Session: TWENTY
EIGHT
MBF-705
LEGAL AND REGULATORY
ASPECTS OF BANKING
SUPERVISION
OSMAN BIN SAIF
Summary of Last session
State Bank of Pakistan Act, 1956
Agenda of this Session
Foreign Exchange Regulation Act
Foreign Exchange Regulation Act, 1947
Act No. VII of 1947
(11thMarch, 1947)
Foreign Exchange Regulation Act,
1947
An Act to regulate certain payments,
dealings in foreign exchange and
Securities and the import and export
of currency and .
Foreign Exchange Regulation Act,
1947
WHEREAS it is expedient in the
economic and financial interest of
Pakistan to provide for the regulation
of certain payments, dealings in
foreign exchange and securities and
the import and export of CURRENCY.
SECTIONS AND CHAPTERS
SECTIONS
CHAPTERS
Short title, extent and commencement.
Interpretation.
Authorised Dealers in Foreign Exchange.
Restrictions on dealing in Foreign Exchange.
Restrictions on payments.
Blocked accounts.
Special accounts.
Restrictions on import and export of certain currency
and .
7
SECTIONS AND CHAPTERS
(Contd.)
SECTIO
NS
CHAPTERS
Acquisition by Federal Government of foreign exchange.
10
Duty of persons entitled to receive foreign exchange, etc.
11
Power to regulate the uses, etc., of imported gold and
silver.
12
Payment for exported goods.
13
Regulation of export and transfer of securities.
14
Custody of securities.
15
Restrictions on issue of bearer securities.
16
Acquisition by Federal Government of foreign securities.
17
Restriction on settlement.
18
Certain provisions as to companies.
19
Power to call for information.
20
Supplemental provisions.
SECTIONS AND CHAPTERS
(Contd.)
SECTIONS
CHAPTERS
21
Contracts in evasion of this Act.
22
False statements.
23
Penalty and procedure.
24
Burden of proof in Certain Cases.
25
Power to Federal Government to give directions.
26
Bar of legal proceedings.
27
Power to make rules.
9
Short title, extent and
commencement
(1) This Act may be called the Foreign Exchange
Regulation Act, 1947.
(2) It extends to the whole of Pakistan and applies
to all citizens of Pakistan and persons in the
service of Government wherever they may be.
(3) It shall come into force on such date as the
Federal Government may, by notification in the
official Gazette, appoint in this behalf.
10
Foreign Exchange Regulation Act,
1947
Foreign Exchange Policy and its
operations in Pakistan are formulated
and regulated in accordance with
the provisions of the Foreign
Exchange Regulation Act, 1947.
11
Objective
The object of this Act is to regulate,
in the economic and financial interest
of Pakistan, certain:
payments,
dealings in foreign exchange,
securities,
import/export of currency.
12
Objective (Contd.)
Under the Act, the basic regulations are
issued by the Government of Pakistan and
the State Bank in the form of Notifications
which are published in the official Gazette.
13
Directions issued under the
Act
For the purpose of securing
compliance with the provisions of the
Act and the Notifications and any
rules, orders or directions issued
thereunder, the State Bank may,
under sub-section (3) of Section 20
of the Act, give directions to:
14
Directions issued under the Act
(Contd.)
Authorised Dealers,
travel agents,
carriers,
stock brokers and
other persons who are authorised by the State
Bank to do anything in pursuance of the Act,
in regard to making of payments and
carrying out other acts in the course of
their business.
15
Directions issued under the Act
(Contd.)
Directions having general application
are issued in the form of public
notices, Foreign Exchange circulars
and circular letters etc.
16
Amendments.
Changes in the regulations are
generally advised by issue of F.E.
circulars.
Amendments in the provisions of the
Manual are printed periodically by the
State Bank in the form of replacement
pages which will be substituted in
place of the old pages
17
Authorised Dealers in Foreign
Exchange
(1)The State Bank may, on application
made to it in this behalf, authorize any person
to deal in foreign exchange.
(2)An authorisation under this section: (i)may authorize dealings in all foreign
currencies or may be restricted to
authorizing dealings in specified foreign
currencies only;
18
Authorised Dealers in Foreign
Exchange (Contd.)
(ii)may authorise transactions of all
descriptions in foreign currencies or
may be restricted to authorizing
specified transactions only;
(iii)may be granted to be effective
for a specified period, or within
specified amounts.
19
Authorised Dealers in Foreign
Exchange (Contd.)
