AML and CFT regulations for Lawyers
AML and CFT regulations for Lawyers: Face to Face meeting with FATF Secretariat on Pakistans’ Post Observation Periodical Report (PoPR) is approaching in second week of May, 2021. The FATF body is to be updated on the issuance of regulations with regard to DNFBPs.
As an Oversight Body of SRBs of lawyers, this Division has already made Oversight Body regulations for the Pakistan Bar Council.
Keeping in view the FATF requirements and methodology, the draft regulations titled “the Anti-Money Laundering and Combating Financing of Terrorism AML-CFT Regulations for lawyers and other independent Legal Professions (DNFBPs), 2021” have beer-. developed.
The Pakistan Bar Council being Self Regulatory Body (SRB), as notified by the Federal Government, under Anti-Money Laundering Act, 2010 (Act VII of 2010) is also required to issue these regulations.
Being Chairman Pakistan Bar Council, you are requested to expedite the issuance of these regulations to all the Bar Councils for lawyers
These regulations may be called the Anti-Money Laundering and Combating Financing of Terrorism AML-CFT Regulations for lawyers and other independent legal professions (DNFBPs) 2021.
(2) They shall come into force at once.
(3) These regulations shall apply to lawyers, and other Legal Professions and Law firms.
Definitions.—(1) In these regulations, unless there is anything repugnant in the subject or context,—
(a) “Act” means the Anti-Money Laundering Act, 2010 (Act VII of 2010);
(b) “Bar Council” means Bar Council as defined under Legal Practitioners and Bar Council Act, 1973 (Act XXV of 1973);
(c) “client or customer” means any person engaging a lawyer or a law firm for the purposes of legal advice and or using legal services;
(d) “close associate” of a PEP means—
(i) any individual known to have joint beneficial ownership of a legal entity or a legal arrangement or
any other close business relations with a PEP;
(ii) any individual who have beneficial ownership of a legal entity or a legal arrangement which is known to have been set up for the benefit of a PEP;
(e) “family member” means and includes—
(i) a spouse of the PEP; and
(ii) lineal descendants, ascendants and siblings of a PEP;
(f) “Islamabad Bar Council” means Islamabad Bar Council as defined in Legal Practitioners and Bar Council Act, 1973 (Act XXV of 1973);
(g) “lawyer” means an advocate as defined in Legal Practitioners and Bar Council Act, 1973 (Act XXV of 1973) and includes independent legal professions and law firms while performing DNF13Ps activities as mentioned in section 2 (xii)(c)(d) of the Act.
AML and CFT regulations for Lawyers
(h) “ML” means money laundering;
(i) “Pakistan Bar Council” means Pakistan Bar Council as mentioned under Legal Practitioners and Bar Council Act, 1973 (Act XXV of 1973);
“PEP” means any individual who is or has been entrusted with a prominent public function in Pakistan, a foreign country or an international organization and includes but it is not limited to—
(i) Heads of states, heads of governments, Ministers and Deputy or Assistant Ministers; Members of Parliament or Provincial Assembly or National Assembly;
(iii) Members of Supreme Courts, of constitutional courts or of any judicial body the decisions of which are not subject to further appeal except in exceptional circumstances;
(iv) Government employees of BPS-21 or equivalent and above;
(vi) Military officers with a rank of Lieutenant General or higher and its similar rank in other services;
(vii) Directors and Members of the board or secretary or equivalent function of an international organization; (viii) Members of the governing bodies of political parties;
(ix) Members of the board or equivalent function in corporations, departments or bodies that are owned or controlled by the state.
(k) “Reasonable measures” means appropriate measures which are commensurate with the money laundering or terrorist financing risks;
(/) “SRB” means self regulatory body for lawyers as notified under the Act; and
(2) The words and expressions used in these regulations but not defined herein shall have the meanings assigned thereto in the Act.
Customer Due Diligence
A lawyer shall not establish or maintain business relationship with clients anonymously or with fictitious name.
(2) A lawyer shall undertake Customer Due Diligence (CDD) measures and assessment when he accepts a case, prepare for, or carries out a transaction concerning the following activities:
(a) buying and selling of real estate;
(b) managing of client money, securities or other assets;
(c) management of bank, savings or securities accounts;
(d) organization of contributions for the creation, operation or management of companies;
(e) creating, operating or management of legal persons or arrangements, and buying and selling of business entities.
