Operation Management TERM REPORT

In Banks
2017

TERM REPORT
On
OPERATION MANAGEMENT
In BANKS

Submitted to:
Sir Mehmood Afzal Khan

Submitted by:
Yousuf Razzaq Abbasi
ROLL No. MBKM 14-01
MBA (B&F) Morning
6th Semester

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Operation Management TERM REPORT
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Acknowledgement

I want to thanks to ALLAH who is very merciful, sensitive about each and every activity of his
humans. Without His help I am unable to perform any task of my life.

All respect to our Holy Prophet HAZRAT MUHAMMAD (peace be upon him) who brought
the light of knowledge when all humanity was in darkness.

I am greatly thankful to my prestigious institute IBF that made this learning opportunity a part of
our education, especially, Sir Mahmood Afzal who did not only guided me he also helps me a
lot during my learning session.

I appreciate and submit my earnest thanks to my affectionate parents, who are always with me and
support me back. I can never return them for their struggle for me but I will always try to fulfill
their expectations from me.

I am thankful to all my family members for their moral boosting and spiritual support during my
study.

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Executive summery

This report is about the operation management of any type of organizations but more of the part
of the report consist on th operation management in banks.

In this report you will find the information related to operation management process and its
mechanism. And also find out the information about operation manager that how operation
manager done his task efficiently and effectively through his efficient performance.

In this report you will find out the job description of operation manager. And how operation
manager perform domestically and internationally.

Most important part of this report is based on the prudential regulations that are defined by SBP
include prudential regulation d for operations and prudential regulations for AML/CFT.

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Table of Contents
Introduction to Operation and Process ..................................................................................................5
Operation as functions with in other function........................................................................................8
Dominating factors in manufacturing and services Organization .......................................................... 10
Differences and similarities between manufacturing and services organization ..................................... 11
Cross functional coordination ............................................................................................................ 15
Common factors to be used by manufacturing and services organization with respect to location ........... 18
Key competencies of manager operation, education and experience ..................................................... 18
Job description of manager operation in banks .................................................................................... 21
RGM/ROC operation in the region .................................................................................................... 23
Domestic operation at head office and its functions ............................................................................. 24
International and overseas operation functions .................................................................................... 26
Types of cheques, crossing, removing of crossing ............................................................................... 27
Duties and responsibilities of collecting and paying banker ................................................................. 31
Banker’s duty of secrecy ................................................................................................................... 32
Banker’s right of lien ........................................................................................................................ 34
Banker’s right of sett-off ................................................................................................................... 35
SBP prudential regulations for operations (O1-O5) ............................................................................. 35
SBP prudential regulations for AML/CFT .......................................................................................... 38
DEFINITIONS ............................................................................................................................. 38
Anti-Money laundering Prudential regulations ................................................................................ 40
Annexures: ................................................................................................................................... 46

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Introduction to Operation and Process

Operations
Definition:
1. Jobs or tasks consisting of one or more elements or subtasks, performed typically in one
location.
2. Operations transform resource or data inputs into desired goods, services, or results, and
create and deliver value to the customers.
Process:
Two or more connected operations constitute a process and are generally divided in four
basic categories:
1. Processing
2. Inspection
3. Transport
4. Storage
Management
“Management in business and organization is an art that coordinates the efforts of people to
accomplish goals and objective using available resources efficiently and effectively”.
POLCA

Management in an organization to accomplish the goal, comprises of the following:

 Planning
 Organizing/Staffing
 Leading/directing
 Controlling
 Appraising

“Management” (from Old French Management “the art of conducting, directing”, from Latin
menu agree “to lead by the Hand”) Characterises the process of leading and directing all or part
of an organization, often a business, through the deployment and manipulation of resources
(human, financial, material, intellectual or intangible)
Simple Definitions of management:
1.The act or skill of controlling and making decisions about a business, department, sports team,
etc.
2.The people who make decisions about a business, department, sports team etc.
3.The act or process of deciding how to use something

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Full definition of management
1. The act or art of managing: the conducting or supervising of something (as a business)
2. Judicious use of means to accomplish an end
3. The collective bod of those who manage or direct an enterprise.

Examples of Management:
1. Business improved under the management of new owners.
2. We’re using new management techniques
3. Management and labor could not agree.
4. He has a job in a middle management
5. The managements of several top corporations met yesterday.
6. A new system of water management
First known use of management:
Related to management: Administration, care, charge, control, direction, governance,
government, guidance, handling, intendance, conduct, operation, oversight, presidency,
regulation, running, stewardship, superintendence, supervision
Bank:
1. “A bank is a financial institution and a financial intermediary that accepts deposits and
channels those deposits in to lending activities, either directly by loaning or indirectly
through capital markets.”
2. “A bank is the connection between customers that have capital deficits and customers
with capital surpluses”
Operation Management:
Definition: “Operation Management is crucial to each type of organization because only through
successful management of people capital information and material can an organization meet its
goals”
Explanation:

 Organizations ranging from sports teams, schools and churches to hospitals, legal
institution, military bases, and large and small business are found in any industrial
society.
 These formal groups enable people to produce vast range products and services that
would be beyond the capability of the individual
 At one time the term “Operation management” referred primarily to manufacturing
production.
 The growing economic importance, of wide range of non-manufacturing business
activities, however broadened the scope of the operations management functions.
 Today the term operations management refers to the direction and control of the process
that transform input into finished goods and services

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 This function is essential to systems producing goods and services in both profits and
non- profit organization.

Figure Explanation:

 Figure illustrates operations management is a part of a production system.

 A production system consists of INPUT , Processes, Output and information flows that
connect with customers and external environment.
 Input include human resource, workers and managers, capital, equipment, and facilities,
purchased materials and services, land and energy.
 The number presents the operation through which products, services or customers may
pass and where processes are used.
Process
Definition: “A process is any activity or group of activities that takes one or more inputs,
transforms and adds value to them, and provides an output for customer”
Type of process:
1. At a Factory a primary process would be a physical or chemical change of raw materials
in to products.

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2. At an Airline, it would be the movement of passengers and their luggage from one
location to an-other.
3. At a School it would be the education of students.
4. At a Hospital it would be the healing of sick or wounded patients.
Facilities:
Facilities vary accordingly like,
 A machine centre in factory.
 Two or more airport terminals-------- for passengers wants to travel by air
 A classroom-------------- for students in case of Schools.
 A hospital room--------- in case of hospitals

Input and Output:

It vary among different industries
Example 1: input to the operations of jewelry stores includes merchandise, the store building,
registers, the jeweller and customers.
Output of the store is customer’s sale
Example 2: Input a factory manufacturing blue jeans include denim, machines, the plant,
workers, managers, and service provided by outside consultants.
Output of the factory is clothing.

Operation as functions with in other function

Operation Management as a set of decisions:
There are various decisions in organization
1. Some decisions are strategic decisions in nature (applicable to whole organization)
2. Other are tactical (related to the department)
Explanation:
Strategic Decisions:

 Strategic decisions are developed further in to further than tactical plans.

 Thus, strategic decisions are less structured and have long term consequences whereas,
(firm decides to make the products export, instead of local sale or firm decides to make
the garments instead of grey cloth or in addition
 Strategic decisions focus on the entire organization, cutting across department lines.
Tactical Decisions:

 Tactical decisions are most structured, routine and repetitive and have short term
consequences.
 Tactical decisions are to focus on departments. Teams and tasks.

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Operations management as function

Types of operations Functions Skill area

Accounting Quantitative method

Distribution Organizational behaviour

Manufacturing Whole selling
Engineering General management
Construction Retailing
Operations Information system
Transportation Bank
Finance Economics
Health care Government
Human resource International business

Marketing Business ethics and law

Operation is among the various function in an organization:

Large companies generally assign each function to a separate department, which assumes
responsibility of certain activities, however many of these functions are interrelated.

Effective communication is essential to achieve organizational goals.

In large organizations operation or production department is usually responsible for the actual
transformation of input into finished goods or services.

1. Accounting, collects summarizes and interprets final information.

2. Distribution deals with the movement, storage and handling of input and output.
3. Engineering develop product and services, design product method.
4. Finance secure, invest the company’s assets.
5. Humane resource (or personnel) hires and train employees.
6. Marketing generates demand for the company’s output.

Important: legal and engineering services may be hired/outsourced in small organizations.

Banking operations management:

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Banking operations make sure our process and transactions are executed correctly, which
minimising risk and maximizing quality of services. These jobs in the middle and back office
teams of all our business unit.

Dominating factors in manufacturing and services Organization

DOMINATING FACTORS IN MANUFACTURING :
Six group of factors dominate locating decision for new Manufacturing plants. These are listed in
order of preference.
1. Favorable Labor Climate(Most Important factor):
A favorable labor may be most important factor in location decision (Labor is easily and in huge
capacity is available)for labor intensive firms/industries such as Textile, Furniture requirements,
Fertilizer, Ghee industries.
2. Selection of location:
After considering the demand of goods and services, management must select a location for the
facility that will supply that demand and locating near markets is again very important when
final goods are bulky or heavy ant outbound cost is very high.
3. Quality of life:
Good schools, recreational facilities, cultural events and attractive life style contribute to quality
of life. This factor is un-important at its own, but it can make a difference in location decision
e.g. Beachon House School
4. Proximity (Near/close)to Supplier and Resources:
Firms dependent on input of bulky, perishable, or heavy raw material, emphasize proximity to
supplier and resources, such as inbound transaction cost become a dominant factor, encourages
such firms to locate facilities near suppliers.
Examples; Locating paper mill near forests, Food processing near farms, Sugar Mill in sugar
cane growers area.
5. Proximity to Present Company:
In many companies plants supply parts to other facilities, or rely on other facilities for
management and staff supply. These ties require frequent co-ordination and communication
,which can be more as distance increases.
6. Utilities, Taxes and Real Estate costs:
Other important factors may include utility cost (telephone, energy and water )local state taxes
and land cost etc. Entrepreneur will consider above factors also while taking a location decision.
7. Other factors:

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Like room for expansion, construction, cost accessibility to multiple modes of transportation,
local ordinance and may others.
DOMINATING FACTORS IN SERVICES:
The following important factors in Services organization:
1.Proximity to Customer:
Location is the key factor in determining how conveniently customers can carry on business with
a firm
Example: Few people will patronize a remotely located dry cleaner or super markets if an other
is not more conveniently available.
2.Transportation cost & proximity to Market:
This is again very important factor in service organization, like Hospitals, Banks if located near
to customers, those make more business sales.
3.Location of competitors:
One complication in estimating the sales potential at different location is the impact of
competitors.

