering from one place to other place. This system of money laundering is mostly associated
with Asia. This systems is called Underground banking and usually use in Asian Countries. This system
reduces remittances through banks and results a country lose foreign currency. If the country has shortage
of foreign currency then they loses their currency values.
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Hundi or Hawala system is very common in money laundering; they are using banking channels for
routing the money from one place to other places in the transferring mode.
2.2.MONEY LAUNDERING IN PAKISTAN
Pakistan needs to endorse an anti-money laundering laws and regulations, recently parliament has
approved Anti money laundering bill. In current scenario Pakistan is facing intense pressure from internal
agencies against money laundering. After 9/11 incident, Pakistan on the top of the list, after 9/11 incident
Pakistan is facing severe behavior from all of the world, On the Risk rating Pakistan fall in high risk
country, and this is very big challenge for Pakistan to face and especially for trade purposes. As per
FATF, Pakistans policies towards money laundering are not stronger than other countries.
The basic causes of money laundering in Pakistan is cash base economy, there is no proper
documentation in our country thats why we are facing money laundering instances in Pakistan. Hawal
and Hundi system is vey lucrative business in Pakistan and its being used to remit fund fro Pakistan to
other countries and from other countries to Pakistan without any resistance. State Bank of Pakistan has
also took many actions to control money laundering by using banking or financial institution. SBP also
supporting global agencies to establish well anti money laundering infra structured, they are established
an independent unit that is working independently along with SBP with the help of international
Agencies. SBP established six regulations to control the money laundering from banking sector.
2.2.1. METHODS USE IN PAKISTAN FOR MONEY LAUNDERING
There are two methods of money laundering in Pakistan, money launderers are using both methods formal
or informal.
2.2.1.1.FORMAL METHODS
In formal methods, money lauders are sing banking channels, by open an account by fraudulently in
banks then the are use that account for money laundering purposes, other money laundering methods
including Credit Cards, Travelling cheques etc, but these are not common in use or prevailing of money
laundering in Pakistan, due to magnitude of fund.
2.2.1.2.NON FORMAL METHOD
The non formal methods is being used for money laundering is very old method, under the name of Hundi
or Hawal system. His is very common in Pakistan. This is very simple of un traceable method because
cash is being paid from one point and received by other person in other point, without any documentation.
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2.2.1.3.PRIZE BONDS
Prize bond also very common method of money laundering in Pakistan, there is no restriction to purchase
Prize bond and its non bearing security issued on the behalf of Minster of finance.
2.2.1.4.REAL ESTAE SCHAMES
Investment in real estate is very common method of money laundering, due to poor infrastructure of
documentation, Pakistan is facing very severe problem of money laundering through real estate.
2.2.1.5.RETAIL BUSINESSES/HOTELS BUSINESSES
Hotels and retail business such as super stores etc are also categorize one of method of money laundering.
2.3.BANK FACE LOSSES BY MONEY LAUNDERING
Pakistani Banks directly or indirectly are facing challenges of Money laundering. If the bank is being
used and declared that the banks are affected by money laundering then the bank is facing reputational
risk. All banks operation in Pakistan must developed a unit called Compliance division. Compliance
division is working for the bank to safe guard banks from money launders by using proactive approaches.









CHAPTER 3
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RESEARCH METHODOLOGY &
PROCEDURE









