In an effort to curb misuse of credit and debit cards for cross-border transactions, with a focus on business-related usage, the State Bank of Pakistan (SBP) has introduced a yearly limit of $30,000 for individual debit/credit cardholders.
The SBP observed that affluent individuals and the business class were utilizing premium credit cards, previously issued by several commercial banks with attractive incentives, for commercial transactions rather than legitimate cross-border travel needs.
To promote responsible card usage, including virtual cards, the SBP has issued a circular outlining the implementation of an annual maximum limit of $30,000 for card-based cross-border transactions. The circular will come into effect from November 1 of the current year, and the cap for the ongoing year will be determined based on the date of issuance of the circular. It’s worth noting that this cap applies to anyone in the financial sector as well.
SBP Urges Due Diligence
Commercial banks are urged to conduct thorough due diligence of their customers during the onboarding process or while updating their risk profiles. They must accurately account for the demands of cross-border card payments within these profiles.
Banks are advised to ensure that multiple card issuance to a single customer aligns with their risk profile and is managed collectively. Furthermore, banks should only permit card-based cross-border transactions that meet their customers’ personal requirements and do not serve commercial purposes.
While it remains the customer’s responsibility to ensure they stay within the annual limit, banks are required to establish a robust monitoring system to verify that card-based cross-border payments made by individuals using one or more cards remain within the prescribed limits and comply with the customer’s risk profile.
Focus on Corporate Cards
For business customers, banks and fintech companies may offer corporate cards, provided they are used in accordance with the applicable rules of the Foreign Exchange Manual and the customer’s profile. Robust monitoring systems must be put in place to track payments made through these business cards.
Public Awareness and Compliance
Banks are strongly advised to conduct awareness campaigns to inform the public about the contents of this circular and the prohibition of cross-border business payments made through personal credit cards.
The SBP emphasizes that banks should diligently follow these guidelines and ensure all stakeholders are aware of them. Any non-compliance may result in action being taken in accordance with the relevant sections of the Foreign Exchange Regulation Act, 1947, including monetary or administrative actions against offending Authorized Dealers (ADs).