Don’t wait for your ship to come in, swim out to it.
Be Proactive, rather than Reactive.
Remittances
Remittances can be defined as an act of transferring money to a distant place. Banks issue remittances on behalf of customers after receiving the value of remittance and related charges/Govt taxes, if any, are taken care of. Payment in cash is not only very risky but also time consuming. Remittances as such play a vital role in day-to-day business. Remittances payable within the country are called ‘In Land Remittances’. Remittances payable outside the country and received from foreign countries are called ‘Foreign Remittances’.
In order to provide for an ownership structure in Pakistan for remittance facilitation, State Bank of Pakistan, Ministry of Overseas Pakistanis and Ministry of Finance launched a joint initiative called ‘Pakistan Remittance Initiative’. This initiative has been taken to achieve the objective of facilitating, supporting, faster, cheaper, convenient and efficient flow of remittances. This initiative shall take all necessary steps and actions to enhance the flow of remittances.
Types of Inland Remittances
• Pay order
• Demand draft
• Telegraphic transfer
• Cashier’s cheques / banker’s cheques / Rupee traveler’s cheques
• Online transfer
• 1. Pay order (PO)
Pay order is an order to pay a certain amount of money mentioned in the instrument on demand to the payee. The bank is discharged by payment in due course. Pay order is generally used for making local payments and the same is done by the branch that issues it. This is an order instrument and transferred through negotiation. This is like a Banker's Cheque but issued locally for local payments. This is different from a demand draft which is payable for outstations and is generally used for outstation payments.

Issuance procedure
• Request shall be received on standard application form or on customer’s written request.
• In the case of a walk-in customer, the necessary KYC (know your customer) procedures should be completed, such as address of the purchaser, telephone number(s) and a photo copy of the CNIC for due diligence. Check that all required information on the application is completed and that it is duly signed.
• If the pay order is to be issued against cash, then the same needs to be collected along with charges and a cash-received stamp is affixed onto the pay order application.
• If the pay order is to be issued against a cheque, then it should be posted in the account. Service charges, if not collected in cash, will have to be posted in the customer’s account through a debit voucher. A transfer stamp needs to be affixed onto the voucher and the pay order before issuing it, either manually or through the system.
Issuance of Pay order / Cashier cheque

Customer approaches the bank for issuance of PO/CC
Request will be received either on standard application form or customer written request In the case of walk-in customer, required KYC should be completed, such as:
Address and telephone number(s) of the purchaser.
Photo copy of CNIC and its comparison with original for due diligence. Purpose of remittance.

Dealing officer must check that all required information in the application form is completed and it is signed

If PO/CC is to be issued against cash, then same shall be collected along with charges and cash received stamp shall be affixed onto application form

If PO/CC is to be issued against cheque, it shall be posted in the account. If charges are not included in the cheque separately, debit voucher shall be prepared and charges shall be recovered

Cheques will be cancelled and transfer stamp must be affixed onto all related vouchers

Duplicate copy shall be handed Pay order/cashier cheque shall be prepared as per details in the application, either manually or through system
It shall be signed by the maker and counter signed by the checker
over to the customer

