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SYLLABUS Back 3101 - Anti Money Laundering Measures and Business Ethics

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Definitions Money Laundering Terrorism Financing Relationship with other crimes and world economy Money Laundering Methodology
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2.A.1 2.A.2 2.A.3 2.A.4

Placement Layering Integration Issuance of Cheque

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Sources and Techniques Crimes and Civil wrongs

Nature of crimes 2.B.2 Corruption, Drug Trafficking, Ransom, Counterfeiting, Copy Rights violations, Arms Smuggling, Stock Exchange Frauds Learning from 79 Federal Violations in USA Nature of Civil Wrongs 2.B.3 Structured Insurance Policies, Letter of Credit, Abuse of Credit Cards, Structured Loans, Under or Over Invoicing, Transit Trade, Free Zone Concessions, Correspondent Banking , Negotiable instruments, Telegraphic Transfers, Off shore transactions. Formal Institutions 2.B.4 Off shore or shell Banks, Insurance and Investments Companies, Bureau De Change, Pension Funds, Shell Corporations, Venture Capital, Casinos, Travel Agencies, Real Estate Agents. Informal Institutions 2.B.5 Cash Business and Transactions, Hundi, Hawala, Fin Chin, Peso Exchange System, Antique Dealers, Precious Commodities dealers. Lotteries. 3. How the banks are abused?

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Review of the accounts with case Studies Review of the customers with case studies Review of the transactions with case studies Case studies of BCCI , Bank of America etc Walking Accounts and Numbered Accounts International Initiatives and relevance with KYC Initiatives

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4.A.1 4.A.2 4.A.3 4.A.4 4.A.5 4.A.6 4.A.7

Concepts and Objectives Bank of International Settlement and BaselCommittee UN Convention on Financing of Terrorism 1999 UN Convention on Narcotic Drugs 1988 OECD Conventions on Corruption and Bribery1997 UN Convention Against Transnational Organized Crimes 2000 Financial Action Task Force's Recommendations (1990 and 2001) 40 + 8

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Implications 4.B.1 National and International Implications 4.B.2 Initiatives by national agencies like State Bank, SECP and National Accountability Bureau. 4.B.3 Identification, Monitoring, Training, Auditing And Anti Money Laundering Units 4.B.4 Reporting to AML units and to Authorities. 4.B.5 Global co-operation and KYC. How to exercise KYC in Pakistan
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Procedure laid down by Financial Action Task Force Procedure laid down by State Bank Recommended steps Step One Policy Step Two Identification and Record Keeping Step Three Monitoring Step Four Reporting Evaluation of: Customer related risks, Transaction related risks, Jurisdiction related risks Role of AML units and Compliance Officers

Business Ethics

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Ethics and approaches in Ethics Ethical Power: Purpose, Perspectives, Patience, Persistence, Pride

Management Books 2000. No 34/35 1998. US Crime Prevention and Criminal Justice News Letter 8. Organizational Tools to Cultivate ethics Ethical Decision making Factors responsible for Ethical & moral erosion Promoting ethics at work place.2001. Background Paper Washington D.C. Financial System Abuse. Anti Narcotic Law of 1997 and Anti Terrorism Law of 1997 and the Circulars of SBP on KYC and related section of Prudential regulations Terms of Use Privacy Policy FAQ Site Map Contact Us 4 . Institute of 2 Bankers 1 3 Munir A.     Work Ethics: Missionand Goal related Work related Style related Belief related Building Ethical Organization:   4. CORE READINGS Pakistan.IMF 2001 SUPPLEMENTARY READINGS Blunden 1 Bon 2 3 Jack A Blum Salva Sandeep The Money Launderers. Selected reading of National Accountability Bureau Ordinance of 1999. 6. Banking Secrecy and Money Laundering. Money Laundering and Financial Intermediaries. Institute of Bankers Pakistan. Financial Crimes And Money Laundering. Kluwer Law International 2001. The Hague. Malik 4 Anti-Money Laundering Measures – A Guide for Bankers Business Ethics in the Banking Sector Banker’s Guide on Anti-Money Laundering Initiatives & Legislation International Monetary Fund. Financial Havens. 5.3. How they do it and how to catch them at all" Chalford England.

