19 Mar 2020
The Central Bank of the UAE is in consultations with its counterpart in Islamabad and will sanction a Pakistani lender operating in the emirates if it deems the bank has breached its anti-money laundering (AML) laws.
The central bank has “zero tolerance for non-compliance with AML regulations,” and expects “high standards of AML compliance from all banks, including the branches of foreign banks operating in the UAE,” according to a statement on Wednesday.
“We are in close contact with the home regulator of the Pakistani bank, the State Bank of Pakistan, and will take appropriate regulatory action once we have verified the findings,” it said.
The UAE regulator’s response comes after media reports alleged that State Bank of Pakistan (SBP) discovered that the UAE operation of one of the South Asian nation’s largest banks displayed “significant irregularities” in dealings with politically exposed clients and screening some transactions.
The findings in a report by Pakistan’s central bank, finalised in the first half of 2019, was conducted after the Financial Action Task Force (FATF), a global watchdog for illicit financial activities, put Pakistan on its monitoring list, Bloomberg reported earlier this week.
Employees in some of its UAE branches allegedly helped certain customers disguise transactions by issuing pay orders in their own names, while gaps in risk profiling and monitoring reflected an “ineffective compliance function and compliance culture”, the SBP said. In an earlier draft version of its inspection report, also seen by Bloomberg, the central bank said UAE staff skirted rules when opening an account for Duduzane Zuma, the son of former South African President Jacob Zuma, and for relatives of Gabonese President Ali Bongo.
However, the Pakistani central bank’s final inspection report said the lender took some remedial measures.
In September last year, New York’s banking regulator fined the Karachi-based bank for weak anti-money-laundering controls and sanctions compliance and ordered it to surrender its license, effectively removing the lender from the US financial system.
By Sarmad Khan, The National, 18 March 2020
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