Securities

and

Exchange

Commission

of

Pakistan

A Project Under Technical Assistance Of The World Bank

ANTI- MONEY LAUNDERING UNIT

BRIEF SERIES
VOL. I, Feb, 2003

Money Laundering; The Concept and the Role of SEC Introduction

The volume of global financial transactions in the last two decades has increased exponentially, especially in the wake of Globalization and financial liberalization. The abundance of such C apital has subsequently given rise to opportunities to launder money through sophisticated financial channels. This issue has become a growing concern, more so than ever before in the events of September 11, 2001. It is imperative that this topic is well understood and its significance realized. 1) According to the United Nations, the term Money Laundering is defined as: Any act or attempted act to disguise the source of money or assets derived from criminal activity. It is the process whereby dirty money produced through criminal activity- is transformed into clean money. Money laundering activities have incredibly detrimental ramifications. The activity damages the financialsector institutions that are critical for economic growth, reduces productivity in the economys real sector by diverting resources and encourage crime and corruption which impede economic growth, and can distort the economys external sector- international trade and capital flows- to the detriment of long-term economic development. Effective anti-money-Laundering policies, on the other hand, reinforce a variety of good governance policies that help sustain economic development. 2. According to a conservative estimate, over US$1.0 trillion exchange hands everyday. A) South Asian Middle Eastern Countries are specifically urged to develop a strong strategy to combat Money Laundering and terrorist financing. Keeping this in mind, B) In a developing Country like Pakistan, it is imperative for regulators to be watchful of the fact that any wrong signal in this regard may hamper much needed Capital Investment in the market. Laundering of the Financial Action Task Force (FATF)

SEC-AML UNIT
Realizing the global sensitivity on combating Money Laundering activities, The SEC with the help of World Bank assistance, has set up an AML unit. The SEC-AML unit is fully cognizant of Pakistans need to develop the market on International standards, so as to maximize the attraction of foreign Investment. Its role is primarily preventive and not necessarily investigative. Two professionals, reporting to the Executive director (CS), are committed Full time to the project. The SEC-AML unit made a detailed presentation to the Chairman and senior members of the Commission on 29th Jan 2003. The presentation included various recommendations and future plans for the Unit. Most of the recommendations were unanimously agreed upon and the Chairman directed for their immediate implementation. The most prominent being (I) Introduction of know-yourcustomer account opening forms, (ii) Payments and receipts above Rs 50,000/- to be made through cheques, and (iii) designation of compliance officers. The implementation of these recommendations will be quintessential to SECs efforts in projecting Pakistan as a country, which is fully cognizant and responsible to its international obligations.

The Rationale Laundering

for

Money

Today, enterprise criminals of every sort, from drug traffickers to stock fraudsters to corporate embezzlers and commodity smu gglers, must launder the money flowing from their crimes for two reasons: The first is that the money trail itself can become evidence against the perpetrators of the offence; the second is that the money per se can be the target of investigation and seizure.

The International Initiative against Money Laundering

The international agreements or treaties, which form the framework for cooperation in money laundering matters include: United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988; UN Security Councils Resolution No. 1373 against terrorist financing; IOSCOs Resolution of 1992 on money laundering; the Basel Statement; The 40+8 recommendations on money