and functions of the Security and Exchange Commission of Pakistan. balance sheets of a company. how they are issued and transferred. how a company is wound up. A general idea of how a company is formed and what are the fundamental provisions of Memorandum of Association of a Company.Corporate and Banking Law Concept Of The Subject Candidates are expected to have a general knowledge of all the laws which affect banking business as a banker is constantly confronted with problems which he will not be able to solve unless he has such knowledge. Provisions of this law pertaining to contracts with minors. From this angle. This law also contains a chapter dealing with duties of a bank when acting as a pledgee of goods pledged with it which should be specially studies by candidates. 3. 2.SYLLABUS Back 3102 . It is not expected of candidates to have a detailed study of each and every one of the following laws but they should have a general idea of them and know their salient features. NEGOTIABLE INSTRUMENTS ACT . candidates are expected to study the following laws. Bankers have to handle considerable guarantee business and the chapter of Contract Act pertaining to Guarantees should be carefully studied. The chapter dealing with duties of an Agent should also be carefully studies as banks have to constantly deal with attorneys of their customers. it will not be possible for him to effectively deal with problems he will face in the day to day discharge of his duties and give to his customers the efficient and prompt service which is expected of a good banker. particularly how a contract is made and what are the essentials of a valid contract. CORPORATE LAWS COMPANIES ORDINANCE Candidates must know the fundamental concept of a corporate entity and limited liability of share holders and Directors of a Company. CONTRACT ACT Candidates must have a general over all knowledge of this law. how assets of a company can be sold and mortgaged and need to register charges against the assets of a company are provisions to which candidates must pay special attention and acquire a good knowledge of them. however. A) 1. They should. need to take special care when dealing with illiterate clients and pardah nashin ladies are aspects which should be given special attention. the manner in which a company operates. and Listed and unlisted companies. Candidates must also have a general knowledge about shares of a company. make a detailed study of topics specified below. functions of its Board of Directors. difference between a Public and Private limited companies. It is neither possible nor practical for a banker to run to a lawyer at every step to seek his advice and unless he has knowledge of salient features of the laws affecting banking business.

3. B) 1. FINANCIAL INSTITUTIONS (RECOVERY OF FINANCES) ORDINANCE. Provision of this law which enables banks to enforce its mortgages without the intervention of courts must be thoroughly mastered by . As such. 4. how they are made. need to give notice of dishonour. endorsed. and the procedure to be followed on dishonour of a Bill of Exchange. Candidates should have a general knowledge about the period of limitation prescribed under the law for recovery of dues of a bank from its customers. How Bills of Exchange are to be presented for payment on maturity. FOREIGN EXCHANGE REGULATION ACT AND EXCHANGE CONTROL REGULATIONS Candidates are expected to have a general knowledge of the provisions of this law and regulations particularly those provisions which affect banks operations as an Authorized Dealer. Candidates are expected to have a general over all knowledge of this law so that they are familiar with its requirements for initiating legal actions against defaulting customers and ultimate recovery. and accepted are matters which should be carefully studied. 2. BANKING LAWS BANKING COMPANIES ORDINANCE This is the fundamental law under which all banks exist and operate. 2001 This is the law which makes special provisions for recovery of banks' dues from its customers.This is a law which affects daily dealings of a Banker and candidates must give special attention to it. The nature of a negotiable instrument. protest for non-payment also need to be studied carefully. The chapter on mortgages need special attention as bankers are faced with problems pertaining to creation and enforcement of mortgages very frequently in their day to day duties. 5. TRANSFER OF PROPERTY ACT Candidates must acquire a general knowledge of the provisions of this law. Candidates must also acquire a general knowledge of what points to look for when examining title documents of any property to determine acceptability of such property as security for advance to a customer. LIMITATION ACT This law has very far reaching consequences on recovery of banks' dues and any slip on the part of a Banker can cause a huge loss to the Bank by the dues becoming irrecoverable. STATE BANK OF PAKISTAN ACT Candidates must acquire a general knowledge of this law particularly those provisions which give powers to the State Bank to regulate and oversee the working of a Bank. candidates are expected to acquire a detailed knowledge of this law. Special provisions in this law pertaining to cheques should be thoroughly mastered. 4. Provisions of the law which provide for exemptions from and extension of limitation under certain circumstances should also be studied.