Payment of Pay Order
When a pay order is presented for payment, the banker should check the
following:
• Issued by the same branch and duly signed by authorized officers.
• There is no alteration on the instrument.
• If presented in clearing, special crossing and clearing stamp is affixed and endorsement is given on back of the instrument.
• Pay order date should not be more than six months old, otherwise it will require revalidation.
After checking all the above points the pay order should be posted in
the register / system and should be marked as paid.
Duplicate issuance
• The purchaser of the pay order should submit an application for loss of the pay order and issuance of a duplicate.
• Signature of the purchaser should be verified from the original application form.
• Prescribed indemnity on required value of stamp paper should be obtained; signed by the purchaser and duly witnessed.
• Approval from competent authorities of the bank for issuance should be obtained.
• Duplicate pay order should be issued and new numbers of the duplicate pay order should be written on PO application form.
Cancellation
• Application from the purchaser, along with original instrument, requesting cancellation of pay order is required.
• The banker should verify the signature of the purchaser from the pay order application form.
• If pay order was issued other than in personal name, clearance / discharge from beneficiary must be obtained.(Note by Ashraf. This precaution has resulted from forgeries and frauds observed in Govt Departments. A person x has to obtain a license from a govt. deptt. The department demands that x submits a pay order as fee for Rs 100,000/- payable to the govt deptt. x pays the amount to a bank, obtains a payorder payable to govt. deptt., delivers the payorder to the govt department. The govt clerk shows pay order received to the officer who signs the licence. The clerk delivers the licence to x. Subsequently the clerk after taking a bribe from x delivers the pay order to x. x returns the pay order to the bank and takes refund. In order to control such frauds the govt departments have asked the banks that they should not refund the pay orders made out in favour of the govt departments unless a responsible govt officer does not authorize refund of such a pay order in writing. Surprisingly the government is unable to discipline its employees and is throwing the burden of preventing frauds by their staff on the banks.
• Pay order should be marked as cancelled and the signature portion of the pay order should be torn out.
• Cancellation should be marked in the PO register / system.
• Proceeds of the pay order should be credited to the customer’s account after recovering cancellation charges.
• If pay order was issued for walk-in customer, another pay order in the name of the purchaser should be issued instead of refunding the amount in cash.
•
• 2. Demand Draft (DD)
A demand draft is a value received instrument issued by the bank. It is issued in order to pay money drawn by one branch of a bank upon another branch of the same bank or its correspondent. Since this is an order instrument, the drawee bank is discharged by payment in due course and the instrument is transferred through negotiation. DDs are generally drawn on other cities with an objective of making payments there.
Issuance
• Request should be received on standard application form or on customer's written request / instruction.
• In the case of a walk-in customer, the necessary KYC (know your customer) procedures should be completed, such as address of the purchaser, telephone number(s) and a photo copy of the CNIC for due diligence.
• Check that all required information on the application is completed and that it is duly signed.
• If DD is to be issued against cash, then the same needs to be collected along with charges and a cash-received stamp is affixed onto the pay order application.
• If DD is to be issued against a cheque, then it should be posted in the account. Service charges, if not collected in cash, will have to be posted in the customer's account through a debit voucher. A transfer stamp needs to be affixed onto the voucher and the DD before issuing it, either manually or through the system.
• DDs should be prepared according to the draft application form, signed by two authorized officers and should be delivered to the purchaser.
• Relative credit advice should be prepared and dispatched to the drawee's branch.
• Amount on the draft is protected from risk of alteration by use of ‘protectograph machine’{I.e. a machine by which the figures showing amounts are EMBOSSED on the draft or mail transfer so that it cannot be altered}
Payment
When a draft is presented for payment, the banker should check the following: -
• Draft is drawn on the branch where it is presented for payment.
• Signed by authorized officers with attorney number.
• Signature should be verified from power of attorney book.
• There is no alteration on the instrument and it is in order in all respects. In the case of any alteration, the same should be duly authenticated under joint signatures.
• If presented in clearing, a special crossing and clearing stamp is affixed and endorsement is given on the back of the instrument.
• DD date should not be more than six months old, otherwise it will require re-validation.
• After checking all the above points, the DD should be posted in the register / system and should be marked as paid.
Duplicate issuance
• The purchaser of the draft should submit application for loss of the demand draft and issuance of duplicate.
• Signature of the purchaser should be verified from the original application form.
• Drawee branch should be informed about the loss of the draft, with request to mark caution for its payment.
• On receipt of confirmation that draft is outstanding, prescribed indemnity on required value of stamp paper should be obtained, signed by the purchaser and duly witnessed.
• Duplicate demand draft should be issued with a note "duplicate draft is issued in lieu of original draft no dated ".
• New number of the duplicate draft should be written on draft application form.
• If purchaser wants his money back, drawee branch should be asked to remit back money by debiting their DD payable account and by issuing a credit advice.
• On receipt of funds, the same should be credited to customer's account.
Cancellation
• Application from purchaser along with original instrument requesting cancellation of the demand draft.
• The banker should verify signature of the purchaser from the draft application form.
• If demand draft was issued in other than a personal name, clearance/discharge from beneficiary must be obtained.
• Draft should be marked as cancelled and signature portion of draft should be torn out.
• Cancellation should be marked in the DD issue register / system.