3. RESEARCH METHODOLOY & PROCEDURE
3.1. RESEARCH DESIGN
The major part of this research is based on Primary data. The methodology of the research is descriptive.
Questionnaire is designed to substantiate the results and opinion of the analyst, researchers, bankers and
anti money laundering specialist.
Descriptive method is used for this research, due to its flexibility. Descriptive type of research is to
gathered data in present active form and emphasis on explaining the scenarios instead of judging or
interpreting. Descriptive study is convenient, quick and flexible approach that provides ease to the
researcher; furthermore, researcher can easily do amendment if any new issues or scenario comes during
the research.
3.2.PROCEDURE
The strategy of the research is divided into three different stages.
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3.2.1. STAGE 1
In the first stage, data is gathered through different secondary sources, especially, SBP regulations, 40
recommendation of FATF (Financial Action Task Force), different articles, different reviews already
done by different researchers, AML Specialist and AML Analyst. This is detailed and thoroughly study
and takes a-lot concentrations.
3.2.2. STAGE 2
In the second stage, a focus group and interviews with different bankers and AML Specialist were
conducted, to indentify the factors of money laundering by using banking channels.
3.2.3. STAGE 3
In the third stage, a detailed questionnaire was distributed among the different bankers, and AML
specialist. This stage is very important for analysis, questionnaire was designed very carefully and each
and every question has some worth and values, with the perspective of ML (Money Laundering).
3.3.DATA COLLECTION METHOD
Data collected for this research from two sources, primary and secondary. The data collected trough
Primary source i.e Interviews, focus group, surveys and questionnaire. The data collected through
secondary source i.e SBP regulations, forty recommendations of FATF, AML journals, articles, and
research papers.
3.4.POPULATION
The population of the research depends on all banks operating in Pakistan. The compliance division is
responsible for Money laundering, and implementation of SBP regulations. The focus of this research is
prevalence of money laundering by using banking channels, thats why compliance division is authorize
department to work as a Anti money laundering, so all compliance department of the banks are consider
as a population.
3.5.SAMPLING
The sampling method in the research is used as per our convenience. The respondents of the research
were focus group, interviews were conducted with different AML Analyst, and surveys and
questionnaire were distributed among different bankers.
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The sample size of the focus groups was 6 to 8 money laundering specialist. Some other online interviews
also conducted through out the world.
Standard size questionnaire was selected; total 200 questionnaires were distributed as per our
convenience. Out of 200, only 171 questionnaires were returned.
3.6.MEASUREMENT
This research is measured with the following tools:
Interviews
Focus group
Questionnaire
3.7. TIME FRAME

The time frame of this research is 12 weeks.









CHAPTER 4
PRESENTATION ANALYSIS &
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FINDINGS









4. RESULT ANALYSIS AND FINDINGS
4.1.INTERVIEW ANALYSIS
Detailed interviews were conducted with different bankers, AML specialist; each and every person
provides very effective information. After discussion with them I concluded there remarks with y
interpretation, they highlighted main areas of money laundering and given tips to overcome money
laundering issues. Following are the key factors that minimize the chances of money laundering through
banking channels.
4.1.1. INTERNAL ARRANGEMENT TO CHECK MONEY LAUNDERING
All banks /DFIs must need to establish well internal control system to reduce the chance of money
laundering. Following are the key concepts that reduce the probability of money laundering.
4.1.1.1.AUTOMATED SYSTEM OF PRODUCING REPORTS
All banks needs to acquired electronic data processing system within the bank through banking
softwares that generate automated reports of transactions for review purposes. Now a days very
advanced level of technologies are using for transactions monitoring that reduces chances of money
laundering.
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4.1.1.2.TRAINING
Staff training is very important part of any job. Banks should develop training centre for branch level,
branches must have to train their relationship managers to know about Anti money laundering, if RM
understand AML procedure then they will use their knowledge to prevent Bank for money laundering.
Being a compliance officer, AML training is basic necessity of their day to day work assignment.
As per AML/CFT regulations R-6, all commercial banks should train their compliance officer at optimum
level to understand the phenomenon of money laundering, thats why they instruct every bank to develop
training centre and train every employees regarding Money laundering and how we protect bank from
money laundering.
4.1.1.3.RECORD KEEPING
Record keeping is very crucial part of any organization, especially for the banks, as per SBP AML/CFT
regulation R-6 all banks/DFIs should keep all record up to 10 years in both form hard as well as soft form.
Complete record of inward and outward remittances and other remittances must be store in safe area.
Record keeping also helps banks to trace any customer with his previous track record in the nutshell,
record keeping helps to prevent banks from money laundering.
4.1.1.4.DORMANT ACCOUNTS
Sudden activity in dormant account seems suspicious and unusual activity in the account and compliance
officer must go trough sudden activity in dormant account and report to higher management to trace and
identify and take corrective measures. All dormant accounts must be active in front of Branch managers
ad account holder himself present in the branch and submit an application to active his dormant account.
Sudden activity in dormant accounts also red flag and one way of placing ill-gotten funds into bank. All
compliance officers must give additional attention to transactions that would happen in dormant accounts.
4.1.1.5.REMITTANCES
One of the ways of money laundering is remittance; it is the easiest way of transfer ill-gotten money from
one place to other place. All compliance officers must pay additional attention in remittance; Money
launders provide false information to remit the fund from one place to other place. All bankers must
identify the actual source of fund before remit the fund. Many instances have seen in remittances that
huge amount of fund transferred abroad without knowing the actual source of fund, and few banks were
penalized.
Page | 31