9. Financial Institutions (Recovery of Finances. 1872.candidates as they are of utmost importance for ensuring prompt recovery of dues of a bank. which affect the operations of individual banks. Contract Act. National Bank of Pakistan Act. Banks (Nationalization) Act. 8. It provides for the manner in which Letter of Credit transactions are handled. Candidates should familiarize themselves with various circulars issued by State Bank from time to time prescribing various modes under which banks can provide finance to their customers. Candidates must study these provisions in detail as they will need to be well familiar with them for handling foreign trade business of the bank. 1882. UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS This is a very important document and has the force of law. 6. RECOMMENDED READING MATERIALS 1 2 3 4 5 6 7 8 9 Companies Ordinance. 5. etc.. 7. 2001. . 1956. . 2006. Offences in Respect of Banks (Special Courts) Ordinance. PRUDENTIAL REGULATIONS OF STATE BANK Candidates must be familiar with these regulations as a banker is expected to know them to be able to ensure that he is able to conduct correctly the business of the bank without committing a breach of any of them. Banking Companies Ordinance. 1984. they must be familiar with their existence so that whenever needed. 1984. ISLAMIC BANKING Candidates must familiarize themselves with various modes of non-interest based and sharia compliant financing. MISCELLANEOUS LAWS There are a number of laws e. Agricultural Development Bank. 1881. they should be able to find the relevant provisions. Transfer of Property Act. Although candidates need not study the provisions of these special laws. OFFENCES IN RESPECT OF BANKS (SPECIAL COURTS) ORDINANCE Candidates must study in detail the provisions of this law which provide for various offences in respects of dealings between a bank and its customers and also offences committed by bank staff in the course of performance of their duties in the bank. Industrial Development Bank. 1908.) Ordinance. State Bank of Pakistan Act. Negotiable Instruments Act. Limitation Act.g.

and sustainability of the required level of skilled manpower. developing the capacity to survive the impact of changes in trade flows and country risk profile. These risks could be in several areas. What the bankers are expected to . Central Banks are de-regulating the banking sector to permit the introduction of riskier products and services. more volatile and more competitive.Advance Risk Management Overall objectives As bankers gain experience. This combination requires bankers to develop the skill of studying.10 Manual of Banking Laws in Pakistan. operational and market risks management capability. they are expected to hold positions carrying higher responsibility. strengthening credit. future needs of business-related skills in the human resource and information technology. it implies developing in advance the capacity for managing risks that are most likely to surface. Developing this quality is therefore becoming increasingly important because market mechanisms are becoming riskier. SYLLABUS Back 3103 . and progress in their careers. The objective of this course is to encourage bankers to develop the knowledgebase and skills to equip themselves for identify and prepare for meeting these risks in the timeframes they unfold. product and service range to face up to competition. and projecting their future impact:      Interest and exchange rates Commodity prices Changing profile of the market players Market practices and conventions Circumstances that cause unusual movements therein Bankers need to develop realistic predictive abilities and strategies based thereon. including shortfall in:      network. interpreting historic trends in the following parameters. In nutshell. 11 Prudential Regulations issued by State Bank of Pakistan. State Bank circulars on non-interest bank financing and opening of Islamic Banking 12 branches of banks. wherein they are required to look at the broader canvas of their assignment and get in the habit of planning to meeting challenges that will unfold in the future.

Product and service range    Developing customers bases in the following market segments: Designing the product or service package Infrastructure needs Area 3 .Credit. operational and market risks management capability Credit Risk:      Trend Analyses: Changes in borrower psyche resulting from: Expected loss model: Changes in the profile of support services: In-house risk assessment capacity Operational Risk     Definitions of operational risk: Operational risk management framework: Operational controls: Self-assessment versus risk assessment: Market Risk    Volatility trends in: Developing trends in BOP and PSBR: Trade flows: . impact on bank’s capital adequacy) Net contribution to bank’s profitability Logistics problems (geographical access. supervision and control) Competitive advantage/weakness Volatility (susceptibility of operations to disruption caused by external factors) Area 2 .Network         Overall profile of competition faced by the branch Deposit base.develop is a futuristic approach to risk management planning to enhance the preparedness of their banks for facing up to unfolding risks and market challenges. skill support requirements. Area 1 . its mix and extent of support to the bank in asset funding and liquidity management Saleof the bank’s range of products and services by the branch Risk asset base. its mix (legal entity types. This skill has critical importance in ensuring the stability of the banking sector over extended periods. connectivity. Keeping this objective in view areas with critical bearing on a bank’s stability have been included in this course. facility and transaction types.