• Proceeds of the draft should be paid by debiting suspense account and crediting customer’s account(s) respectively.
• On receipt of credit advice, the suspense account created in lieu of the cancelled DD should be reversed within a maximum of 30 days.
3. Telegraphic transfer (TT)
Telegraphic transfer is a transfer of money by cable or through telegraph from one branch of a bank to another branch of the same bank or its correspondent of a named beneficiary. TT message is prepared under test number. The authenticity of the TT message should be confirmed by the drawee branch by verifying a secret test number. When the test is confirmed, the proceeds of the TT are credited in the account of the beneficiary.
Issuance
• Customer should apply for remittance of funds through TT on standard application form or on instructions letter duly signed.
• If remittance is requested against deposit of cash, it should be counted and a received cash stamp should be affixed.
• If cheques are tendered along with remittance application they should be posted in the customer’s account and vouchers for the charges should also be prepared and posted.
• The details of the TT should be entered in the TT issue register.
• TT message should be prepared and test should be applied.
• The message should be transmitted by a cable/telegraph/telex.
• Delivery of message over phone should be avoided.
Payment
• On receipt of message at the DRAWEE branch, test should be verified on the message.
• If test is not agreed, message should be sent to the issuing branch for revision of test.
• If test is agreed, “Test Agreed Stamp” should be affixed on the message.
• Vouchers shall be prepared by debiting head office account of issuing branch and crediting bills payable TT payable account.
• If beneficiary’s account is in the same branch, bills payable TT payable shall be debited and customer’s account will be credited.
• If beneficiary’s account is in another branch, TT receipt should be issued in the name of the beneficiary and paid in normal clearing.
•
4. Cashier cheque / banker's cheque
A cashier cheque is a kind of a draft drawn by a branch on its Head Office or Main Office. Cashier cheques are a guaranteed form of payment. This is an order instrument that can be paid when presented at the counter, but generally issued as a crossed cheque. This is a very customer-friendly instrument as it serves the purpose of both demand draft and pay order. A pay order is issued and paid by the same branch; a DD is paid by the branch on which it is drawn, whereas a cashier cheque can be paid at any branch of the bank. Any customer, including walk-in customers, can order a cashier’s cheque from any bank simply by handing them the money over the counter, but if he/she has an account with the bank it is sometimes cheaper.
In western countries such as the UK, cashier cheques are issued with special characteristics, such as:
• Generally issued with enhanced security features, including special bond paper.
• These are designed to decrease the vulnerability to items being counterfeited.
• The cheque is generally signed by one or two bank employees; however, some banks issue cashier’s cheqes featuring a signature of the bank’s or other senior official.
A cashier cheque includes the name of the issuing branch and its code, instrument number, date, drawn on main office and amount in words and figures. It can be issued for any amount and requires the signatures of two authorized officers.
Issuance
• Application for issuance of cashier cheques should be submitted on a standard form or can be issued against a customer’s written instructions.
• Customer’s name, address and telephone number should be obtained on the application form.
• If purchaser is a walk-in customer, copy of CNIC should be obtained along with original for attestation. This is SBP’s minimum requirement for walk-in customers.
• If a cashier cheque has to be issued against cash, then cash should be counted and “Received Cash Stamp” should be affixed onto the application.
• If a cheque is tendered along with an application, it should be posted in the customer's account and a transfer stamp should be affixed on both the cheque and the application form.
• A cashier cheque of the required amount should be issued under full signature and attorney number.
• Post the details of the cashier cheque in the system; as such, details of the instrument are updated at Head Office record online and on real time basis.
• After posting in the system, the instrument may be delivered to the customer.
• Dispatch related credit advice to the cashier cheque cell.
Encashment
• Cashier cheque can be paid in cash, transfer or clearing.
• Before encashment, dealing officer should verify signatures on the instrument.
• It is advisable that before encashment, a list of lost instruments should be referred to.
• For walk-in customers, a copy of CNIC should be obtained.
• In the case of a lost instrument being presented for payment, it should be marked as Reported Lost and returned to the presenter.
• The dealing officer, after satisfying himself about the authenticity of the instrument, should cancel it in the same manner as other instruments are cancelled and post the same in the system. The holder should be paid in the mode it was presented for payment (cash, transfer, clearing) and a stamp shall be affixed. (Explain in what meanings the word cancel is used in practical banking)