 Management must consider the current location of competitors.

 Avoid areas where the competitors are already established.
 However in such industries such as cars sales shoe room and fast food chain, locating
near competitors are advantageous.
4.Site specific factors:
Retailers must consider the level of retail activity, residential destiny ,traffic flow and site
visibility.

 Retail activity in the area is important as shoppers often decide on impulsive to go for
shopping or to eat in a restaurant.
 Traffic flow and visibility are important because business customers arrive in cars.

Differences and similarities between manufacturing and services

organization
Manufacturing & Services, Differences& Similarities

History of Operation Management till middle of 20 th century (1950), it was considered/focused of

Management of Manufacturing Organizations, and thus called as Industrial Management or
Production Management.

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Service organizations, because they performed almost at handicraft level, were largely ignored.
Today‘s Manager apply,

 Quality
 Job Design
 Capacity
 Facility
 Location
 Layout
 Inventory& Scheduling to both manufacturing and provision of service.
Benefits.

Benefits of these applications are improved quality…….reduces the cost…… and increase the
value to the customer all of which give a firm Competitive Edge.

Difference between Manufacturing and Services Operation:

Manufacturing/goods producing Services Organization

1. Physical, durable products. 1.Intanglible, perishable products

2. Output can be inventorised. 2. Output cannot be inventorised.

3. Low customer Contact. 3. High customer Contact.

4. Long response time. 4. Short response time.

5.Regional,National or International Market 5. Local Market

6.Large facilities 6. Small facilities

7.Capital Intensive 7. Labour Intensive

8. Quality easily measured. 8. Quality not easily measured.

Explanation:

Difference between Manufacturing and Services Operation fall into eight categories

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Manufacturing/goods producing Services Organization

1. First distinction arises from physical 1. Services are intangible, perishable

nature of the product; Manufactured goods product…often being ideas, concepts or
are physical, durable products. information.

2. Output can be produced, stored and 2. Services cannot be pre-produced, services

transported in anticipation of future organization don’t have the luxury of using
demand….. inventorised. finished goods, inventories as a cushion
against Erratic customer demand.

3. Most of products have little custome r 3. However in many service organizations

contact with production system. Primary like college .hospital, airport, and Railway
customer contact with distributor and stations etc customer are input and output
Retailer. is Degree, healing of patients, movement of
passengers from one place to another.

4. Response time is long in case of 4. Response time is short, rather immediate ,

manufacturing of goods, it can be weeks or patient admitted hospital , Bank branch to
month. This depends upon demand like en-cash cheques, deposit cash etc.
garments manufacturer serves orders of
manufactured, may be 15 to 30 days.

5. Location or size of operation, regional 5. Service organizations require direct

aspect. Manufacturing concerns serves customer contact, must locate relatively
National, Regional or International Market. near their customer.

6. Therefore larger facilities require d 6. Relatively facilities at small or medium

(Spinning/weaving or Garments size required (Like hair dresser ,
manufacturer) restaurants etc)

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7.These are usually capital intensive, 7.Labour intensive (Like banks, hospitals)
(Spinning, Weaving , Fertilizer units)

8. In manufacturing system , there are 8. The quality of service system which

tangible products and less customer contact generally produce intangible which is
,quality relatively easy to measure (Like harder to measure. Further individua ls
cloth quality can be measured in a weaving performance affect assessment of service
unit) with friendly chat with salesman…….othe r
may assess quality by the speed and
efficiency of transactions.

Similarities in Manufacturing & Services Operations:

Despite distinction, the similarities between manufacturing and services operation are compelling;

1) Every organization has processes that must be designed and managed effectively, some
type of technology, be it manual or computerized, must be used in each process.
2) Every organization is concerned about quality, productivity and timely response to
customer.
3) A services provider, like a manufacturing concern must make choice about the capacity,
location and layout of its facilities.
4) Every organization deals with supplier of outside service and materials, as well as
scheduling problems.
5) Matching staffing levels and capacities with forecasted demand is universal problem.
6) Finally the distinctions between manufacturing and services operations can get cloudy,
consider how the first three distinctions can get blurred.
7) Manufacturer do not just offer products, and services organization do not just offer
services…..Both type of organization normally provide a package of goods and services;
i.customers expect both good service and good food at Restaurant and both good service
and quality goods from Retailer.
ii Manufacturing firm offer many customer, services after sale.

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8) Despite the fact that service provider can’t inventoried their output, but they must inventor y
their products.
Example; hospital must maintains an adequate supply of Medicines

9) As far customer contact, many service operations have little outside customer contact.
Example; i. Back office operations of bank……
Ii. Baggage handling at an Airport.
10) Everyone in an organization has some customer,
i. Outside customers (External Customer)

ii .Inside customers (Internal Customers, own employees)

Cross functional coordination

What is cross functional coordination and describe ways to achieve this cross
functional coordination?

Cross functional coordination:

Operation manager need to build and maintain solid relationships both inter organizationally and
intra organizationally. Intra organizational relationship means “cross functional coordination”

In this relation, jobs or tasks move sequentially from marketing to operation. In this ways
decision making is slow as decision are taken by different departments not at organizational level
perspective.

Cross functional coordination is necessary for effective operation management like

1. Marketing department:
Operation strongest connection is with the marketing function which determines the need for
new product and services and the demand for the existing one.

Operation manager must bring together human and capital resources to handle demand
efficiently.

Operation must consider facility, location and relocation to serve new markets and the design
of layout for service organization must match the image that marketing seeks to convey the
customer.

Marketing and sales make delivery promises to customers which must be related to their
current operation capabilities

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Marketing demand forecast guide the operation manager in planning output rate and
capacities.

2. Accounting department:
Operation manager also need feedback from accounting function to understand current
performance.

Financial measures help the operation manager asses the labor cost, long term benefits of
new technologies and quality improvements.

Accounting can help the operation manager monitored the production system.

Operation managers can point out problems and their remedies.

Accounting also help has an impact on the operations because of order fulfillment cycle

3. Human resource function:

It interacts with operation to hire and trained workers and aids in change overly related to
new process and job design.

Human resource can help make promotion and transfer into and out of operation easier,
thereby encouraging cross functional coordination

4. Engineering function:
It also can have a big impact on operation.

In designing new product, engineering needs to consider technical trade off it must ensue that
the product design not create costly specification or exceed operations.

5. Research and development:

It helps operations for new product and services.

Tools that are used to achieve cross functional coordination:

There are several approaches to achieve cross functional coordination. Each organization should
select one of them to get everyone pulling in the same direction. These are:

1. Unified strategy:
It should be developed by the management as a starting point. Giving each department a vision
of what it must do to help fulfill overall organizational strategy.

Strategy: means a plan of action designed to achieve long term or overall aim

Vision: means the ability to think about or plan the future with imagination and wisdom.

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2. Organizational structure and management hierarchy:

 It can be redesigned to promote cross functional coordination.
 Drawing departmental lines around the area of specialization may work against the
integration by creating insular view and turf battles.

3. Goal setting process and reward system:

 It can encourage cross functional coordination.
 So bringing peoples from different functional areas through task forces or committees to
make decision and solve problems.

4. Improvement to information:
 It can also boost cross functional coordination.
 Information must impart to tailor the needs of each functional manager. However sharing
information helps harmonies the efforts of managers from different parts of the
organization and enables them to make decisions consistent with organizational goals.

5. Informal social system:

It is another device that can be used to boost coordination and beetr understanding across
functional lines.

Examples: joint cafeteria facilities, exercises rooms and social events can help to build a sense of
joint ownership and working together.

6. Employee selection and promotion:

It also can help foster more cross functional coordination by encouraging broad perspective and
common goals. Employees must first be competent in their own skill area.

Conclusion:
Best mix of approaches depends on the organization, some organization need more cross
functional coordination:

 The need is greatest when the functions are wide spread (due to organizational strtucre or
geographical distance)
 Organizations are large
 Many products and services are customized

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Common factors to be used by manufacturing and services

organization with respect to location
Common factors of manufacturing and services:
History of operations management till middle of 20 century (1950) , it was considered focused
the management of manufacturing organization, and thus called as industrial management or
production management.
Service organization, because they performed almost at handicraft level, were largely ignored.
Today’s Manager apply,
Quality, (standard of something as measured against other things of similar kind, the degree of
excellence of something ……… Distinctive attribute or characteristic possessed by someone,
something)
Job design, (job design is the allocation of specific work, tasks to individuals and group)
Capacity, (The maximum amount that something can contain……. The amount that something
can produced……….specific ability)
Facility, (A place, or place of equipment provided for a particular purpose…….A natural ability
to do or learn something well and easily)
Location, (Address, or geography)
Layout, (master plan …...The way in which the part of something arranged or laid out)
Inventory, (An itemized catalog or list of tangible goods or property or the intangible attribute
or qualities)
Scheduling, to both manufacturing and the provision of services. (Arranged or plan an event to
take place at a particular time…….scheduling meaning” what is scheduling the job or activity of
planning the time at which particular task will done”)
BENEFIT. Benefit of above application are improved quality…… reduce the cost……. And
increased value to the customer…….. all of which give a firm competitive edge.

Key competencies of manager operation, education and experience

Key Competencies of Manager Description
1) Critical Thinking and Problem Solving Skills:

Manager Operation must have the ability to think about the problems critically and provide
solutions with his experience, he should be a problem solver.

2) Planning and Organizing:

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This is a basic requirement of every Manager of any organization(may be of production or
Services) to make planning and organizing in his area of responsibility, so that he can achieve his
objectives and targets assigned to him by his seniors/Management. Example of a bank Manager
Operation and Manager Operation of Spinning Unit.

3) Decision Making:

This quality is again a prerequisite for a Manager Operation, because daily, he has to take many
decisions related to his department in the light of Organizational Policies and Procedure and
Industry norms.