All banks are using advance level of system that protects them from money laundering by using
remittance mode of transfer. OFAC, and European Union and other countries have developed list of black
people who are involved in terrorist activities and money laundering, all banks are using good systems
that screen out that list then release any payment, that decrease the chance of money laundering.
4.1.1.6.CASH TRANSACTIONS
Cash transactions is very common pattern of money laundering, banks have to give extra attention in all
cash transactions and they have to report all cash transactions that above 2.5M single transactions. All
bankers must have to understand the importance of money laundering through cash transactions and give
special attention to cash transactions.
4.2.DIFFERENT IMPACT OF MONEY LAUNDERING
There are many impact of Money laundering, some impacts are:
4.2.1. SOCIAL IMPACT OF MONEY LAUNDERING
Money laundering creates both impacts social and political. Costs of social and political of money
laundering are extremely large, political involvement prevalence the money laundering by using their
political power. Money launders loaded the criminal money into banks and business spoil the social
environment. Illicit money move in the economy and that create bad impact on the economy. Social
environments very affected by money laundering.
4.2.2. MACRO ECONOMIC IMPACT OF MONEY LAUNDERING
The large flow of illicit money creates the distortions in macroeconomics factors and giving rising trend
in unemployment and stops the economic activities and become cause of money laundering haven. Large
flow of illicit money place in banking industry and thereafter they use illicit money in the economy. The
banking standard also affected by money laundering. The impact of money laundering as a
macroeconomic summarized as under:
Dispute normal business activities and public policy decision making
Create distorts in the allocation of financial and banking resources
Discourages the inflow of foreign investment
Damages the country image and its people
Abet corruption in the country
Create bad impact on the country currency
Page | 32

4.3.LAW RELATING TO MONEY LAUNDERING
Following are the laws associated with money laundering that helps to control the money laundering:
Money laundering Act 1986 (USA)
Money laundering control Act 1986 (USA)
Financial transactions reports Act 1988 (AUS)
Criminal of terrorism Act (UK)
Money laundering Regulations 1993 (UK)
Drug trafficking Act 1994 (UK)
Money laundering suppression (USA)
Criminal Justice Act 1995 (SCOT)
Proceed of Crime Act 1995 (SCOT)
Money laundering and financial crimes strategy Act 1998 (USA)
Control of Narcotics substances Ordinance 1995 (PAK)

Mechanism of preventing Banks from Money Laundering


Page | 33

4.4. ANALYSIS OF QUESTIONNAIRE

When researcher asked this question, does the money laundering exist in Pakistan, then 97% respondent
said yes it exist and it increasing day by day, we need to improve our systems and need to implement
AML/CFT measures in all over Pakistan. Money launders usually use banking channels to launder money
over here.

