FMU Karachi for raising ‘Red Flags’
ISLAMABAD: Financial Monitoring Unit (FMU) Karachi has asked all reporting entities including Federal Board of Revenue (FBR) and Securities and Exchange Commission of Pakistan (SECP) to raise “Red Flags” for detecting suspected trade transactions involving transfer and export of technology, goods, software, services or expertise that could be used in nuclear, chemical or biological weapon related programs having significant threat to global security. The FMU has issued a circular number 10 of 2002 on the Red Flags Indicators for proliferation financing (2020) here on Friday. Through this circular, the FMU has explained in detail the methodology to detect such kind of suspicious transactions of proliferation financing for reporting to the FMU.
According to the circular, the Strategic Export Control Division (SECDIV), Ministry of Foreign Affairs has also issued detailed guidance document namely “Guidelines on the Implementation of the UN Security Council Resolutions Concerning Targeted Financial Sanctions on Proliferation Financing”.
The Financial Action Task Force (FATF) recommendations require countries to put in place effective national cooperation and, where appropriate, coordination mechanisms to combat the financing of proliferation of weapons of mass destruction (WMD), FMU said.
The FMU has informed the reported entities that in order to identify a suspicion that could be indicative of Proliferation Financing FMU has prepared the red flags indicators that are specially intended as an aid for the reporting entities, which are attached as “Red Flags Indicators for Proliferation Financing”.
The FMU stated that to identify a suspicion that could be indicative of proliferation financing activity, FMU has prepared the red flags indicators that are specially intended as an aid for the reporting entities. These red flags may appear suspicious on their own; however, it may be considered that a single red flag would not be a clear indicator of potential proliferation financing activity. A combination of these red flags, in addition to analysis of expected overall financial activity, business profile may indicate towards potential proliferation financing activity.
The Red Flags of the customer behaviour can be raised based on the following situations: When customer is involved in the supply, sale, delivery or purchase of dual-use, proliferation sensitive or military goods, particularly to higher risk jurisdictions. When customer or counter-party, or its address, is the same or similar to that of an individual or entity found on publicly available sanctions lists. The customer is a research body connected with a higher risk jurisdiction of proliferation concern. When customer’s activities do not match with the business profile provided to the reporting entity. When customer is vague about the ultimate beneficiaries and provides incomplete information or is resistant when requested to provide additional information.
When customer uses complicated structures to conceal connection of goods imported/exported, for example, uses layered letters of credit, front companies, intermediaries and brokers. When a freight forwarding/customs clearing firm being listed as the product’s final destination in the trade documents. When final destination of goods to be imported / exported is unclear from the trade related documents provided to the reporting entity, Red Flags added.
The Red Flags of the customer transactional patterns can be raised based on the following situations: Project financing and complex loans, where there is a presence of other objective factors such as an unidentified end-user. The transaction(s) involve an individual or entity in any country of proliferation concern. The transaction related to dual-use, proliferation-sensitive or military goods, whether licensed or not. The transaction(s) involve the shipment of goods inconsistent with normal geographical trade patterns i.e. where the country involved does not normally export or import or usually consumed the types of goods concerned. Over / under invoice of dual-use, proliferation-sensitive or military goods, trade transactions. When goods destination/shipment country is different from the country, where proceeds are sent/ received without any plausible reason, Red Flags added.