4) Communication Skills:

For every Manager, communication quality is must, it can be oral or written. If a Manager is
lacking in this area, he will not prove himself to be successful Manager, because he has to
convey many instruction, verbally and in writing as well to his juniors, equal level and seniors.

5) Persuasiveness:
Manager Operation like all other Managers has the ability to pursue, those may be his internal
customers or External customer , or senior management on account of various issues. Example
from staff working under his control. follow up with client and follow up with management.

6 )Influencing and Leading:

Manager Operation has the ability to influence others, those may be his sub-ordinates, seniors,
customers, Suppliers or industry colleagues from other organizations etc. Secondly Manager is
considered to be a person having such personality and skills that he can lead his team in any
organization.

7) Delegation:

Here , delegation means to authorize your staff to perform a specific task. Manager especially the
Operations Manager cannot perform every function of his department/organization , naturally he
will delegate various tasks/job to different employees under his domain, to complete various task
in a professional way and within time line. Example of a Manager Operation of Ghee Unit and a
bank are the examples.

8) Team Work:

This is the era of Team work, present day requirement is “Either you are a good team Member or
a Good Team Leader” , so for a Manager Operation , this quality is mandatory, because he has to
lead a team of workers and supervisor is to accomplish the assigned task.

On the other hand he is also team member of General Managers Team (Production Unit) , or
Team of Regional Operational Chief (in Bank).

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9) Negotiation:

Negotiation means a quality in a Manager Operation through which he can make Negotiation
with different groups. Like Negotiation with their customers regarding their production
processing, negotiation with workers at Union level, Negotiation with other organizations
representative on behalf of his own organization, individually , or as a member of Negotiating
Committee (collectively) to finalize the issue.

11) Conflict Management:

In organizations, there can be so many conflicts; Manager Operation must have the ability to
resolve those conflicts. Management always appreciates those Managers who have the
conflict resolution mind , and they are assigned the task of Operation keeping in view this
ability in addition to others as well.(Policy and Procedure implementation conflict/dispute
between various depts. Employees regarding performance of various tasks etc.

12) Adaptability:

Manager Operation is the person who is actually looking after te entire process of
Operation/Production . All new applicable ideas of his own mind or received from other industry
Competitors or from other sources, he should implement those or convey them to his top
Management.

13) Stress Tolerance:

Stress means pressure and tolerance means to control/overcome that pressure .Thus Manager
Operation in any organization is required to be able to perform his duties and responsibilities
under any circumstances/pressures. So that organizational goals may be achieved without any
interruption. Operations Manager posted abroad can take required decisions at his own when no
body is there to guide him, he can take decisions in the best interest of organization according to
Policy, procedure, market norms and with his experience.

Example: For above type of slots , a process of stress interview is conducted on prospect
candidates, best performers of this process are selected and posted on above posts abroad.

Education & Experience

The formal education and experience for the operations manager job description varies according
to the nature of the job responsibilities.

However the following are commonly required in the operations manager rule.

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1) College degree in business administration, commerce, management industrial techno logy
or industrial engineering. Certain schools offer bachelor’s and master’s degree in
operations management.
2) Industry relevant production experience
3) Knowledge and experience in organization effectiveness and operations management
4) Knowledge of business and management principles and practices
5) Knowledge of financial and accounting principles and practices
6) Knowledge of human resource principles and practices
7) Knowledge of project management principles and practices
8) Information technology skills

Job description of manager operation in banks

OPERATIONS MANAGEMENT IN BANKS

JOB DESCRIPTION MANAGER OPERATIONS

1. Supervision of transaction processing beyond Manager Tellers and Services Limit

set on Misys.

To ensure the transaction are properly executed, certain limits are allocated to Tellers, Manager
Tellers & Services and beyond the limits allocated to them are assigned to Manager Operations.

This is applicable for both Debit and credit transaction.

2. Verification of Account opening formalities.

Manager Operations ensure that all required information 's and documents are received and fed
in the system.

3. Correspondence with Head office and other branches.

All Correspondence relating to Branch operations is responsibility of Manager Ops.

4. Branch administration and HR related matters; maintenance of staff record, leave plan,
rosters/duty list etc.

It is responsibility of manager operation to keep record of staff and their duty and leave
plans.

5. Supervision of security stationary.

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Security stationary is the stationary which is very important and sensitive in its nature, like
Cheque books, Different Finance documents to be signed by the borrowers, deposit slips, AOF,
and SS Card etc.

6. Responsibility for the day to day efficient running of the branch's operations

All working of the branch should be conducted in such a manner that all rules and regulations,
procedure and practices are properly applied.

7. Implementation of bank operational policies and procedures, including Prudential

Regulations requirements and best practices.

It is manager operation duty that all the rules and regulations are being followed by the
staff.

8. Use of problem solving skills to resolve operational problems.

Provide guidance to the staff related to various problems faced by them, like system problem,
procedural issues, any other issue from the customer, like honoring of bank draft, deposit of
specially crossed cheques in another titled Account.

9. Compliance with Money Laundering Regulations; with your customer Guidelines

(Observance of SBP PR's)

10. ATM Operations/reconciliation of report.

Report produced by the system regarding debit by other ATMs of Account holder maintaining
Account with your branch.

11. Branch Audit.

Providing record to Audit Team and rectification and follow up of outstanding issues.

12. Reporting of CTR and STR.

Cash Transactions Reports Rs2.5000M and Suspicious Transaction Report to RHQ and
Compliance/AML Dept.HOK

13. Maintenance of ID's record

Blocking and Un_blocking on transfer or during leave of the concerned staff. V important,
Leaving staff himself ensure that he should block his I'd to avoid its misuse.

14. Party Statement Retrieving.

As per request of the parties retrieval of their Account Statements from the system.

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15. Maintenance of cash department.

(Cash excess/less queries etc.)

16. Maintenance implementation of SBP Cash Policy & regulation.

Like sorting of notes daily, use of issue able note to customers and in ATMs.

17. Service Quality/Branch cleanliness, maintenance.

There are KPI's on above which are included in Managers Annual Appraisal.

18. Maintenance of Branch Security.

Manager Ops is responsible of Branch Security; he should take necessary steps to ensure the
security, especially of cash in safe,at counter, in transit and lockers etc.

RGM/ROC operation in the region

Roles and responsibilities of REGIONAL MANAGER /ROC:

Manager operation is dealing with one branch .Regional manager is dealing with 80 branches.
There are following roles and responbilties of regional manager.

 Overall supervision of operational activities of area/region.

 Trust account can not be opened without approval of head office.
 ATM up time (up to 70%).they should be in usable condition.
 Monthly increase in ATM transaction (up to 50%).
 Cash holding (cash with be according to limit of branches limits or needs.).
 Rent management
 Expense management
 Service quality
 Mystery shopper
 Branch up keeping
 Counter efficiency
 Telephone timeliness
 Number of complaints received (one complaint above block of 5000 accounts).
Controls:

 Audit category (A 5%_B95%)

 Audit issue outstanding more than 90 days out of total issues.
 Resolution of ICU reviews.(internal control unit).
 Fraud with financial impact.(1% per block of 30 branches)

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Operation Management TERM REPORT
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Domestic operation at head office and its functions

DOMESTIC OPERATIONS

Headed by a functional Head at Head Office level, who also look after the overseas GM network
(if there is no separate Head?)

An GM reports to above Functional Head, who look after the affairs of operations of Domestic
network.

Two DGM’s report to above GM

All Regional General Managers Operations directly report to the GM Head Office.

All matters from Head office related to Operations of Regions are routed through above Two
DGM’s

Following task sent by the RGM (Opns.) to Head Office for their.

i. Getting prior approval of all Trust, NGO/NPO, Club Associations Accounts etc. from Head
ROCD
ii. Legal opinion on various matters (Deceased A/c, Opinion on Company matters etc.)
iii. Approval/Clearance of PEP
iv. AML alert (generated by AML dept. Global Compliance HOK), rectification and follow
up for final resolution of these alerts.
v. Providing and receiving branch wise top 100 depositors/customers for EDD.
vi. Receiving of CTR/STR for onward submission to AML dept. HOK for further submiss io n
to SBP
vii. Handling of other matters related to operations from Regions/Branches
REGIONAL GENERAL MANAGERS (OPERATIONS)/REGIONAL
OPERATIONS CHIEF AND AREA MANAGER OPERATIONS

Following are the main jobs related to above RGM/AM (Operations)

i. Over all supervision of operational activities of Region/Area

ii. ATM, up time (Branches & off site ATM’s more than 97%

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Operation Management TERM REPORT
In Banks
iii. Monthly increase in ATM transactions more than 50%
iv. Cash holding (customized target)
v. Rent management (Lockers rent)
vi. Expenses Management (All expenses should be with in approved Budget)
vii. Service Quality
viii. Mystery Shopping
ix. Branch up-keeping
x. Counter efficiency
xi. Telephone timeliness
xii. Number of complaints received (Misbehavior0Attitude) 01 per block of 5000 Accounts.
CONTROLS

 Audit category (A- 5% and B-95%)

 Audit issues over 90 days against total issues (%)
 Resolution of ICU reviews
 Frauds with financial impact (1% per block of 30 branches)
BRANCH OPERATIONS MANAGER

Productivity and efficiency

 Average number of daily transactions per operations staff more than or equal to 100
 ATM up-time (if available) equal to or more than 97%
 % increase in increase in monthly ATM transactions, more than or equal to 50%
 Cash Management (1.75%)
CONTROLS

 Audit Rating, A or B (3 or 2 marks)

 Resolution of Audit issues including Desktop Review (with in 90 days)
 Accurate KYC profiling (100%)
 ICU Reviews rectifications (less than 5%)
 EXPENDITURE CONTROL (wit in Budget)
SERVICE QUALITY

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Operation Management TERM REPORT
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 Branch keep-up, more than or equal to 90%
 Counter efficiency, more than or equal to 90%
 Telephone timeliness
 Number of Complaints received, ZERO

International and overseas operation functions

GLOBAL OPERATIONS OF A COMMERCIAL BANK

Almost every bank has following operations set up and functions.

i. International network operation (Consists of all overseas branches)

ii. Head of overseas branch / branches is called, Chief Manager, Country Head. Country
Manager.
iii. Every Bank Branch/ or Main Branch is considered as an independent bank in that country.
iv. As far operation in these branches are concerned, they have to follow Local
Laws/Regulations.
v. In case of Policy which is more stringent is followed, i.e., Record retention policy of host
country is five year where as Bank’s Head office is 10 years, so 10 years will be followed,
Local Regulator has no objection.
vi. Head office Policies are customized, to meet a particular area, like;-
vii. In CAD, relaxation in Policy to meet particular issue
viii. US, policies are strict
ix. In overseas branches usually, 80% business is Trade related, Import/Export Transactions.
x. Finances related to Trade are allowed.
xi. Remittances business is at a very good volume.
xii. Only 20% work of General banking exists in overseas branches.
xiii. Foreign exchange Regulations vary from one location/Area to other area.
xiv. Easiest Regulations are prevailing in UAE and EPZ (Pakistan)
xv. UCP 600 and URC522 are applicable in all banks, branches.
xvi. In Pakistan maximum export period on credit can be allowed for maximum 180 days,
whereas in overseas locations, it can be 360 days.
xvii. CAD, in Gulf, Singapore, Hong Kong, Maldives etc. is centralized.

