Lahore: Zafar Securities (Private) Limited has been fined for failing to adhere to the anti-money laundering (AML) regulations set by the Securities and Exchange Commission of Pakistan (SECP), as the company did not properly verify the source of significant client investments.
The SECP initiated proceedings against Zafar Securities following an inspection that revealed the brokerage firm did not comply with regulatory requirements involving client income verification. This inspection, conducted over three months starting July 2022, resulted in a show cause notice issued on July 4, 2023.
According to information available from the Pakistan Stock Exchange (PSX), the inspection focused on transactions involving two specific trading IDs, where investments totaled 15.99 million rupees and 71.47 million rupees, respectively. Zafar Securities failed to provide adequate documentation to verify the income sources for these investments, which is a mandatory requirement under the AML regulations.
The regulatory review discovered that while Zafar Securities submitted some documentation after the initial review, including salary slips for three clients, these documents were deemed insufficient. Specifically, one salary slip provided did not correspond with the funds allocated in the client’s trading account, which pointed to a significant discrepancy in compliance.
As a result, the SECP has imposed a monetary penalty of 60,000 rupees on Zafar Securities for these violations. The firm has been directed to deposit the fine within 30 days and ensure strict compliance with all relevant anti-money laundering and countering financing of terrorism regulations in the future.
This order is part of the SECP’s broader efforts to enforce compliance with the AML/CFT regulatory framework to prevent illicit financial activities within the country’s financial system. Zafar Securities is also advised to enhance their due diligence processes to prevent future non-compliance.