(3) Customer Due Diligence or CDD entails:
(a) identification of client/customer (whether natural or legal person or legal arrangement) and its verification of identity using reliable, independent source documents;
(b) identification and verification of identity of a person purporting to act on behalf of a client;
(c) in relation to legal persons and legal arrangements take reasonable measures to understand the nature of customer’s business and its ownership and control structure, identify customer and its beneficial owner and verify the identity of customer and the beneficial owners using relevant information or data obtained from a reliable source;
(d) lawyer shall perform enhanced due diligence where the ML/TF risks are higher. Such enhanced due diligence may include obtaining additional information regarding purpose of transactions and source of funds;
(e) the enhanced due diligence shall be applied while dealing with natural and legal persons of high risk countries and geographies identified by FATF, National Risk Assessment, and SRB’s risk assessment.
in case CDD process is not satisfactorily completed, business relationship should not be established and filing of STR may be considered; in case of suspicion of money laundering or terrorist financing and performing CDD process will tip-off the client, it is permitted not to pursue CDD process, and instead file an STR with FMU; conduct ongoing due diligence of all their customers including existing customers on the business relationship, to ensure that the transaction being conducted are in line with the customer’s business, risk profile and source of funds; and to carry out any other due diligence measures as and when required by the SRB under the Act.
(4) In relation to Politically Exposed Person (PEP) and their close associates or family members, the lawyer shall:
(a) determine if a customer or beneficial owner is a PEP or subsequently becomes a PEP;
(b) take reasonable measures to establish the source of wealth and the source of funds of customers and beneficial owners identified as PEPs;
(c) conduct enhanced ongoing monitoring of business relations with the customer; and
(d) obtain senior management approval before establishing or continuing business relationship
STR and CTR reporting
If a lawyer has reasonable grounds to suspect that funds are the proceeds of money laundering, terrorist financing, proliferation financing or other criminal activity, it shall promptly send STR to FMU. The lawyer is required to report all suspicious transactions, including attempted transactions, to FMU, regardless of the amount involved.
The filing of a STR shall not be disclosed. CTRs will be reported as required under Section 7 of the Act.
The lawyer shall ensure implementation of Targeted Financial Sanctions requirements including freezing of assets and any other action in line with United Nations Security Council Resolutions (UNSCRs)under United Nation Security Council Act, 1948 and Anti-Terrorism Act 1997.Information of any such action taken shall be promptly reported to respective Bar Council and an STR shall also be filed to FMU.
Risk Assessment and Mitigation
The lawyer shall take appropriate steps to identify, assess, and understand their ML/TF risks. This includes:
(a) consider all the relevant risk factors before determining what is the level of overall risk and the appropriate level and type of mitigation to be applied;
(b) keep these assessments up to date; and have appropriate mechanisms to provide risk assessment information to respective Bar Council.
(2) The lawyer shall:
(a) have policies, controls and procedures, to enable them to manage and mitigate the risks that have been identified by National Risk Assessment, respective Bar Council and its own risk assessment;
(b) monitor the implementation of those policies and procedures and to enhance them if necessary; and
(c) take enhanced measures to manage and mitigate the risks where higher risks are identified.
The lawyer shall develop and implement internal policies, procedures and controls in his services and business against ML/TF risks having regard to the ML/TF risk and the size of the business:
(a) compliance management arrangements;
(b) screening procedures to ensure high standards when hiring employees;
(c) an ongoing employee training programme; and
(d) an independent audit function including assessment of the adequacy and effectiveness of the policies, controls and procedures and to make recommendations accordingly.
(2) The lawyer shall ensure that his foreign branches and majorityowned subsidiaries apply AML/CFT measures consistent with Pakistan requirements where the minimum AML/CFT requirements are less stringent than Pakistan.
The lawyer shall maintain all necessary records of transactions at their registered office for a minimum period of fiveyears from completion of the transaction. correspondence, and results of any analysis undertaken for a minimum period of five years after the business relationship is terminated.
(3) The records shall be sufficient to permit reconstruction of transactions so as to provide, when necessary, evidence for prosecution of criminal act.
(4) The lawyer shall provide information (CDD and any other transaction), on timely basis to respective SRB, investigating and prosecuting agencies and FMU, for supply of CDD information as and when required under the law.
Any violation of any provision of these regulations will be subject to sanctions in accordance with the AML/CFT Sanctions Rules, 2020 and penalties may be imposed by respective Bar Council according to Clause (h) of sub-section (2) of section 6A of the Act.