powerful groups in the domestic markets: Trends in contract performance ethics: Building-in risk factor into lending operations: Liquidity risk Area 4 .    Geopolitical uncertainties and impact on trade flows: Development of monopolies.Futuristic skills in the bank’s human resource    Human resources Risk assessment skills: Specialization in financing specific business sectors: Financial and risk analysis           Specifying risk monitoring requirements Service delivery skills: Familiarity with service requirements Familiarity with functioning and capability of delivery systems System weaknesses and contingency measures Supervisory skills: New demands created by the variety of services and products on sale Remedies for the gaps in data processing and reporting system Bank’s compliance needs: Creative skills: Area 5 .Information Technology Future demands    Targets for eliminating manual operations: Risks and issues involved in centralized data processing Risk involved in software change Area 6 . performance support.Sustainability of the required level of skilled workforce     A rational and clear relationship between employee empowerment. and actual output to consolidate the credibility of the reward system Continuously monitor industry averages of compensation for various cadres Devise career development paths and demonstrate their unambiguous implementation by up-grading all deserving employees Visibly convey to the employees the bank’s commitment to up-grade employee skills to improve their ability to contribute and thus move up the line .

Williams. McGraw Hill. Dan Galali and Robert Mark. McGraw Hill Inc Uyemura. 6 McGraw-Hill 7 Richard S. New York Risk Management Financial Risk Management Financial Modelling for Business Decisions The Bankers’ Handbook Foreign Exchange Handbook Financial Risk Management Performance management Liberation Management .Recommended Readings: 1 Chroury. Donald R. Thomas I. Thomson Press 8 Tom Peters. Dennis G. Baughn. Tokyo 5 Paul Bishop & Don Dixon. Chartered Institute of Management. & van Deventer. Fawcett Columbine.. 2 Brian A. Walker. Eales. Topman International Edition. Bryan Kefford. McGraw Hill. 3 Kogan Page Edited by William H. Storrs and 4 Charles E.

    Financial statements and their nature Major financial aspects and framework for their analysis Balance sheet ratios. 2.  Sources and uses of funds/cash flow statement 3. income statement ratios. and ensuring feasibility and internal coherence Short term and long term plans Financial planning models Financial Analysis and Control Financial ratio analysis 2. and trend analysis Common size and index analysis Cash flow analysis and financial planning II.1 1. dividend policy. capital budgeting decisions. Operating plans . degree of financial leverage. The Planning Function: Budget Process 1. The Overall Course Objective The course focuses on the theoretical as well as the practical aspects of the financial planning and budgeting that a candidate working in financial industry may come across. and liquidity requirements Role of financial planning: examine interactions. The syllabus is designed to provide the candidates with an in depth knowledge of the financial planning and budgeting so as to enable them to:     Develop conceptual understanding of the subject Apply the methods and techniques to carry out financial planning and budgeting in financial institutions Formulate financial plans and budgets to manage various financial activities. and Evaluate the financial plans and budgets for effective financial control Curriculum Conceptual Understanding 2. Strategic plan 2. I.Financial Planning and Budgeting 1.SYLLABUS Back 3104 . identify possible outcomes. explore options. Introduction to Financial Planning and Control     Elements of financial planning: financial planning process.

Use of Pro forma financial statements 12. Fundamentals of budgets 6. Preparation of budgets 8. Valuation: the Basis of Financial Decision Making Approaches to Valuation  Discounted cash flow valuation . Financial plans or budgets 4.3. Variance analysis 4. Working Capital Management I. Cash budget 9. Reasons to hold cash Speeding up cash receipts and slowing down payments E – commerce Optimum cash balance Investment in marketable securities Account receivables and inventory management III. Forecasting techniques 5.     Liquidity management Introduction Working capital issues Decision on current asset composition – short term and long term mix Decision on current asset financing Cash and marketable securities      II.    Credit and collection policies Analysis of the credit applications Inventory control and management Short term financing Spontaneous financing Negotiated financing Factoring accounts receivables Composition of short –term financing IV. Budgeted balance sheet 11. Cost estimation and estimation techniques 7. Income and expense budget 10.     5.