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xviii. CTP in UAE
xix. Cash transactions are very few due to various Rules/laws and practices.
AUDIT

There are usually three types of Audit.

1. Internal Audit
2. Regulators Audit
3. External Audit
INVESTMENTS PORTFOLIO

Investment in Euro Bonds, Sakuk Bonds can be made through these overseas branches.

INCOME SOURCES

Most of the income in these branches comes from

 Letter of credit
 Letter of Guarantee
 Trade related Business, especially from Import Business. Income from Export business is
comparatively less.

Types of cheques, crossing, removing of crossing

What is cheque?
A cheque which is payable to a particular person or his order is called an order cheque. This is
a cheque whereby the printed word “Bearer” on the cheque is cancelled. An order cheque can be
paid to the named payee across the bank's account if so presented.

Types of cheques:
1. Order Cheque:
A cheque which is payable to a particular person or his order is called an order cheque.

 This is a cheque whereby the printed word “Bearer” on the cheque is cancelled. The
cancellation of the word “Bearer” automatically makes the cheque an “order” cheque.

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Operation Management TERM REPORT
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 An order cheque can be paid to the named payee across the bank’s account if so
presented.
 Identification must be insisted on by the bank when encashing the order cheque for the
presenter. The ID number and the named payee’s signature will be asked for on the back
of the cheque.

2. Bearer Cheque :
A cheque which is payable to a person whosoever bears, is called bearer cheque.

 The cheque sometimes can be made payable to “Cash” or bearer or made payable to a
specific name, for example, “bujji sekhar or Bearer”.
 This cheque is payable by the drawee bank over the counter to the Bearer or presenter
of the cheque.
 A Bearer cheque can be negotiated or pass to another person by mere delivery. In other
words, the holder (or the Transferor), when giving it to another person need not endorse
the cheque.
 No identification is needed when a bearer cheque is presented for encashment.
However, in normal banking practice, where the amount of the cheque is substantia l,
the identity of the encasher is insisted on.
 A bearer cheque can be collected by the bank for the credit of anyone’s account
 In banking practice, the need for the encasher’s signature on the back of the cheque is
merely to evidence that the encasher has received the money from the bank.

3. Blank Cheque:
A cheque on which the drawer puts his signature and leaves all other columns blank is called a
blank cheque.

1. A check that is signed by the payer but with no specific amount indicated, leaving this
determination up to the drawee.

2. More generally, a term used for any situation in which a usually high level of trust is
afforded by one party to another.

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4. Post Dated Cheque:

If a cheque bears a date later than the date of issue, it is termed as postdated cheque.

Any check or draft that has a future date written upon it by the user. The amount of the check will
not be drawn from the account until the date written on the check. For example, a check written
on the 14th of the month but dated for the 28th will not be cashed for another two weeks.

5. Open Cheque:
 A cheque that is not a crossed cheque. The person whose name appears on the cheque
can write the name of another person on it, and the money will be paid to them.
 An open cheque is a cheque that is not crossed on the left corner and payable at the
drawee bank on presentation of the cheque.
 The words ‘OPEN’ should not be struck off and the person issuing the cheque should
sign on the reverse of the cheque also before giving it to another person; otherwise the
bank may refuse payment. The latter can collect the money from any branch of the bank
nowadays, depending on the bank. S/he should also sign at the back of the cheque while
receiving the amount.

6. Crossed Cheque:
A crossed cheque is one which has two short parallel lines marked across its face.

 A cheque which carries too parallel transverse lines across the face of the cheque with
or without the words “I and co”, is said to be crossed.
 Crossed cheques are of two types. By simply crossing a cheque or with the words” &
Co”, by the payer, the payee can either deposit it in his/her account or endorse it in favor
of another person on the reverse. This practice is nowadays not accepted by the banks.
 The advantage of crossing is that it reduces the danger of unauthorized persons getting
possession of a cheque and cashing it. A crossed cheque can only be cashed through a
bank of which the payee of the cheque is a customer.
 A cheque crossed generally will be paid to any bank through which it is presented.
 A cheque crossed specially will be paid only when it is presented for collection by the
bank named between the parallel lines. Such crossing affords a greater measure of
protection against loss.

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Types of crossing:

i. General crossing:
A crossed cheque generally is a cheque that only bears two parallel transverse lines, optionally
with the words 'and company' or '& Co.' (or any abbreviation of them) on the face of the
cheque,between the lines, usually at the top left corner or at any place in the approximate half (in
width) of the cheque. In the UK, the crossing is across the cheque by the person who origina lly
wrote the cheque (the drawer), or it can legitimately be added by the person the cheque is payable
to (the payee), or even by the bank that the cheque is being paid into .
Generally-crossed cheques can only be paid into a bank account, so that the beneficiary can be
traced
A crossed cheque on its own does not affect the negotiability of the instrument.
ii. Restrictive or special crossings:
Where some customary instruction is written between the two parallel transverse lines
(constituting crossing of cheque) that may result in imposing certain restrictions on the collecting
or paying banker, it is called restrictive crossing. The example is "A/c Payee only" or "State Bank
of India". In these cases, the respective restrictions mandate to pay the cheque in the account of
the payee only or to pay the cheque through State Bank of India (acting as collecting banker) only.
iii. Account payee:
Adding a crossing to a cheque increases its security in that it cannot be cashed at a bank counter
but must be paid into an account in exactly the same name as that which appears on the ‘payee’
line of the cheque (i.e. the person who has received the cheque, who is legally the “payee” and
“holder” of the cheque).
iv. Specific bank:
A crossing may have the name of a specific banker added between the lines. A cheque with a such
a crossing can only be paid into an account at that bank.
The beneficiary bank can add an additional crossing to allow another bank, who are acting as their
agent in collecting payment on cheques, to be paid the cheque on their behalf.
v. Not negotiable:
The words 'not negotiable' can be added to a crossing.
The effect of such a crossing is that it removes the most important characteristic of a negotiable
instrument: the transferee of such a crossed cheque cannot get a better title than that of the
transferor (cannot become a holder in due course) and cannot convey a better title to his own
transferee, but the instrument remains transferable.

Opening of cross the cheques:

Since crossing is material part of the cheque. Its cancelation amount to material alteration. Hence
only the drawer of the cheque is authorized to cancel the general crossing even through the
instrument was crossed after been deceived to payee.

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Cancelation of crossing:

The drawer of the cheque can cancel the crossing of the cheque, by cancelling the parallel lines
and writing in words - Crossing Cancelled and Signing below.

Duties and responsibilities of collecting and paying banker

Duties and protection to paying banker
Duties of paying banker as to cross cheque:
I. Section 126 of negotiable instrument act 1881 lays down that cheque crossed generally be
paid only to the bank (not to any individual or a firm).
II. A cheque crossed specially should only be paid to the banker to whom it is crossed or as
an agent for only to a banker.
III. Section 127 of negotiable instrument 1881 allows a second special crossing in favor of a
banker who would be acting as the agent of the first banker for collection.it should be
cleared that second crossing holder of a bank is acting as an agent of first crossing holder
bank.
IV. A bank must not pay cheque by ignoring the crossing, as he is not legally justified in
making cash payment over the counter to the payee.
Opening the crossed cheque:
I. since crossing is material part of the cheque, its cancellation amounts to material alteration.
Hence only the drawer of the cheque is authorized to cancelled the general crossing, even
though the instrument was crossed after being delivered to the payee.
II. Special crossing can also be cancelled by only the bank that has specially crossed the
cheque.
Protection to the paying banker:
I. Section 128 of negotiable instrument act 1881 makes its obligatory ot the banker that the
payment of the crossed cheque should only be made in “due course.”
Due course means payment in good faith and without negligence to the banker.
II. If bankers make payment out of “due course” in contra vention of the section 10 and 126
of the negotiable instrument act 1881, he gets no legal protection and will have to
compensate to the customer for any loss suffered by him by such payment.
III. Section 129 of the negotiable instrument act 1881 says “bank shall be liable to the true
owner of the cheque for any loss, he may sustain owing to the cheque having being so paid
(in due course, in good faith and without negligence).”
IV. Section 89 provide a relief to the banker, if cheque presented for payment does not appear
to be crossed or crossing has been obliterated (to remove/destroyed) at the time of
presentation’s banker may make a payment according to the apparent tenor of the
instrument, and he will be discharged from all liabilities.

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Duties and protection to collecting banker:
Duties and responsibilities of collecting banker:
1. Collection of draft:
Act as an agent, banker should use his reasonable skills, care and diligence in presenting and
securing payment.
2. Established the bonafldies of the account holder:
Banker must make inquiry when a person wants to become his customer (through KYC &
CDD, it can be ensured).
3. Examination of crossing:
There should be examination of crossing both general or special.
4. Examination of endorsement:
It should be done by the collecting banker, whether it should be honored or dis-honor.
5. Notice of dishonor
In case of dis-honor, collecting banker must notify to the customer and can recover his charges
(if any).
Protection to the collecting banker:
Section 131 of the negotiable instrument act 1881, “subject to the provision of this act relating
to cheque crossed “accountant payee where a banker a good faith and without neglige nce
receive payment for a customer of a cheque crossed generally or specially to himself and the
customer has no title or defective title there to, the banker shall not incur any liability to the
true owner of the cheque by reason only of having received such payment.