In the above question, respondent said in Pakistan, money laundering usually done by hundi, smurfing, and
money changers. 36% respondent said in Pakistan, money laundering done by using Hundi and 31%
respondent said by Banking channels and 16% respondent said by money changer, and 17% respondent
said they are using Smurfing.
97%
3%
Money Laundering Exist in Pakistan
Yes No
Hundi
36%
Smurfing
17%
Banking products
31%
Money Changer
16%
If yes, which Source is used fr money laundering
Page | 34


When researcher asked the question what level of money laundering exist in Pakistan, 36% respondent said
50% level of money laundering exist and 30% respondent said 75% exist and 19% respondent said 100%
level of money laundering exist in Pakistan.

When the most important question asked with the respondent what is the level of cash transactions, 100%
respondent said there is no limits of cash transaction in the banking sector, and this is very serious issues
and no one giving so much interest if the financial institution give attention in this area then we can stop
money laundering.

0% - 25%
15%
25% - 50%
36%
50%- 75%
30%
75% - 100%
19%
Level of Money Laundering Exist in Pakistan
0% 0%
100%
Banks allow Cash Transactions deposits at a
time.
1M - 10 M 10M - 20M No Limits
Page | 35


When researcher asked this question, does AML and KYC goes hand to hand, the 57% respondent said
yes, there is directly link between AML and KYC, if you know your customer then you can easily
categorize them according to their risk, KYC is vey important part of the customer profiling. 31%
respondent said they dont know and 1% respondent said no, both are separately goes, money launder are
very cleaver and they are hiding them self and no one can judge easily.

Does a bank use KYC as a on going process? 63% respondent said yes it is on going process and banks
revised customer KYC as per customer profile, and 37% respondent said they use KYC only at the time
of account opening.
Yes
57%
No
12%
Dont Know
31%
Does Anti Money Laundering and KYC go hand in
hand
Ongoing process
63%
At the time of
account opening
37%
Do Banks use KYC as
Page | 36


Staff training is very important part of AML/CFT unit. If the analyst not well educated to related filed
then how can he analyze complex situations, 36% respondent said they get trained only annual basis, and
42% respondent said they get training on every six months and only 22% compliance officers said they
get training on quarterly basis. As per SBP AML/CFT regulations point no 6, every banks must trained
their compliance officers at least once a year. Its is mandatory requirement for every banks.








CHAPTER 5
22%
42%
36%
Staff Training
Quarterly Semiannually Annually
Page | 37

CONCLUSION&
RECOMMENDATION









5. CONCLUSION AND RECOMMENDATIONS
5.1.CONCLUSION

The basic objective of this research is to identify and discuss the methods of money laundering used in
Pakistan. Money laundering by using banking channels is not a new thing in Pakistan, after 9/11, the
consequences of money laundering have seen internationally, especially with perspective of Pakistan,
being a Muslim country. In all over the world, the importance of money laundering have seen in last
decade, therefore all banks from all over the work must have develop a confidential unit name is
compliance, who continuously looking and working on the customer suspicious activities through
banking channels.
Pakistan also in the category of high risk jurisdiction, due to fail to implement FTAF recommendations
and tighten the AML/CFT policies through parliament. Pakistan needs to enact AML/CFT act through
parliament.
Page | 38