     Principles of capital budgeting Generation of investment proposals Estimation of the cash flows for the projects Evaluation of cash flows Selection of project based on acceptance criterion Continual reevaluation of investment projects after their acceptance Risk and Managerial options in capital budgeting       II.      Evaluating investment options for risk and return Defining risk and return Measurement of risk through probability distribution Attitude towards risk Diversification and portfolio management The Capital Assets Pricing Model Cost of capital II. . Planning the Investment. Relative valuation Estimation of Discount Rate   Cost of equity Weighted average cost of capital Estimation of cash flows Fixed-income bond valuation Preferred and common stock valuation Valuation of firm 6. Financing and Dividend I. Problem of project risk Comparing Net Present Value (NPV) & Internal Rate of Return (IRR) Risk & Investment Total project risk Firm-portfolio approach Managerial options 7. Capital Budgeting I.

     Required rate of return Operating and financial leverage Making capital structure decision EBIT-EPS analysis Cash flow and ability to service Dividend policy Procedural aspects of dividend payment Dividend and its impact on firm value Stock split and bonus dividend Managerial consideration as to dividend policy IV.     8. Analyzing and Managing Financial Risk           Introduction – the changing financial environment Types of risks faced by the financial institutions Risk based analysis Analytical tools to asses risks Derivative securities Hedging risk Future markets Forward & Option contracts Interest rate and currency swaps Commodity contracts 10.  Cost of individual sources of capital Deriving weighted average cost of capital Determining the financing mix III. Financial Models / Financial Forecasting and Quantitative Methods      Mathematical models Terminology Descriptive and prescriptive models Deterministic and probabilistic models Computer models 9. Assets Liability Management (ALM) in Financial Institutions      Introduction The objectives and role of ALM Committee Accounting and Economic perspectives on ALM NIM and its decomposition The effects of rate. volume and mix on NIM and total revenue .

Pocock & A. Inc. Milton Control Gower Press South-western Publishing Co.3 Candidates are expected to develop thorough understanding of the basic concepts of financial planning and budgeting and their application in different areas of banking operations. Core Readings: * Fundamentals of Financial Management * Commercial Bank Financial Management * Financial Management and Authors James C Van Horne & John M Wacllowiez Jr. procedures. New York Instituteof Bankers. Pakistan Project Appraisal * Handbook of Financial Planning M.H. sensitivity analysis. and mitigating the risk Optimizing the capital structure and dividend decisions Asset Liability Management in banks and financial institutions Systems & Procedures 2. To ensure an effective hands-on understanding of the techniques. Taylor and Control * Cost Accounting – Planning & Adloph Matz & Usry F. cost of capital.   Interest rate sensitivity and GAP management Duration and value at risk Implementing ALM and management issues Operational Areas: 2.A. and systems relevant to the course subject case studies and scenario based questions will be incorporated in the examination.2 The major areas and decision scenarios where the subject could improve the effectiveness of management decisions are:          Formulating effective financial plans in financial institutions for improving performance Evaluation of financial health and performance of an entity through financial statement analysis and analysis of cash flows Use of Forecasting techniques in financial planning Budgeting and preparation of forecasted financial statements Use of forecasted financial statements as a planning and control tool Planning and control of working capital and liquidity management Capital budgeting – Evaluation of investment projects. . Pakistan Instituteof Bankers. Macmillan Publishing Co. evaluation techniques. Joseph S Sinkey Publishers Prentice Hall International.

Van Horne New Policy * Fundamentals of Financial Birgham E. South Western.Y Khan and P. Management Eugene F.Ltd.K Jain M. Brigham & * Financial Management Michael C. Inc. UK Tata Mc-Graw-Hill Publishing United Kingdom. New York Prentice Hall International.Supplementary Readings: * Financial Management and James C. Vikas Publishing House Butterworth – Heinemann. Dryden Press. Ehrhardt Theory & Practice * Managerial Finance * Financial Management * Financial Planning & Control Parkinson Allan M. Terms of Use Privacy Policy FAQ Site Map Contact Us . Mohsin Co. F.