Banker’s duty of secrecy

Banker’s duty of secrecy

Relationship between the banker and customer is obviously confidential. Therefore, a banker
must maintain secrecy about the state of his customers account.

In 1924 “Tournier Vs National provincial and union bank of England, it was decided that
banker must not disclose the condition of his customers account except on reasonable and proper
occasion and the obligation to observe secrecy, does not end even with the closing of customers
account”.

Sec 33-A of banking companies ordinance, 1962 has made it obligatory for each
banker in Pakistan to maintain complete secrecy relating to the operations of account, except in
permitted situations.

The banks (nationalization) Act 1974 has made obligatory to every banker in Pakistan to
maintain secrecy.

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Sec 12(1) of the Act says “The chairman and member of the council, every bank,
members of the Board of Management and chief Executive by Whatever named called shall
observe, except as otherwise required by law, the practices and usage customary among bankers
and in particular, shall not divulge any information relating to the offers of its constituents,
except in circumstances in which it is in accordance with the law or practice and usage
customary among bankers.

Secrecy not essential in following occasions

1. under compulsion of law:
A banker may be asked to give evidence in the court of law. A court order should be
served to the banker before a compulsion court desires inspection of bank.

i. Sec 6 of “ The Bankers Book Evidence Act 1891” permits the banker to produce
certified copies of relevant parts of the entries etc. from ordinary books of banker
and the court will be pleased to accept the evidence, so produced.
ii. Sec 165 of Pakistan Criminal Procedure code authorizes an investigating Police
Officer to search the record of a bank or call for any information relating to certain
offence provided prior permission has been obtained from a Session judge.
iii. Sec 144 of Income Tax Ordinance 1979 allow ITO to inspect books of bank and
call for information required by him, but with prior permission of Income Tax
Commission.
2. Duty to Public Disclosure:
(1) Sometimes it becomes banker duty to disclose the nature and operation of account
maintained by his customer in the interest of the public during emergencies.

(2) Banker may make suitable disclosure of unsatisfactory operation of account, but extreme
care is needed (an opinion from law Division should be sort)

3. Express/Implied Consent:
A customer may give standing instruction to the banker to supply certain information about
his account for preparation of balance sheet and sent periodic statement of account to some
professional advisors for certain period of time.

4. In The Interest Of the Bank:

1. Sometimes bank sue their customer to recover the amount due in their loan or overdraft
account (this is very common in the banking course).

2. In this case bank has to disclose some aspects of customers account.

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3. Sometimes bank has to disclose nature of account in the court while suit against the bank.

Banker’s right of lien

BANKERS RIGHTTO LIEN:
“Lien is right to retain the property belonging to another until the debt due from the later
(borrower) has been paid”

According to the Sec 127 of the contract Act 1872, a banker’s general lien is peculiar (strange)
type for it extends to all the securities placed with him by his customer.

CASE LAW: In Brando vs Bernett (1864), it was decided that” Banker must undoubtedly have a
general lien on all securities deposited with them as a banker by a customer, unless there be an
express contract or circumstances that shown an implied contract in-consistent with lien.

Following conditions must be fulfilled before exercising this right:

1. Property must come in to the hands of the bankers as a banker of the customer.
2. There should not be any entrustment for special purpose.
3. Banker should obtain possession lawfully.
4. There should be no agreement in-consistent with the right of lien.

Documents taken under lien:

Bank generally obtain letter of lien from customer, while taking property under lien. When loans
or such other facilities are given to them against these:

1. Bills, cheques and documents for collection.

2. Bearer bonds and coupons which are left for collection.
3. Coupons only where the bond is in safe custody.
4. Promissory note, bill of exchange, T. bills, bonds and deposit certificates etc. are
deposited with the bank.
5. Securities left after adjustment of an advance or loan.
6. Dividend interest where stocks and debenture certificates issued in the name of the bank
under instructions of the purchaser.

Following are not subject to the lien:

1. When it is not the property of the customer, if the banker is unaware. The lien is not
affected.
2. Bill of exchange and other securities deposited for a specific purpose
3. Contingent liabilities of bill, not yet due.
4. Over articles deposited for safe custody.
5. Over the securities for sale.

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6. Over bonds, when customer himself cuts the coupon for collection or bonds for safe
custody.

Banker’s right of sett-off

Right of set-off
Definition

“Set-off means adjusting debit balance against the deposit balance in other account or account of
the same borrower’’

Set-off is a statutory right of Bankers.

The institute of Bankers in London expressed its views in its Journal in 1924 in following words.

“The Right of set-off has however long been recognized as being subject to Limitations

Which in many circumstances deprive it or much of its value to the banker”.

Once sometime has occurred to stop the account, as for example, The death of the customer or
the commission of an available act if bankrupts by him, the banker’s Right of set-off comes into
operations without restrictions, but so long as the accounts are active. The bankers cannot set-off
the debit balance of the account against other balance of the other, except after reasonable
notices given to the customer, unless either,

(a)There is a definite agreement giving the banker the right or

(b)Such right can be inferred from the course of business between the bankers and its customer

1. From ordinary course of business, it would be a matter of great difficulty to establish

such a right.
2. It would therefore, usually be un-wise to rely on any right of set-off to a accept subject to
a reasonable notice, and it is very obviously that the necessity of giving notice would
deprive the right of most of its value.

SBP prudential regulations for operations (O1-O5)

Prudential regulations for operations:
REGULATION O-1

UNDERTAKING OF CASH PAYMENTS OUTSIDE THE BANK’S AUTHORIZED

PLACE OF BUSINESS

This regulation relates with the payments of cash to its customers, following are important point
which are necessary for the banks/branches to observe.

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1. Banks shall not undertake any business of cash payments, other than the authorized place
of business, except
2. through the installation of Automated Teller Machine (ATM) at various Points of Sale
(POS),
3. For this purpose, adequate and suitable security measures should be put in place for cash
feeding and safety of the Automated Teller Machines.
4. Currently Cash withdrawal limit from ATM is 500000/- per day
5. Branchless banking receipts/payments are allowed in accordance with branchless banking
regulations, (it is also called Mobile Banking (Banking facilities provided through a
vehicle in an area.)
6. Further designated branches of the banks are allowed under this regulation, collection and
payment of cash for their prime customers through cash carrying companies registered
with concerned Government department.
REGULATION O-2

WINDOW DRESSING

This Regulation related to “operations” say that banks will take all necessary measures and ensures
that their different activities are performed properly, according to set procedures and best practices,
regulatory requirements and no short-cut or negative practices is used to inflate their profit,
deposits, finance, regulatory requirement etc.
Banks/DFIs shall refrain from adopting any measures or practices whereby they would either
artificially or temporarily show an ostensibly (looking true, but not) (zahiree taor par in urdu)
different position of bank’s/DFI’s accounts as given in their financial statements. Particular care
shall be taken in showing their deposits,

1. MCR (Minimum Capital Requirement) means minimum paid up capital of the bank.
nonperforming loans/assets
2. provisioning, profit
3. inter-branch and inter-bank accounts
4. other method to artificially inflate balance sheet or show improved profitability.
REGULATION O-3

RECONCILIATION OF INTER-BRANCH ACCOUNTS AND SETTLEMENT OF

SUSPENSE ACCOUNT ENTRIES

This again a very important Regulation related to the operation of the bank. According to this
Regulation, All entries outstanding in the Inter-Branch Accounts (by whatever name called) and/or

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Suspense Account must be reconciled/cleared and taken to the proper head of account within a
maximum period of 30 days from the date of origination of entry.
Examples: Cheques, bills, drawn on other banks/branches, certain emergency payment, approval
of which is required, advance against salary, entertainment expenses reqired proper approval etc.
Following are the exception to this regulation
Entries made on shall not be classified as Suspense Account and may be recorded in their
respective head of account under other assets and the above instructions shall not be applicable
to these items.
1. Entries of tax at source, advance tax paid, tax recoverable
2. advance expense on new branches
3. advance rent paid
4. legal expenses
5. mark-up/service charge recoverable
6. Qarze Hasna for marriage
7. forward cover fee,
8. outstanding amount of the premium on Crop Loan Insurance Scheme (CLIS) receivable
from Government of Pakistan (GoP)
9. entries relating to frauds and forgeries, cash theft and looted
Important

 All outstanding amount shall, however, be reconciled/cleared immediately on

reimbursement of premium amount from the GoP.
 Entries in suspense account relating to frauds and forgeries, cash theft and looted, will
immediately be cleared/ reversed after receving the Insurance claim.
 Banks/DFIs shall institute an effective internal control system for the operations of Inter-
Branch and Suspense Accounts, which ensures reconciliation/clearing of the entries in
shortest possible time

REGULATION O-4

MAINTENANCE OF ASSETS IN PAKISTAN

This regulation, states that how much Assets (in %) created by the bank against their demand and
time liabilities in Pakistan and abroad.
1. Every bank/DFI shall maintain in Pakistan not less than 80% of the assets created by it
against such time and demand liabilities as specified in Part-A of Form X (prescribed
under Rule 17 of the Banking Companies Rules, 1963).

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2. Accordingly, assets held abroad by any bank/DFI shall not, at any point in time, exceed
20% of its time and demand liabilities specified in the said Form X.
3. All other assets financed from sources other than time and demand liabilities specified in
the said Form X shall be held within Pakistan.
REGULATION O-5

FOREIGN CURRENCY DEPOSITS UNDER FE 25-1998

This regulation is related with the foreign currency deposits with the banks of their customer in
1998, when Pakistan made Atomic blast and foreign currency accounts in Pakistan were freezed
by the Govt. / SBP.
Main points are:

 Withdrawals from these accounts were under certainrestriction, like payment at a specified
rate in PKR instead of Fcy.
 These FCY deposits can be invested in the instruments and institutions with investme nt
grade as defined by SBP.
 Banks are free to determined rate of return on the deposits mobilized by banks under FE-
25 scheme.
 Banks can use these deposits for financing in FCY for imports/exports subject to the
cinditions that their risks are adequately covered.
 SBP issues instructions related to FE-25 deposits from time to time.