There are diverse ways that are in practice for money laundering in commercial banks similar to
placement, layering, and integration. The money laundering on one hand creates the social problem like
concentration of wealth in few hands and on the other hand, from commercial banks point of view it
results in the unbalanced increase in deposit of the banks. The phenomenon of money laundering was not
so much famous before the 9/11. The incidence of 9/11 opened the eyes of financial institutions and the
regulatory bodies specially in the USA because before 9/11 there were many shell banks (fugue banks)
which used to transact with huge funds without any source of origin of these funds, which resulted in the
disaster like 9/11.Money laundering exists in Pakistan, and money launders normally using banking
channels and hundi, hawala system to launder money from one place to other place, detail analysis have
done in this research.
To prevent the banks from money laundering, USA and other countries have develop some laws and
ACTs to prevent banks from money laundering. USA is very active member in this field. Financial
Action Task force is doing excellent work in to prevent financial institution from money laundering.
In this study, researcher define the process of money laundering, and how it works and how Pakistani
banking channels is being used for money laundering, researcher also describe the facts and figures of
money laundering and its impact on country, as a social and as a political. Researcher conducted
interviews, fills up questionnaires from different bankers, reviewed prior history and then researched to
conclude this research with recommendations.
5.2. RECOMMENDATION
On the basis of findings, analysis and review interviews and literature reviews, researchers recommended
following few things that would be beneficial to prevent the banking sector from money laundering.
Banks should attempt sensible efforts to focus the customer identification, and must verify and do
the effective measures for checking the bonafides of new customer.
Banks/DFIs must be participation with law implementation orgs. With any obligations forced by
principles identifying with client privately, banks should collaborate completely with national law
implementation orgs including, where there are sensible reason for suspecting cash washing,
taking suitable measures which are steady with the law.
Banks/DFIs must need to enhance due diligence to manage suspicious and unusual or un-
economic transactions. They must need to investigate the suspicious transactions with advance
level of monitoring system.
All banks/DFIs must follow SBP regulation to prevent Banks from money laundering.
Page | 39

All banks must need to develop or establish their own AML/ KYC policy to prevent bank from
money laundering.
They must need to establish proper handling suspicious transactions.
They must file suspicious transactions report to FMU.
They must develop Compliance department to strengthen the banking system.
Pakistan must need to develop the national anti money laundering database and keeping safely
information submitted by financial institutions.
Pakistan must need to implement World wide recommendations ad must establish their policy on
the basis of FATA 40 Recommendations
By implementation of above mentioned recommendations, the relevant authorities should further
reinforce the battle against the cash launderer and demonstrate to them that there is no spot to cover
up.
Finally, Commercial banks are urged to create programs against money laundering that negligibly
would see the advancement of strategies and methods and the contribution of administration all the
while. On going representative, preparing projects and review checks of the framework are likewise
proposed.












Page | 40

REFERENCES









1. Andreas, Peter, and Ethan, 2006 Origins and transformation of international crime control,
Oxford university press
2. Arjauo, Ricardo Azevedo and Moreira, Tito Belchior, 2005 Inter-Temporal Model of Dirty
Money, Journal of money laundering control
3. Bell. R.E, 2001 Discreation and Decision Making in Money laundering Prosecutions:. Journal of
Money Laundering Control, Vol 5 No 1.
4. Khan Nawz Gul 2002, Anti Money Laundering measures, The Institute of Bankers Pakistan.
5. Wolfsburg AML Principles
6. Norgren C. 2004. The control of risks associated with crime, terror and subversion, Journal of
money laundering control, 7(3).
Page | 41

7. Warren, M.E. 2006, Political Corruption as duplicitous Exclusion. PS Political science and
Politiccs, 37 (4).
8. Asian development banks 2003, Enhancing the sian development Banks role in Combating
Money Laundering and the financing of terrorism.
9. SB regulations AML/CFT
10. Risk based approach (RBA)
11. FATF Recommendations















