Banking Laws, Regulations and Ethics
Scope
Banking Laws, Regulations and Ethics tests the legal framework, regulatory compliance, AML/CFT, and conduct. The exam tests who must do what, when, and with what documentation.
Core rules
- Key laws: SBP Act 1956, Banking Companies Ordinance 1962, Companies Act 2017, AML Act 2010, and SBP Prudential Regulations/AML-CFT regulations.
- AML/CFT: CDD, beneficial ownership, PEP screening, sanctions screening, transaction monitoring, STR/SAR to the FMU, no tipping off, and record retention.
- Conduct: confidentiality, conflict-of-interest disclosure, no insider trading, no misuse of customer information, careful gift acceptance, and whistleblowing channels.
- Banking Mohtasib handles customer complaints after the bank's internal process.
Worked example
A customer asks to deposit PKR 1.8 million in cash as three separate deposits just below the reporting threshold. The officer should not split the deposits to avoid reporting. Structuring is a red flag; the bank should complete CDD, monitor, and file an STR with the FMU if suspicion remains, without telling the customer. Reasoning: the offence is the attempt to evade reporting, and tipping off is itself prohibited.
Traps
- Tipping off a customer about an STR.
- Treating confidentiality as absolute when lawful disclosure is required.
- Ignoring a conflict of interest because the employee disclosed it informally.
- Assuming board approval cures a breach of SBP regulations.