and Market Segments Nature of Competition and Availability of Substitutes Consumption Growth Collection of Secondary Information and Conduct of Market Surveys Demand Forecasting. Management Aspects         Credit Worthiness and Management Capabilities Sponsors’ Background. Financing Criteria      Selection of Sponsors Sponsors’ Stake Selection of Industry Group Selection of Projects Exposure Limits 2. Quantitative Methods Time Series Causal Methods Demand and Supply Projections Marketing Strategy. Business Environment.Project Financing 1.3152 . Trends. Project Cycle      Project Identification Evaluation Appraisal Approval Implementation 3. Market and Demand Aspects                Demand and Supply Analysis Determinants of Demand Market Considerations. Educational Qualifications. Organizational Structure Pricing Distribution Promotion . Previous Experience (Technical and Managerial) Performance of Allied Concerns Credit Reports and Business Reputation Technical Manpower Availability and Training of Personnel Sound Internal Controls Organizational Chart Key Personnel 4.

   Project Chart and Layouts Environmental Considerations Manpower 6. Service 5. Actual Construction. Financial Aspects  Capital Cost Estimates. Project Formulation. Implementation Scheduling Indicating  Various Implementation Stages Such as Negotiations and Contracting. Major Heads Such as: o Land and Site Development o Building and Civil Works o Engineering and Construction .    Site Preparation and Development Building and Infrastructures Outdoor Works Engineering and Construction Schedules. Erection. Technical Aspects   Material Inputs and Utilities Manufacturing Process and Technology o Choice o Acquisition o Appropriate Product Mix      Plant Capacity. Trial Runs and Commissioning 7. Technological Requirements Investment Cost Resources of the Sponsors Government Policy Location and Site   Proximity to Raw Materials and Markets Availability of Infrastructure Construction Plan and Specifications.

Documentation And Disbursement of Funds     Loan and Financing Agreements Guarantees Securities And Charge Creation Disbursement of Funds 10. o Time Parameters .o o o o o o o o o o o o o o o o o o o o o Imported and Locally Manufactured Equipments Erection and Installations Foreign Technicians and Training Abroad Preliminary and Capital Issue Expenses Pre-operating Expenses Furniture & Fixture Contingencies Working Capital at Startup Product Cost. Euro-Currency Markets Leasing Consortium / Syndicate Financing Supplier Credit Public Floatation 9. Project Monitoring and Supervision  Need for Monitoring during Construction. Implementation and Operations. Overheads. Cost of Distributing and Selling Prices Profitability Projected Financial Statements Cost Break-Even Analysis Sensitivity Analysis Pay Back Period Average Weighted Cost of Capital Internal Rate of Return and Internal Economic Rate of Return Foreign Exchange Earnings and DRC Job Creation Backward and Forward Linkages. etc 8. Commercial Banks. Sources of Finance Such As         Sponsors and their Foreign Partners National / International Development Financial Institutions. and Externalities Development of Backward Areas Income Distribution.

I.R. Implementation and Review By Chandra Prasanna “A Bankers’ Guide to Project Finance. Techniques of Project Supervision. Analysis. o Personal Links o Plant Visits o Follow-up and Progress Reports o Appointment of Institutional Directors o Industrial Surveys o o o o 11. Appraisal and Supervision” by G. Financing. Kherati SBP: Prudential Regulations GOP: The Financial Institutions (Recovery Of Finances) Ordinance. Asrar H.D.C. Siddiqui: Practice and Law of Banking IBP: Financial Management and Project Appraisal Terms of Use Privacy Policy FAQ Site Map Contact Us .) Projects: Planning.j Recommended Reading Materials 1 2 3 4 5 6 7 8 “Manual for the Preparation of Feasibility Studies” by W.M. Behrens & P. Hawranek United Nation Industrial Development Organization (U. 2001 SBP: Guidelines for Infrastructure Financing Dr. Restructuring and Write Off Institution of Legal Proceedings Out-of-Court Settlement C.O. Deviations from Approved Project Parameters      Time Over-Runs Cost Over-Runs Irregularities by Sponsors Change in Duty Structure Role of Early Warning Signals 12.I. Cost Parameters Physical Quantities and Qualities of Project Organization and Staffing M. Selection.M.I.S.N. Recovery From NPLs      Provisioning and Classification of Loans Rescheduling.