Page | 42

APPENDI X A: QUESTI ONNAI RE
RESEARCH THESIS
Prevalence of money laundering & its compliance in commercial Banks of
Lahore.
Name of the Bank__________
1. Does money laundering exist in Pakistan?
o Yes
o No
o Do not know
2. If yes, which source is used for money laundering in Pakistan?
o Shall Banks
o Hundi
o Commercial Banks
o Money Changers
o Smuarfing
o Hundi and Money Changers
o Any other
3. To what extent money laundering exist in Pakistan?
o 0% - 25%
o 26%- 50%
o 51% - 75%
o 75% -100%
o To certain extent________
Prevalence of money laundering in Commercial Bank of Pakistan 94
4. To what extent bank allow the money to be deposit by the customer at one
time?
o Rs.100 Rs.1 lac
o Rs.2 lac 10 lac
o Rs.1million Rs.10million
o Rs.10million Rs.20 million
o To certain extent_________
5. To what extent bank allow the depositor, to deposit money over the counter
transaction?
o Rs.100 Rs.1 lac
o Rs.2 lac 10 lac
o Rs.1million Rs.10million
o Rs.10million Rs.20 million
o To certain extent_________
6. What is the maximum interest rate on deposit, when deposit is greater then 1
million?
o 0% - 10%
o 11% - 20%
o 21% - 30%
o 31% - 40%
o To certain extent_________
7. Does bank allow the depositor to transfer money from one bank to another bank
or other country banks?
o Yes
o No
Prevalence of money laundering in Commercial Bank of Pakistan 95
8. If yes, then what effect on the performance of the bank?
Page | 43

o Increase the performance.
o Decrease the performance.
o Decrease the deposit.
o No effect.
9. To what extent (minimum to maximum) permission is granted to the customer
by the bank to transfer money from on bank to another bank or from one
country to another country?
o Rs.1000 - Rs. 1 Lac
o Rs. 1Lac - Rs. 1 million
o Rs. 1 million - Rs. 10 million
o Rs.10 million Rs. 20 million
o To certain extent_________
10. Does bank allow the non-account holder to transfer money to the other bank or
to another branch of the same bank, or from other country bank?
o Yes
o No
11. To what extent the bank allow the non-account holder to transfer the money at
one time?
o Rs 1000 Rs. 10000
o Rs. 10000 Rs. 1 Lac
o Rs. 1 Lac Rs.5 Lac
o Rs. 5 Lac Rs 10 Lac
o To certain extent________
12. To what extent the bank allow the non account holder to transfer amount to his
Prevalence of money laundering in Commercial Bank of Pakistan 96
own account?
o Rs 1000- Rs 10000
o Rs 10000 Rs. 1 Lac
o Rs. 1 Lac Rs. 5 Lac
o To certain extent________
13. To what extent (minimum to maximum) transfer fee is charged by the bank
when the amount is transferred from one destination to another destination?
o 0% -10%
o 11% -20%
o 21% -30%
o 31% - 40%
o To certain extent______
14. Does anti-money laundering and KYC go hand in hand?
o Yes
o No
o Does not know
15. Which identifying bank systems will you introduce as a result of KYC?
o Customer information
o Customer nature of business
o Customer source of income
o All of the above
16. Do Banks use KYC as?
o Ongoing process
o It done when bank need information
o When SBP advice the Banks.
o To be conducted at the time when bank entering into a formal
Page | 44

relationship with Customer.
Prevalence of money laundering in Commercial Bank of Pakistan 97
o All of above
17. How can bank recognize the customer which has never been seen before?
o Introduction
o ID card
o Reference
o All of above
18. Which elements are used to manage the money laundering risk in the bank?
o Senior management oversight
o Well defined organizational structure and staffing
o Independent monitoring and assessment
o Ongoing interaction with audit and risk review and other control
functions.
o All of the above
19. Which Customers must be identified by the bank?
o Worthy customers
o High risk customers
o Non resident customers
o Resident customers
o All of the above
20. How money laundering effect the bank?
o Unbalanced growth in deposit.
o Provide liquidity position.
o Performance increase.
o Risk Increase.
o Deposit increase.
Prevalence of money laundering in Commercial Bank of Pakistan 98
o All of above.
21. If money laundering effect on the bank then which type of risk create money
laundering for the bank.
o Reputation risk
o Credit risk
o Operational risk
o Compliance risk
o All of above
22. Does the bank take steps to understand the normal and expected transactions of
its customers based on its risk assessment of its customers?
o Yes
o No
23. Which prudential regulation is implemented by the bank to identify the
customer?
o KYC
o Anti money Laundering
o both
24. How frequently are your staffs trained on KYC processes?
o Quarterly
o Semiannually
o Annually
o Both
25. Do you have any suggestion about the anti money laundering?
Page | 45