SBP prudential regulations for AML/CFT

SBP prudential regulations for AML/CFT:
DEFINITIONS
For the purposes of these regulations-
1. “Beneficial owner”
in relation to a customer of a bank/ DFI, means the natural person(s) who ultimately own(s) or
controls a customer or the person on whose behalf a transaction is being conducted and
includes the person(s) who exercise(s) ultimate effective control over a person or a body of
persons whether incorporated or not;

2. “Beneficiary”
means the person to whom or for whose benefit the funds are sent or deposited in bank;
3. “Beneficiary institution”
means the financial institution that receives the funds on behalf of the wire transfer or fund
transfer beneficiary;

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4. “Control”
in relation to a legal person, means the power to exercise a controlling influence over the
management or the policies of the undertaking, and, in relation to shares, means the power to
exercise a controlling influence over the voting power attached to such shares;
5. “Correspondent bank”
means the bank in Pakistan which provides correspondent banking services to bank or financ ia l
institution situated abroad and vice versa;
6. “Correspondent banking”
means provision of banking services by one bank (correspondent) to another bank (respondent)
including but not limited to opening and maintaining accounts in different currencies, fund
transfers, cheque clearing, payable through accounts, foreign exchanges services or similar
other banking services;
7. “Cross-border wire transfer”
means a wire transfer where the ordering institution and the beneficiary institution are located
in different countries or jurisdictions;
8. “Currency Transaction Report or CTR”
means as defined under AML Act;
9. “Customer”
means a person having relationship with the bank which includes but not limited to holding of
deposit/deposit certificate/ or any instrument representing deposit/placing of money with a
bank/DFI, availing other financial services, locker facility, safe deposit facility, or custodial
services from the bank/DFI;
10. “Customer due diligence or CDD”
in broader terms includes; a) identifying the customer and verifying the customer’s identity on
the basis of documents, data or information obtained from customer and/or from reliable and
independent sources; b) identifying, where there is a beneficial owner who is not the customer,
the beneficial owner and taking adequate measures, to verify his identity so that the bank/DFI
is satisfied that it knows who the beneficial owner is, including, in the case of a legal person,
trust or similar legal arrangement, measures to understand the ownership and control structure
of the person, trust or arrangement; c) understanding and, as appropriate, obtaining
information on the purpose and intended nature of the business relationship; and d) monitor ing
of accounts/transactions on ongoing basis to ensure that the transactions being conducted are
consistent with the banks/DFIs knowledge of the customer, their business and risk profile,
including, where necessary, the source of funds and, updating records and data/ information to
take prompt action when there is material departure from usual and expected activity through
regular matching with information already available with bank/DFI.
11. “Domestic wire transfer”

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Operation Management TERM REPORT
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means any wire transfer where the originator and beneficiary institutions are located in
Pakistan regardless the system used to effect such wire transfer is located in another
jurisdiction;
12. “Dormant or in-operative account”
means the account in which no transaction has been taken place from last one year;
13. “FATF Recommendations”
means the Recommendations of Financial Action Task Force as amended from time to time;
14. “FMU”
means financial monitoring unit established under the AML Act;
15. “Fund transfer/wire transfer”
means any transaction carried out by financial institution on behalf of originator person by way
of electronic means or otherwise to make an amount of money available to beneficiary person
at another beneficiary institution, irrespective of whether the originator and the beneficiary are
the same person;
16. “Government entity”
means federal or provincial government, a ministry within such a government, a local
government or an agency specially established by any such government, or a department,
organization or corporation owned or controlled by such government under federal, provinc ia l
or local law;
17. “Intermediary institution”
is an intermediary in the wire transfer payment chain; that receives and transmits a wire transfer
on behalf of the ordering institution and the beneficiary institution, or another intermed iar y
institution;
18. “Monetary threshold”
expressed in Pak rupee includes a reference to the equivalent amount expressed in any other
currency;
19. “Money laundering and financing of terrorism or ML/TF”
has the same meaning as ascribed to them in AML Act;
20. “Occasional customer” or “walk-in-customer”
means the person conducting occasional transactions and is not a customer; having relations hip
with the bank/DFI;

Anti-Money laundering Prudential regulations

The State Bank of Pakistan issued tough regulations to stop money-laundering and combat
terrorism financing by making the regulations up to international standards The State Bank of

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Operation Management TERM REPORT
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Pakistan has made amendments in Prudential Regulations for Corporate/Commercial Banking-
M-1 & M-2 to prevent possible use of banking sector for money laundering and terrorist
financing, and with the view to preserve integrity and safety of the financial system.

Regulation R-1Customer Due Diligence(CDD)

R-2Correspondent Bank

R-3Wire Transfers/Fund Transfers

R-4Reporting of Transactions (STRs/CTRs)

R-5Record Keeping

R-6Internal Controls, Policies, Compliance, Audit & Train

State Bank of Pakistan issued tough regulations to stop money-laundering and combat terrorism
financing by making the regulations up to international standards.

The State Bank made anti-money laundering and combating the financing of terrorism
(AML/CFT) regulations more comprehensive by revising the existing regulations of Prudential
Regulations on Corporate and Commercial Banking.

Most of the requirements of the new regulations are already in place, These regulations have
been issued to all banks and development finance institutions (DFIs) to introduce a
comprehensive regulatory framework in line with international standards to mitigate various
risks arising from money laundering and terrorist financing.The AML/CFT regulations provide a
system of risk-based approach under which customers would be profiled as per risk involved.

R-1:
Customer Due Diligence (CDD)
With the view to preserve integrity and safety of the financial system, it is expedient to prevent
the possible use of the banking sector for money laundering and terrorist financing. To this end,
Customer Due Diligence/Know Your Customer (CDD/KYC) requires special attention and
concrete implementation. Accordingly, the following minimum guidelines are required to be
followed by banks/DFIs to avert the risks posed by the money laundering and terrorist financing.
However, banks/DFIs are free to take additional measures in line with Financial Action Task
Force Recommendations

Banks and DFIs are obliged to strictly follow the guidelines of Customer Due Diligence (CDD)
and make sure that personal accounts are not to be used for business purposes to avert the risks
posed by money laundering and terrorist financing.SBP has directed banks and DFIs to
formulate, and put in place, a comprehensive Customer Due Diligence (CDD) or Know Your

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Operation Management TERM REPORT
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Customer (KYC) policy duly approved by their Board of Directors and, in case of branches of
foreign banks, approved by their head office, and cascade the same down the line to each and
every business location and concerned officers for strict compliance.

Types of Customers:

CDD/KYC policy of the banks and DFIs shall inter alia include a description of the types of
customers that are likely to pose a higher than average risk to the institution, and guidelines for
conducting Enhanced Customer Due Diligence;, depending upon the customers background,
country of origin, public or high profile position, nature of business, etc, Beneficiary financial
institutions shall adopt effective risk-based procedures for identifying and handling wire
transfers that are not accompanied by complete originator information, the SBP said. Adding
wire transfers with incomplete originator information may be seen with suspicion, which may
require reporting to Financial Monitoring Unit (FMU) of SBP or termination of the transaction.

Banks/DFIs shall not allow personal accounts to be used for business purposes. To ensure the
compliance of this requirement, banks/DFIs should obtain satisfactory information on the
purpose and intended nature of the relationship and financial status including sources of income
etc from the customer.

2. Banks/DFIs shall formulate and put in place a comprehensive CDD/KYC policy duly
approved by their Board of Directors and in case of branches of foreign banks, approved by their
head office, and cascade the same down the line to every business location/concerned officers for
strict compliance.

3. CDD/KYC policy of the banks/DFIs shall inter alia include a description of the types of
customers that are likely to pose a higher than average risk to the bank/DFI and guidelines for
conducting Enhanced Customer Due Diligence depending upon the customer’s background,
country of origin, public or high profile position, nature of business, etc.

BANKS/DFIS SHOULD UNDERTAKE Anti Money laundering MEASURES WHEN

(a) establishing business relationship;

(b) conducting occasional transactions above rupees one million whether carried out in a single
operation or in multiple operations that appear to be linked;

(c) carrying out occasional wire transfers (domestic/cross border) regardless of any threshold;

(d) there is suspicion of money laundering/terrorist financing; and

(e) there is a doubt about the veracity or adequacy of available identification data on the
customer. BANKS/DFIS SHALL UNDERTAKE AT LEAST FOLLOWING CUSTOMER DUE
DILIGENCE MEASURES:

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Operation Management TERM REPORT
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(a) Banks/DFIs should not open and maintain anonymous accounts or accounts in the name of
fictitious persons.

(b) All reasonable efforts shall be made to determine identity of every prospective customer. For
this purpose, minimum set of documents to be obtained by the banks/DFIs from various types of
customers/account holder(s), at the time of opening account, as prescribed in Annexure-VIII of
the Prudential Regulations for Corporate/Commercial Banking. While opening bank account of
"proprietorships", the requirements laid down for individuals at Serial No (1) of Annexure-VIII
shall apply except the requirement mentioned at No (3) of the Annexure. Banks/DFIs should
exercise extra care in view of the fact that constituent documents are not available in such cases
to confirm existence or otherwise of the proprietorships.

(c) Banks/DFIs shall identify the beneficial ownership of accounts/transactions by taking all
reasonable measures.

(d) For all customers, banks/DFIs should determine whether the customer is acting on behalf of
another person, and should then take reasonable steps to obtain sufficient identificatio n data to
verify the identity of that other person.

(e) For customers that are legal persons or for legal arrangements, banks/DFIs are required to
take reasonable measures to (i) understand the ownership and control structure of the customer
(ii) determine that the natural persons who ultimately own or control the customer. This includes
those persons who exercise ultimate effective control over a legal person or arrangement.

(f) Government accounts should not be opened in the personal names of the government
official(s). Any such account, which is to be operated by an officer of the Federal/ Provincial/
Local Government in his/her official capacity, shall be opened only on production of a special

g) Banks must take care of all the Dormant accounts NGO NPO accounts Personal accounts shall
not be allowed to be used for charity purposes/collection of donations.