5. Rupee Traveler's Cheques (TC)
Cheques issued in Pak rupees by the banks to their customers who wish to travel within the country are called Rupee Traveler's Cheques. Each cheque has a space for the customer to sign immediately on receipt of the cheque and another space to sign in the presence of the paying banker at the time of encashment.
Issuance
• Application of issuance of rupee traveler's cheque should be submitted only on the standard form.
• Customer's name, address and telephone number should be obtained on the application form.
• If purchaser is a walk-in customer, copy of CNIC should be obtained along with original for attestation.
• If TCs have to be issued against cash, then the same should be counted and a "Received Cash Stamp" should be affixed onto the application.
• If a cheque is tendered along with the application, it should be posted in the customer's account and a transfer stamp should be affixed on both cheque and application form.
• TCs of the required denomination should be issued under full signature and attorney number, in the name of the beneficiary, the details of whom should be written on the application form. TCs should be issued after obtaining first the signature on each TC and on the purchase receipt.
• Related credit advice should be dispatched to the TC's cell.
Encashment
• TCs can be presented for payment either in cash, transfer or in clearing.
• Authenticity of the TC should be checked by verification of the signature on the TC and signature of the purchaser on the purchaser receipt.
• Customer should be asked to put his/her signature in the second space.
• For walk-in customers, a copy of CNIC should be obtained.
• After verification of signature and CNIC, payment can be made.
• If presented in clearing, crossing, clearing, discharge on the reverse should be verified and if everything is in order, cheque should be marked as cancelled, and related credit advice should be issued.
6. Online Transfer
Online transfer means transfer of funds electronically through a computer system. In a cash-free world all transactions can be done electronically. To receive money the customer should have a bank account in the country, but to transfer money, a walk-in customer can also make use of the online fund transfer facility. This is a highly effective and secure way to transfer money.
Through an online system, branches are linked to computer centers and customer's account records are held and processed centrally. Details of counter transactions are transmitted for action from branch terminals online and on a real time basis. This online service can be used for inquiry purposes and for actual banking transactions. The funds are generally available to the beneficiary within minutes and there is no receiver fee. The processing of online funds transfer should be in line with the provisions given in the Payment System and Electronic Funds Transfer Act 2007.
Procedure for online transfer
• Customers can apply for online transfer either through a standard application form or by using deposit slips. These slips are designed in a manner so that a depositor can write the name of a local branch where the cash is deposited and name of the remote branch where funds have to be credited.
• Before accepting an online transfer it should be checked if the remote branch is computerized and online.
• If cash is deposited, a 'received cash' stamp should be affixed onto the application form after counting the cash and recovering charges.
• The customer's cheque and written instructions can also be accepted for online transfer.
• In the case of written instructions, vouchers for debit of the customer's account should be prepared for remittance amount plus charges.
• If the remitter is a walk-in customer, a copy of CNIC should be obtained along with the original for attestation.
• After all cheques are cleared, access to the remote branch should be made and vouchers should be posted. After posting and supervision, fund transfer through the online system should be completed on a real time basis.
Precautions
In recent times, fraudulent activities in processing of online cash payment of cheques have increased. Fraudsters use chemicals to change the words and figures of the cheque, converting small amounts into large amounts. With a view to preventing fraud and payment of tampered cheques, the following additional control steps may be taken for payment of online cash cheques over the counter:
• Collection of photo copy of CNIC of bearer of cheque and its verification from original.
• All cheques presented for online cash payments should be checked under an ultra violet lamp which can detect whether cheques have been tampered with. These lamps are not costly and can be purchased from local markets.
For online payment of cheques of large amounts, a call back process must be followed by the payee branch. This can be done by referring the details of the cheque to the drawer branch for a call back verification of the cheque with the account holder.
ii. Foreign Remittances
(explain similar modes used for foreign remittances as for inland remittances.
The inward remittances increase our foreign exchange reserves and thus encouraged.
Outward remittances use up valuable foreign exchange so restrictions placed on outward remittances against Pak rupees.)

