The State Bank of Pakistan (SBP) has introduced a comprehensive “Regulatory Framework for Exchange Companies (RFEC)” to enhance oversight, improve compliance, and strengthen the operations of exchange companies. The updated framework, which will replace the existing Exchange Companies Manual, will come into effect on January 1, 2025.
Under the new regulations, exchange companies are allowed to sell foreign currency to individuals up to a maximum of $10,000 per day and $100,000 per year, or the equivalent in other currencies, subject to compliance with regulatory requirements. Customers will be required to provide an undertaking at the time of each transaction, confirming that they have not exceeded these limits.
Exchange companies must implement robust information systems to ensure compliance with these limits. Additionally, they are required to retain copies of customers’ identification documents, such as CNIC, NICOP, POC, or passports, after verifying the originals.
Biometric Verification and Documentation
For transactions equivalent to $500 or more, biometric verification of Pakistani nationals is mandatory, and the record must be maintained. If biometric verification cannot be completed, the company must obtain an original online Verisys slip issued by NADRA. For transactions of $1,000 or more, the purpose of the transaction and supporting documents must be recorded, along with the source of funds.
For transactions of $2,000 or more, payments must be made through bank transfers or cheques from the customer’s personal account. The transaction receipt must include the reference number, the name of the bank, and the customer’s identification document number.
When purchasing foreign currency from individuals, exchange companies are only allowed to conduct transactions on a “Ready” value date. For transactions of $2,500 or more, a copy of the customer’s identification document must be retained.
Outward Remittances
The framework restricts outward remittances to personal financial transactions only. Exchange companies are prohibited from processing outward remittances for trade, commercial transactions, or payments for services and commissions, whether for individuals or corporate clients. Outward remittances are capped at 75 percent of the inward home remittances mobilized by the company during the preceding month.
Paid-Up Capital Requirements
The SBP has also increased the minimum paid-up capital requirement for exchange companies from Rs. 500 million to Rs. 1 billion. This follows a previous increase in September 2023, when the capital requirement was raised from Rs. 200 million to Rs. 500 million. Companies with capital deficiencies must meet the shortfall in phases: Rs. 600 million by December 31, 2025, Rs. 800 million by December 31, 2026, and Rs. 1 billion by December 31, 2027.
Strengthened Governance and Compliance
The updated framework emphasizes corporate governance, internal controls, and IT system requirements. It also strengthens the supervisory and enforcement regime, updates reporting requirements, and provides a unified source of regulatory guidance for exchange companies. Exchange companies are required to align their policies, procedures, and systems with the new framework by June 30, 2025.
