Send Foreign Currency Abroad for Illegal Trade: SBP

KARACHI: The State Bank of Pakistan (SBP) has stated that it is not permitted to send currency out of Pakistan for foreign exchange transactions through any payment channel.

The SBP, in a circular issued on May 18, 2022, stated that a number of foreign exchange trading, margin trading and contract for difference (CFD) websites/apps/platforms have been observed. (such as OctaFX, Easy Forex, etc.) offer their products to residents of Pakistan, attracting audiences through social media advertisements to purchase their products/services. Such purchases by residents of Pakistan violate Section 4(1) of the Foreign Exchange Regulation Act 1947 (FERA).

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In addition, it has also been observed that banks facilitate settlements/payments through their payment channels to these offshore trading platforms.

The SBP clarified that the transfer of currency directly/indirectly outside Pakistan to foreign exchange trading, margin trading and CFD trading apps/websites/platforms through any payment channel n is not permitted because no general or special permission has been granted by the State Bank. under section 5(1) of the FERA.

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The central bank has drawn the banks’ attention to section 4(1) of the Foreign Exchange Regulation Act 1947 (FERA), which provides, “except with the prior general or special permission of the Bank of State, no person other than an authorized dealer may in Pakistan, and no person residing in Pakistan other than an authorized dealer may, outside Pakistan, buy or borrow, sell, lend or barter with a person who is not is not an authorized dealer, of foreign exchange”.

In addition, banks’ attention is also drawn to Section 5((1(a)) of the FERA which provides, “Except as may be provided for in and pursuant to any general or special exemption from the provisions of this sub-section section which may be conditionally or unconditionally by the State Bank, no person in Pakistan or resident in Pakistan shall: (a) make any payment to or on the credit of any person resident outside Pakistan”.

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In view of the above, banks are advised to ensure compliance with the aforementioned sections of FERA and take all necessary steps, including the following, to stop payments to all such websites/apps/platforms. forms of forex trading, CFDs, margin trading by their clients via any payment channel:

— Inform their clients of the inherent risks and the illegality of such trade with such a person/entity.

— Institute an ongoing monitoring mechanism whereby such websites/apps/commerce platforms are identified and prevented from making payments through any payment channel.

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In the event that a bank is found to have failed to execute the measures and facilitate the transactions as stated above, the State Bank of Pakistan may prosecute such delinquent licensed dealer under the relevant provisions of FERA and take any pecuniary or administrative action as deemed necessary.