State Bank of Pakistan (SBP) mandates biometric verification
for all branchless banking transactions
In order to combat money laundering and terrorist financing,
the State Bank of Pakistan (SBP) has made biometric verification mandatory for
all branchless banking (BB) transactions.
An official notification from the SBP emphasizes that this
measure aims to enhance controls and safeguard the financial system. The
directive issued by the SBP instructs banks and Microfinance Banks (MFBs)
providing branchless banking services (Authorized Financial Institutions) to
take the following actions:
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Biometric Verification for All Cash Transactions:
Starting from January 31, 2024, all Authorized Financial Institutions must
conduct biometric verification (BV) of account and wallet holders for all
'cash-in' and 'cash-out' transactions at branchless banking agents' locations.
This requirement is in addition to the BV already specified for certain
transactions and customer types in a prior circular.
Deployment of BV Devices: Institutions are encouraged
to prioritize the deployment of new biometric verification devices at agents'
locations, with a particular focus on areas at high risk for Terrorist
Financing (TF). Subsequently, this deployment will extend to other areas across
the country.
Technology Upgrades: Banks and MFBs are directed to
take all necessary measures and controls, including hardware and software
upgrades, to ensure compliance with the new BV requirements.
Strengthened Transaction Monitoring: Automated
Transaction Monitoring Systems (ATMS) must be enhanced to capture all
branchless banking transactions, including those conducted at agents'
locations. The system should have the capability to identify suspicious,
unusual, or out-of-pattern transactions and highlight accounts with a notably
high number of transactions. Any flagged activities should be subject to further
assessment and reported as Suspicious Transaction Reports (STRs) under the
Anti-Money Laundering (AML) Act of 2010. Additionally, the ATMS should have the
ability to reconstruct individual branchless banking transactions to aid in
gathering necessary evidence for potential criminal investigations under
relevant laws.
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Internal Risk Assessment Reports: Authorized
Financial Institutions are instructed to ensure comprehensive coverage of
branchless banking operations in their Internal Risk Assessment Reports (IRARs)
as required by the SBP's Anti-Money Laundering (AML), Counter Financing of
Terrorism (CFT), and Countering Proliferation Financing (CPF) Regulations.
The SBP's decision to mandate biometric verification for
branchless banking transactions demonstrates its commitment to strengthening
the financial system's integrity and combatting illicit financial activities.
This move is anticipated to contribute to a more secure and transparent
financial environment in Pakistan, aligning with global efforts to combat money
laundering and terrorist financing. Stakeholders in the banking sector are
urged to promptly implement these measures to ensure compliance and fortify the
country's financial safeguards.
Source: pkrevenue.com