(3)An authorised dealer shall in all his
dealings, in foreign exchange comply with
such general or special directions or
instructions as the State Bank may from
time to time think fit to give, and, except
with the previous permission of the State
Bank, an authorised dealer shall not engage
in any transaction involving any foreign
exchange which is not in conformity with the
terms of his authorization under this section.
20
Authorised Dealers in Foreign
Exchange (Contd.)
(4)An authorized dealer shall, before
undertaking any transaction in foreign
exchange on behalf of any person, require
that person to make such declarations and
to give such information as will reasonably
satisfy him that the transaction will not
involve, and is not designed for the
purpose of, any contravention or evasion
of the provisions of this Act or of any rules,
directions or orders made thereunder,
21
Authorised Dealers in Foreign
Exchange (Contd.)
and where the said person refuses to
comply with any such requirement or
makes only unsatisfactory
compliance therewith, the authorised
dealer shall refuse to undertake the
transaction and shall, if he has
reason to believe that any such
contravention or evasion as aforesaid
is contemplated by the person,
report the matter to the State Bank.
22
3BCancellation of authorization:
Without prejudice to the provisions of
section 23B, if an authorized dealer or
money changer commits a contravention
of any term of authorization or uses it for
any purpose other than the purpose, or
there otherwise exist reasons appearing
sufficient to the State Bank, after giving a
reasonable opportunity of being heard to
the authorized dealer or money changer
to cancel the authorization.
23
Jurisdiction of the Offices of
Exchange Policy Department
Under the Act, the State Bank is
responsible for day to day
administration of Foreign Exchange
Policy which is exercised through its
Exchange Policy Department.
24
Jurisdiction of the Offices of
Exchange Policy Department (Contd.)
The Principal Office of the
Department is situated at Karachi
under the charge of a Director.
The Department has following
offices with the jurisdiction of each
Office mentioned there against:
25
Office Jurisdiction
1. Operations Division,
Exchange Policy Department,
SBP, Central Directorate, Karachi:
Karachi Division.
2.
3.
4.
5.
6.
7.
8.
Hyderabad: Hyderabad Division
Sukkur: Sukkur Division.
Quetta: Quetta, Kalat, Sibi and Mekran Divisions.
Lahore: Lahore Division.
Faisalabad: Faisalabad and Sargodha Divisions
Sialkot: Sialkot District.
Multan: Multan and Dera Ghazi Khan Divisions.
26
Office Jurisdiction (Contd.)
9. Rawalpindi: Rawalpindi Division
10.Islamabad: Federal Capital Area of
Islamabad.
11.Peshawar: Hazara, Kohat, Malakand and
Peshawar Divisions.
12.Gujranwala: Gujranwala Division,
excluding Sialkot District.
13.D. I. Khan: Dera Ismail Khan Division.
14.Bahawalpur: Bahawalpur Division.
15.Muzaffarabad: Azad Kashmir.
27
Notice to Customers
Authorised Dealers are required to
bring the Foreign Exchange
regulations to the notice of their
customers and to ensure compliance
in their day to day operations.
28
Evasion
They should also report to the State
Bank every case of :
evasion or attempt,
direct or indirect,
at evasion of the provisions of the
Act and Notifications or any rules,
orders or directions issued
thereunder, immediately as it comes
to their notice.
29
References to the State
Bank
Authority has been delegated to the
Authorised Dealers to approve
certain transactions on behalf of the
State Bank.
30
References to the State Bank
(Contd.)
In these cases, Authorised Dealers
should, before approving any
transactions, satisfy themselves
about the bonafides of the applicant
and the genuineness of the
transaction by verifying the
necessary documents.
31
References to the State Bank
(Contd.)
They should refer to the State Bank
along with their
recommendations/comments only
those cases which they are not
authorised to approve.
32
References to the State Bank
(Contd.)
While referring cases to the State
Bank, they should ensure that the
applications are on the prescribed
forms, wherever such forms are
prescribed and are supported by
appropriate documentary evidence.
33
References to the State Bank
(Contd.)
In all these cases it will be deemed
that they have satisfied themselves
about the bonafides of the applicants
and the correctness of the
statements made by them on the
application and the accompanying
documents, if any.
34
Submission of Returns to the State
Bank
Authorised Dealers must submit to
the State Bank returns of their
dealings in foreign exchange on due
dates in the forms prescribed in the
Manual.