REGULATION 2:
CORRESPONDENT BANKING
banks/ DFIs shall take the following measure for providing correspondent banking services

- Gather and Know about Major information business activites location listings etc. regarding the
respondents banks. Its kyc Policy must compy with your Policy

- The Corresponding bank must have good KYc policy and have no bad rating even if the
crossponding bank is a foreign bank clearly understand and comply its KYC policy

- Before getting in to any relationship grant permission from senior management

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Operation Management TERM REPORT
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- No bank shall get in to relationship with a shell bank who have no physical existence

Regulation 3:

Wire Transfer/ Fund Transfer :

Banks are acting on behalf of the originator and the beneficiary and as an intermediary during
sending and receiving of funds whether domestically or across national boundaries.

Responsibility Of the ordering institution:

 Name CNIC address of The originator

 Identify and verify the originator and beneficiary

 Record details of transfer amount, tyoe of currency, the value date amd the purpose of
transaction. Responsibility Of Beneficiary institution:

 Must comply strict policies and procedure

 Remain Cautions regarding the transparency of transactions

 Make sure originator information records are complete as demanded

Responsibility of Intermediary institution:

 Passing onward message of payment

 Making all the record complete and authenticated of the originator

Regulation4:
Reporting Of Transaction STR’s CTR’s
 Comply with rules and regulations of proper reporting of suspicious and currency transaction

 Implent all policies procedures in a strict manner according to AML ACT

 Pay special attention to large and unusual transactions

 Set procedures and alarm limit for suspicious transactions

 STR should be reported regardless of any amount limit but CTR’s to be reported exceeding 2.5
million

 STR must be filed and documented and recorded properly

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Operation Management TERM REPORT
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 Employees of the bank are strictly prohibited to report customer about its transaction get STR.
This activity would be against code of conduct and the employee would be penalized.

Regulation 5:
Record Keeping:
 Maintenance of record of customers both domestic and international

 The record must be kept date wise with due diligence so in any case it could be use as evidence
in court of law.

 All Record Files, documents of the customer must be kept till ten years after the business
relationship ended Documents Like:

copies of identification documents

 account opening forms,

 KYC forms,

 Verification documents and other documents along with records of account files and business
correspondence

Regulation 6:
INTERNAL CONTROL, POLICIES, COMPLIANCE, AUDIT AND
TRAINING:
 Each Bank/ DFI shall formulate its own AML/CFT policy duly approved by their Board of
Directors. All policies and procedures must involve details regarding CDD Record keeping
reporting of STR’s and CTR’s  Must take care of Money laundering and financing of terrorism

 Banks AML program must comply with Prudential regulation Of SBP concerning to
Commercial banking and DFI’s

 Bank must maintain independent audit which should be sufficiently resourced

 Develop employee comprehensive due diligence at the time of hiring staff to bring up a clean
history of hiring without any favouritism

 Bank must conduct annually training program for the employees for the succulent working of
operations and procedures concerning to AML

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Operation Management TERM REPORT
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 Training for the optimum use of advanced technology to test the capability and performance of
employees these training could be on job trainings or could be separately organized for the AML
propagation

Conclusion:
State Bank of Pakistan, during inspection, would particularly check the efficacy of the
CDD/KYC policies and system of the banks/DFIs and its compliance by all the branches and the
staff members. Appropriate action shall be taken against the bank/DFI and the concerned staff
members for non-compliance and negligence in this area, under the provisions of Banking
Companies Ordinance, 1962.These regulations have been issued to all banks and development
finance institutions (DFIs) to introduce a comprehensive regulatory framework in line with
international standards to mitigate various risks arising from money laundering and terrorist
financing. A statement issued by the SBP.The revised system would ensure clean and transparent
banking transactions on the one hand and enable the country to meet international standards on
the other. The provisions of regulations introduce a system of comprehensive list of red alerts in
the context of Pakistan, which will trigger scrutiny of accounts and transactions to ensure that
proceeds of crime are not processed through the banking channels. To address the issue of
rigidity in obtaining documents for opening accounts, the list of identification and verification
documents has been expanded and Nadra receipt or token included as eligible document for
opening of a bank account. This would enable customers to open bank account by submitting any
document issued by Nadra, including CNIC, passport, NARA, POC, Nadra receipt/ token. Banks
and DFIs would not open or maintain anonymous accounts or accounts in the name of fictitious
persons or numbered accounts. In the case of joint accounts, CDD measures on all of the joint
account holders would be performed as if each of them were individual customers of the bank or
DFI.The government accounts will not be opened in the personal names of the government
official,”Banks and DFIs would not provide any banking services to proscribed entities and
persons or to those who are associated with such entities and persons, whether under the
proscribed name or with a different name.

Annexures:
 Annexure 1
Minimum Documents to be obtained from Various Types of Customers under AML/CFT
Regulation

Serial no Types of customers Documents/papers to be

obtained

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Operation Management TERM REPORT
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1. Individuals A photocopy of any one of the
following valid identity
documents;

(i) Computerized National

Identity Card (CNIC)
issued by NADRA.
(ii) National Identity Card
for Overseas Pakistani
(NICOP) issued by
NADRA.
(iii) Pakistan Origin Card
(POC) issued by
NADRA.
(iv) Alien Registration Card
(ARC) issued by
National Aliens
Registration Authority
(NARA), Ministry of
Interior (local currency
account only).
(v) Passport; having valid
visa on it or any other
proof of legal stay along
with passport (foreign
national individuals
only).
2. Sole proprietors Photocopy of identity document
as per Sr. No. 1 above of the
proprietor.

(ii) Registration certificate for

registered concerns.

(iii) Sales tax registration or

NTN, wherever applicable.

(iv) Certificate or proof of

membership of trade bodies etc,
wherever applicable.

(vi) Declaration of sole

proprietorship on
business letter head.
(vii) Account opening
requisition on business
letter head
3. Partnership Photocopies of identity
documents as per Sr. No. 1

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Operation Management TERM REPORT
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above of all the partners and
authorized signatories.

(ii) Attested copy of

‘Partnership Deed’ duly signed
by all partners of the firm.

(iii) Attested copy of

Registration Certificate with
Registrar of Firms. In case the
partnership is unregistered, this
fact shall be clearly mentioned
on the Account Opening Form.

(iv) Authority letter from all

partners, in original, authorizing
the person(s) to operate firm’s
account.

4. Limited i. Certified copies from

companies/corporations Company
Secretary/Public Notary
of:
Resolution of Board of Directors
for opening of account
specifying the person(s)
authorized to open and operate
the account.

(ii) Memorandum and Articles

of Association.

(iii) Certificate of Incorporation.

(iv) Certificate of
Commencement of Business,
wherever applicable.

(v) Photocopies of identity

documents as per Sr. No. 1
above of all the directors and
persons authorized to open and
operate the account.

(vi) List of Directors on ‘Form-

A/Form-B’ issued under

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Operation Management TERM REPORT
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Companies Ordinance 1984, as
applicable.

(viii) Form-29, wherever

applicable;
For individual (natural person)
shareholders holding 5% or
above stake in
company/corporation,
photocopies of identity
document as per S. No. 1 above;
and

(ix) For legal persons holding

shares equal to 5% or above, in
addition to any other relevant
document including certificate
of incorporation, photocopies of
identity document as per S. No.
1 above of their individual
shareholders holding 5% or
more stake.

5. Branch Office or Liaison Office A copy of permission letter from

of Foreign Companies relevant authority i-e Board of
Investment.

(ii) Photocopies of valid

passports of all the signatories of
account.

(iii) List of directors on

company letter head or
prescribed format under relevant
laws/regulations. (iv) A Letter
from Principal Office of the
entity authorizing the person(s)
to open and operate the account.

6. Trust, Clubs, Societies and Certified copies of

Associations etc
(a) Certificate of
Registration/Instrument of Trust
(b) By-laws/Rules &
Regulations (ii) Resolution of
the Governing Body/Board of

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Operation Management TERM REPORT
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Trustees/Executive Committee,
if it is ultimate governing body,
for opening of account
authorizing the person(s) to
operate the account.

(iii) Photocopy of identity

document as per Sr. No. 1 above
of the authorized person(s) and
of the members of Governing
Body/Board of Trustees
/Executive Committee, if it is
ultimate governing body.

7. NGOs/NPOs/C harities Certified copies of

(a) Registration
documents/certificate

(b) By-laws/Rules &

Regulations (ii) Resolution of
the Governing Body/Board of
Trustees/Executive Committee,
if it is ultimate governing body,
for opening of account
authorizing the person(s) to
operate the account.

(iii) Photocopy of identity

document as per Sr. No. 1 above
of the authorized person(s) and
of the members of Governing
Body/Board of Trustees
/Executive Committee, if it is
ultimate governing body.

(iv) Any other documents as

deemed necessary including its
annual accounts/ financial
statements or disclosures in any
form which may help to
ascertain the detail of its
activities, sources and usage of
funds in order to assess the risk

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Operation Management TERM REPORT
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profile of the prospective
customer

8. Agent accounts Certified copy of ‘Power of

Attorney’ or ‘Agency
Agreement’.

(ii) Photocopy of identity

document as per Sr. No. 1 above
of the agent and principal.

(iii) The relevant

documents/papers from Sr. No. 2
to 7, if agent or the principal is
not a natural person

9. Executors and Administrators Photocopy of identity document

as per Sr. No. 1 above of the
Executor/Administrator.

(ii) A certified copy of Letter of

Administration or Probate

10. Minor Accounts (i) Form-B, Birth

Certificate or
Student ID card (as
appropriate) shall be
obtained from
minor.
(ii) (ii) Photocopy of
identity document as
per Sr. No. 1 above
of the guardian of
the minor.

 Annexure 2
Examples or Characteristics of Suspicious Transactions (Red Alerts) That May Be a Cause for
Increased Scrutiny for AML/CFT Purposes

1. General Comments

The following are examples or characteristics of possible suspicious transactions for money
laundering or financing of terrorism. This list of situations may be taken as a means of
highlighting the basic ways in which money may be laundered. The examples provided are not
exhaustive and may serve only as guidance of banks/DFIs to recognize suspicious activities.

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Operation Management TERM REPORT
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While each individual situation may not be sufficient to suggest that money laundering is taking
place, a combination of such situations may be indicative of such a transaction. A customer's
declarations regarding the background of such transactions shall be checked for plausibility and
explanation offered by the customer may be accepted after reasonable scrutiny.