Prevalence of money laundering in Commercial Bank of Pakistan 99
APPENDI X B: Glossary
Money laundering
The process by which the proceeds of crime are converted into assets which appear to
have a legitimate origin.
Anti money laundering
Anti money laundering, the process by which efforts. are made to prevent and, detect
money laundering
Compliance
The process complying with laws, regulations and guidance.
Base l
The Basel Committee formulates broad supervisory standards and guidelines and
recommends statements of best practice for banking supervisory authorities to
implement in ways best suited to their own national systems.
Basel II
The Basel committee of banking supervisions. Basel II helped to strengthen the
soundness and stability of the international banking system as a result of the higher
capital rations it required.
Know Your Customer (KYC)
The requirement that financial institutions understand who their customers are, which
includes obtaining documentation to verify identity, address source of Income.
Non-Bank institution
Non-Banking Financial Institutions By law or regulation, the jurisdiction requires non
bank financial institutions to meet the same customer identification standards and
adhere to the same reporting requirements that it imposes on banks.
Data Protection
The regulation of the use of personal data held by businesses, covering the way such
Information is handled and the rights of individuals to gain access to information held
about them.
Dormant Accounts
These are bank accounts where there have been no transactions (deposits or
withdrawals for a period of time (usually at least a year) and where the account holder
has made no contact with the bank during the period or following attempts made by
the bank to make contact with the account holder.
Terrorist Financing
The financing of terrorist acts, terrorists, and terrorist organizations
Financial Action Task Force (FATF)
Financial action task force is an inter-governmental body; its Secretariat is based at the
Organization for Economic Co-operation and Development (OECD). FATFs purpose
is to develop and promote policies to combat money laundering and terrorist financing.
It currently has 29 member countries.
Prevalence of money laundering in Commercial Bank of Pakistan 100
Transaction Monitoring: Monitoring customer transactions for indications of
suspicious activity report to be filed.




Page | 46






APPENDIX-A












Page | 47

QUESTIONNAIRE
RESEARCH THESIS

Name of the Bank__________
1. Does money laundering exist in Pakistan?
o Yes
o No
o Do not know

2. If yes, which source is used for money laundering in Pakistan?
o Shall Banks
o Hundi
o Commercial Banks
o Money Changers
o Smuarfing
o Hundi and Money Changers
o Any other

3. To what extent money laundering exist in Pakistan?
o 0% - 25%
o 26%- 50%
o 51% - 75%
o 75% -100%
o To certain extent________

4. To what extent bank allow the money to be deposit by the customer at one time?
o Rs.100 Rs.1 lac
o Rs.2 lac 10 lac
o Rs.1million Rs.10million
o Rs.10million Rs.20 million
o To certain extent_________

5. To what extent bank allow the depositor, to deposit money over the counter transaction?
o Rs.100 Rs.1 lac
o Rs.2 lac 10 lac
o Rs.1million Rs.10million
o Rs.10million Rs.20 million
o To certain extent_________

6. Does bank allow the depositor to transfer money from one bank to another bank or other country
banks?
o Yes
o No

7. If yes, then what effect on the performance of the bank?
o Increase the performance.
o Decrease the performance.
o Decrease the deposit.
o No effect.