Specimens of all application forms
and returns prescribed by the State
Bank are given in Appendices.
35
Stationery
(i) Forms M , T-1, E and I will be got
printed by the Head/Principal Offices
of the Authorised Dealers themselves
strictly according to the size,
contents and format of the
specimens supplied to them by the
State Bank.
36
Stationery (Contd.)
These forms should bear an
identifying prefix as per Appendix
followed by serial numbers in six
digits except in the case of form E
which will have seven digits.
37
Stationery (Contd.)
For example, the first number of all
the forms printed by XYZ bank
except form E will be XYZ 000001
(i.e. six digits) and so on, and in the
case of form E, the serial number
will be XYZ 0000001 (i.e. seven
digits) and so on..
38
Stationery (Contd.)
The other prescribed forms may also
be got printed by the Authorised
Dealers themselves. These must
conform exactly in size, content and
format to the respective forms
prescribed by the State Bank
39
Stationery (Contd.)
(ii) As omission of any part in the
printing of the forms is likely to make
a material change and may weaken
the position of the State Bank legally,
Authorised Dealers should take
utmost care in the printing of the
forms.
40
Stationery (Contd.)
They should also keep an updated
record of the forms printed and
distributed to their branches, which
should be kept adequately stocked to
avoid any complaint on account of
non-availability of the forms.
41
8.Restrictions on import and export
of certain currency
(1)The Federal Government may, by
notification in the official Gazette, order
that, subject to such exemptions, if any,
as may be contained in the notification, no
person shall, except with the general or
special permission of the State Bank and
on payment of the fee, if any, prescribed
bring or send into Pakistan any gold or
silver or any currency notes or bank notes
or coin whether Pakistan or foreign.
42
8.Restrictions on import and export
of certain currency (Contd.)
The restriction imposed by subsection shall be deemed to have
been imposed under section 16 of
the Customs Act, 1969, without
prejudice to the provisions of section
23 of this Act, and all the provisions
of that Act shall have effect
accordingly.
43
11.Power to regulate the uses,
etc., of imported gold and silver.
The Federal Government may, by
notification in the official Gazette,
impose such conditions as it thinks
necessary or expedient on the use or
disposal of or dealings in gold and
silver prior to, or at the time of,
import into Pakistan.
44
19.Power to call for information.
The Federal Government or the State
Bank may, at any time by notification in
the official Gazette, direct owners subject
to such exceptions, if any, as may be
specified in the notification, of such
foreign exchange or foreign securities as
may be so specified, to make a return
thereof to the State Bank within such
period, and giving such particulars, as
may be so specified.
45
22.False statements.
No person shall, when complying with
any order or direction under section 19
or when making any application or
declaration to any authority or person
for any purpose under this Act, give any
information or make any statement
which he knows or has reasonable
cause to believe to be false, or not true,
in any material particular.
46
23.Penalty and procedure.
(l)Whoever contravenes, attempts to
contravene or abets the contravention
of any of the provisions of this Act or of
any rule, direction or order made
thereunder other than the provisions of
sub-sections (2), (3) and (5) of section 3,
sub-section (3) of section 4, section 10,
sub-section (1) of section 12 and subsection (3) of section 20
47
23.Penalty and procedure
(Contd.)
or any rule, direction or order made
thereunder shall notwithstanding
anything contained in the Code of
Criminal Procedure, 1898, be tried by
a Tribunal constituted by Section
23A, and shall be punishable with
imprisonment for a term which may
extend to two years or with fine or
with both,
48
23.Penalty and procedure
(Contd.)
and any such Tribunal trying any
such contravention may, if it thinks
fit, and in addition to any sentence
which it may impose for such
contravention, direct that any
currency, security, gold or silver, or
goods or other property in respect of
which the contravention has taken
place shall be confiscated.
49
25.Power to Federal Government
to give directions.
For the purposes of this Act the
Federal Government may from time
to time give to the State Bank such
general or special directions as it
thinks fit, and the State Bank shall, in
the exercise of its functions under
this Act, comply with any such
directions.
50
26.Bar of legal proceedings.
No suit, prosecution or any other
proceeding shall lie against the
Federal Government or the State
Bank or any officer of the Federal
Government or of the State Bank or
any other person exercising any
power or discharging any functions
or performing any duties under this
Act.
51
27.Power to make rules.
The Federal Government may, by
notification in the official Gazette,
make rules for carrying into effect
the provisions of this Act.
52
THANK YOU
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