2. Transactions which do not make economic sense or inconsistent with customer’s business or
profile

i) A customer’s relationship having a large number of accounts with the same bank, frequent
transfers between different accounts or exaggeratedly high liquidity.

ii) Transactions in which assets are withdrawn immediately after being deposited, unless the
customer's business activities furnish a plausib le reason for immediate withdrawal;

iii) Transactions that cannot be reconciled with the usual activities of the customer, for example,
the use of Letters of Credit and other methods of trade finance to move money between countries
where such trade is not consistent with the customer's usual business; iv) Provision of bank
guarantees or indemnities as collateral for loans between third parties that are not in conformity
with market conditions;

v) Unexpected repayment of an overdue credit without any plausible explanation;

vi) Back-to-back loans without any identifiable and legally admissible purpose;

vii) Paying in large third party cheques endorsed in favour of the customer;

viii) Substantial increases in deposits of cash or negotiable instruments by a professional firm or

company, using client accounts or in-house company or trust accounts, especially if the deposits
are promptly transferred between other client company and trust accounts;

ix) High velocity of funds through an account, i.e., low beginning and ending daily balances,
which do not reflect the large volume of funds flowing through an account;

x) Mixing of cash deposits and monetary instruments in an account in which such transactions do
not appear to have any relation to the normal use of the account;

xi) Multiple transactions carried out on the same day at the same branch of a financial institution
but with an apparent attempt to use different tellers;

xii) The structuring of deposits through multiple branches of the same bank or by groups of
individuals who enter a single branch at the same time;

xiii) The deposit or withdrawal of cash in amounts which fall consistently just below
identification or reporting thresholds;

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Operation Management TERM REPORT
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xiv) The deposit or withdrawal of multiple monetary instruments at amounts which fall
consistently just below identification or reporting thresholds, if any, particularly if the
instruments are sequentially numbered;

xv) Customers making large and frequent deposits but cheques drawn on the accounts are mostly
to counter-parties not normally associated with customer’s business;

xvi) Extensive or increased use of safe deposit facilities that do not appear to be justified by the
customer's personal or business activities; AML/CFT Regulations 24

xvii) Goods or services purchased by the business do not match the customer's stated line of
business; xviii) A retail business has dramatically different patterns of currency deposits from
similar businesses in the same general location;

xix) Loans are made for, or are paid on behalf of, a third party with no reasonable explanation;

xx) Suspicious movements of funds occur from one financial institution to another, and then
funds are moved back to the first financial institution.

xxi) The deposit of excess balance in the accounts linked to credit cards/store value cards.

xxii) Unusual pattern of purchase through credit cards/store value cards etc. 3. Transactions
involving large amounts of cash

i) Exchanging an unusually large amount of small-denominated notes for those of

higher denomination;
ii) Purchasing or selling of foreign currencies in substantial amounts by cash settlement
despite the customer having an account with the bank;
iii) Frequent withdrawal of large amounts by means of cheques, including traveler’s
cheques;
iv) Large cash withdrawals from a previously dormant/inactive account, or from an
account which has just received an unexpected large credit locally or from abroad;
v) Large cash withdrawals made from a personal or business account not normally
associated with customer’s profile;
vi) Company transactions, both deposits and withdrawals, that are denominated by
unusually large amounts of cash, rather than by way of debits and credits normally
associated with the normal commercial AML/CFT Regulations 25 operations of the
company, e.g. cheques, letters of credit, bills of exchange, etc;
vii) Depositing cash by means of numerous credit slips by a customer such that the
amount of each deposit is not substantial, but the total of which is substantial;
viii) The deposit of unusually large amounts of cash by a customer to cover requests for
bankers' drafts, money transfers or other negotiable and readily marketable money
instruments;

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Operation Management TERM REPORT
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ix) Customers who together, and simultaneously, use separate tellers to conduct large
cash transactions or foreign exchange transactions;
x)

Large cash deposits made to the account of an individual or legal entity when the apparent
business activity of the individual or entity would normally be conducted in cheques or other
payment instruments.

4. Transactions involving locations of concern & wire transfers

i) Transactions involving foreign currency exchanges or deposits that are followed

within a short time by wire transfers to locations of specific concern (for example,
countries identified by national authorities/international bodies, UN or FATF etc.);
ii) A personal or business account through which a large number of incoming or
outgoing wire transfers take place without logical business or other economic
purpose, particularly when this activity is to, through or from locations of specific
concern (as mentioned above);
iii) The use of multiple accounts to collect and then funnel funds to a small number of
foreign beneficiaries, both individuals and businesses, particularly when these are in
locations of specific concern (as mentioned above);
iv) Obtaining credit instruments or engaging in commercial financial transactions
involving movement of funds to or from locations of specific concern when there
appears to be no logical business reasons for dealing with those locations (as
mentioned above); AML/CFT Regulations 26
v) The opening of accounts of financial institutions from locations of specific concern
(as mentioned above);
vi) The business relationships conducted in unusual circumstances e.g. significant
unexplained geographic distance between the bank and the customer;
vii) The receipt of small or large amounts (in cash, using online or otherwise) from
various locations from within the country especially if such deposits are subsequently
transferred within a short period out of the account and/or to a destination not
normally associated with the customer;
viii) Substantial increase in cash deposits by a customer without apparent cause,
especially if such deposits are subsequently transferred within a short period out of
the account and/or to a destination not normally associated with the customer;
ix) Building up large balances, not consistent with the known turnover of the customer's
business, and subsequent transfer to account(s) held overseas;
x) Transfer of money abroad by an interim customer in the absence of any legitimate
reason;

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Operation Management TERM REPORT
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xi) Repeated transfers of large amounts of money abroad accompanied by the
instruction to pay the beneficiary in cash;
xii) Large and regular payments that cannot be clearly identified as bona fide
transactions, from and to countries or geographic areas identified by credible sources;
 as having significant levels of corruption, or other criminal activity
 as providing funding or support for terrorism activities
 as associated with the production, processing or marketing of narcotics or other
illegal drugs etc.
xiii) Wire transfers ordered in small amounts in an apparent effort to avoid triggering
identification or reporting requirements; AML/CFT Regulations 27
xiv) Wire transfers to or for an individual where information on the originator, or the
person on whose behalf the transaction is conducted, is not provided with the wire
transfer, when the inclusion of such information would be expected;
xv) Use of multiple personal and business accounts or the accounts of non-profit
organizations or charities to collect and then funnel funds immediately or after a
short time to a small number of foreign beneficiaries.
xvi) Customer who generally use credit cards/store value cards out of their defined
geographical location or locations prone to money laundering and terrorist financing.

5. Transactions involving unidentified parties

i) Provision of collateral by way of pledge or guarantee without any discernible plausible

reason by third parties unknown to the bank and who have no identifiable close relationship
with the customer;

ii) Transfer of money to another bank without indication of the beneficiary;

iii) Payment orders with inaccurate information concerning the person placing the orders;

iv) Use of pseudonyms or numbered accounts for effecting commercial transactions by

enterprises active in trade and industry;

v) Customer’s holding in trust of shares in an unlisted company whose activities cannot be

ascertained by the bank;

vi) Customers who wish to maintain a number of trustee or clients' accounts that do not
appear consistent with their type of business, including transactions that involve nominee
names.

6. Other suspicious accounts or customers

i) Large sums deposited through cheques or otherwise in newly opened accounts which may
be suspicious; AML/CFT Regulations 28

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Operation Management TERM REPORT
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ii) The customers who are reluctant to provide minimal information or provide false or
misleading information or, when applying to open an account, provide information that is
difficult or expensive for the bank to verify;

iii) An account opened in the name of a moneychanger that receives structured deposits;

iv) Customers whose deposits contain counterfeit notes or forged instruments;

v) An account operated in the name of an offshore company with structured movement of

funds; vi) Accounts that receive relevant periodical deposits and are dormant at other
periods. These accounts are then used in creating a legitimate appearing financial
background through which additional fraudulent activities may be carried out;

vii) A dormant account containing a minimal sum suddenly receives a deposit or series of
deposits followed by daily cash withdrawals that continue until the sum so received has been
removed;

viii) An account for which several persons have signature authority, yet these persons appear
to have no relation among each other (either family ties or business relationship);

ix) An account opened by a legal entity or an organization that has the same address as other
legal entities or organizations but for which the same person or persons have signature
authority, when there is no apparent economic or legal reason for such an arrangement (for
example, individuals serving as company directors for multiple companies headquartered at
the same location, etc.)

x) An account opened in the name of a recently formed legal entity and in which a higher
than expected level of deposits are made in comparison with the income of the promoter of
the entity; AML/CFT Regulations 29

xi) An account opened in the name of a legal entity that is believed to be involved in the
activities of an association or foundation whose aims are related to the claims or demands of
a terrorism organization;

xii) An account opened in the name of a legal entity, a foundation or an association, which
may be linked to a terrorism organization and that shows movements of funds above the
expected level of income;

xiii) Shared address for individuals involved in cash transactions, particularly when the
address is also a business location and/or does not seem to correspond to the stated
occupation (for example student, unemployed, selfemployed, etc.);

xiv) Stated occupation of the customer is not commensurate with the level or type of activity
(for example, a student or an unemployed individual who receives or sends large numbers of

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Operation Management TERM REPORT
In Banks
wire transfers, or who makes daily maximum cash withdrawals at multiple locations over a
wide geographic area);

xv) Regarding non-profit or charitable organizations, financial transactions for which there
appears to be no logical economic purpose or in which there appears to be no link between
the stated activity of the organization and the other parties in the transaction;

xvi) A safe deposit box is opened on behalf of a commercial entity when the business
activity of the customer is unknown or such activity does not appear to justify the use of a
safe deposit box;

xvii) Safe deposit boxes are used by individuals who do not reside or work in the institution's
service area despite the availability of such services at an institution closer to them;

xviii) Unexplained inconsistencies arising from the process of identifying or verifying the
customer (for example, regarding previous or current country of residence, country of issue
of the passport, countries visited according to the passport, and documents furnished to
confirm name, address and date of birth);

xix) Official embassy business is conducted through personal accounts. AML/CFT

Regulations 30 xx) Large deposits on pretext of transfer/disposition of property.

xxi) Frequent and unusual advance payments against imports

57