Page | 48

8. To what extent (minimum to maximum) permission is granted to the customer by the bank to transfer
money from on bank to another bank or from one country to another country?
o Rs.1000 - Rs. 1 Lac
o Rs. 1Lac - Rs. 1 million
o Rs. 1 million - Rs. 10 million
o Rs.10 million Rs. 20 million
o To certain extent_________

9. Does bank allow the non-account holder to transfer money to the other bank or to another branch of the
same bank, or from other country bank?
o Yes
o No

10. To what extent the bank allow the non-account holder to transfer the money at one time?
o Rs 1000 Rs. 10000
o Rs. 10000 Rs. 1 Lac
o Rs. 1 Lac Rs.5 Lac
o Rs. 5 Lac Rs 10 Lac
o To certain extent________

11. To what extent the bank allow the non account holder to transfer amount to his own account?
o Rs 1000- Rs 10000
o Rs 10000 Rs. 1 Lac
o Rs. 1 Lac Rs. 5 Lac
o To certain extent________

12. To what extent (minimum to maximum) transfer fee is charged by the bank when the amount is
transferred from one destination to another destination?
o 0% -10%
o 11% -20%
o 21% -30%
o 31% - 40%
o To certain extent______

13. Does anti-money laundering and KYC go hand in hand?
o Yes
o No
o Does not know

14. Which identifying bank systems will you introduce as a result of KYC?
o Customer information
o Customer nature of business
o Customer source of income
o All of the above

15. Do Banks use KYC as?
o Ongoing process
o It done when bank need information
o When SBP advice the Banks.
o To be conducted at the time when bank entering into a formal relationship with Customer.
o All of above
Page | 49

16. How can bank recognize the customer which has never been seen before?
o Introduction
o ID card
o Reference
o All of above

17. Which elements are used to manage the money laundering risk in the bank?
o Senior management oversight
o Well defined organizational structure and staffing
o Independent monitoring and assessment
o Ongoing interaction with audit and risk review and other control functions.
o All of the above

18. Which Customers must be identified by the bank?
o Worthy customers
o High risk customers
o Non resident customers
o Resident customers
o All of the above


19. If money laundering effect on the bank then which type of risk create money laundering for the bank.
o Reputation risk
o Credit risk
o Operational risk
o Compliance risk
o All of above

20. Which prudential regulation is implemented by the bank to identify the customer?
o KYC
o Anti money Laundering
o both

21. How frequently are your staffs trained on KYC processes?
o Quarterly
o Semiannually
o Annually
o Both








Page | 50











APPENDIX-B












Page | 51


Glossary
Money laundering
The process by which the proceeds of crime are converted into assets which appear to
have a legitimate origin.
Anti money laundering
Anti money laundering, the process by which efforts. are made to prevent and, detect
money laundering
Compliance
The process complying with laws, regulations and guidance.
Base l
The Basel Committee formulates broad supervisory standards and guidelines and
recommends statements of best practice for banking supervisory authorities to
implement in ways best suited to their own national systems.
Basel II
The Basel committee of banking supervisions. Basel II helped to strengthen the
soundness and stability of the international banking system as a result of the higher
capital rations it required.
Know Your Customer (KYC)
The requirement that financial institutions understand who their customers are, which
includes obtaining documentation to verify identity, address source of Income.
Non-Bank institution
Non-Banking Financial Institutions By law or regulation, the jurisdiction requires non
bank financial institutions to meet the same customer identification standards and
adhere to the same reporting requirements that it imposes on banks.
Data Protection
The regulation of the use of personal data held by businesses, covering the way such
Information is handled and the rights of individuals to gain access to information held
about them.
Dormant Accounts
These are bank accounts where there have been no transactions (deposits or
withdrawals for a period of time (usually at least a year) and where the account holder
has made no contact with the bank during the period or following attempts made by
the bank to make contact with the account holder.
Terrorist Financing
The financing of terrorist acts, terrorists, and terrorist organizations
Financial Action Task Force (FATF)
Financial action task force is an inter-governmental body; its Secretariat is based at the
Organization for Economic Co-operation and Development (OECD). FATFs purpose
is to develop and promote policies to combat money laundering and terrorist financing.
It currently has 29 member countries.
Prevalence of money laundering in Commercial Bank of Pakistan 100
Transaction Monitoring: Monitoring customer transactions for indications of
suspicious activity report to be filed.