It is important for the government to know statistics about earning and spending foreign exchange so detailed procedures for reporting foreign remittances have been put in place.

12.3. Outward Foreign remittances;
A remittance abroad involves foreign exchange, the grant of which is subject to the approval of the Foreign Exchange Department of State Bank of Pakistan. For certain specified purposes and for restricted amounts, authorized dealers have been delegated authority to sanction remittances on behalf of State Bank. Except for cases falling under this category, in all other cases prior approval of the Foreign Exchange Department, SBP, on the appropriate form, must be obtained before effecting any remittance.

(According to the current exchange rules, if a person maintains a foreign currency account in a bank the amount debited to the foreign currency account can freely be remitted inside or outside Pakistan in foreign currency without approval from State Bank of Pakistan)

The usual type of remittances and the relevant chapter of the Exchange Manual pertaining to the regulations regarding remittances abroad against payment of Pakistan Rupees are as follows:

i. Travel Allocation Chapter XVIII: - Example remittance or issue of currency notes or traveler’s cheques to travelers for holiday or business trip abroad.

ii. Private Remittances Chapter XVII: - Example remittances for purposes like appearing in foreign examinations, education, etc. Some remittances are approved by commercial banks themselves when the applicants meet the criteria laid down by SBP in the Exchange Manual. For others application is made to SBP.

To facilitate payments abroad, Pakistani banks maintain foreign currency accounts with banks in the principal financial centers of the world which are called Nostro accounts. Before deciding on which correspondent a drawing is to be made a reference should be made to the list of correspondent banks and their agency arrangements. In case a bank does not maintain an account in the country on which the drawing is being made, reimbursement to the drawee bank should be provided as laid down in the agency arrangements. (Explain agency arrangements)

Remittances in currencies not quoted by the banks in Pakistan;
Remittances should normally be effected in currencies the rates for which are quoted by banks. Remittances may also be made in other currencies in special cases provided a provisional deposit sufficient to cover the expected cost is obtained and held in sundry creditors account.

When a remittance is received in Foreign Currency for payment in Pak Rupees the Bank Purchases (buys) foreign currency and pays out Pak Rupees.
When a remittance is SENT in foreign currency against payment in Rupees the bank SELLS foreign currency and charges (debits) the customer in Pak Rupees.

SWIFT
(Society for Worldwide Interbank Financial Telecommunication)
Compared to dispatch of draft and Mail Transfer, and even TT, the SWIFT is a very secure system. The movement of funds is instantaneous. SWIFT was established in 1973 by 239 banks in 15 countries as a non-profit bank-owned cooperative society. The SWIFT transactions relate to remittances, bank transfer and even documentary credits. By using standard format for each type of transaction the transactions are easy to reconcile. The system offers efficiency, speed, accuracy and security and therefore almost all foreign remittances are made by means of SWIFT, now a days.

The SWIFT is a computerized payments system. In the sending bank branch the message is input by one authorized officer and it is approved for dispatch by two different authorized officers, all three using their own passwords. The computer system converts the message into codes so that it cannot be stolen during transmission. At the destination bank branch authorized officers can retrieve the message through their passwords and take action on the payment instructions. It is a highly secure and instantaneous payments system and is used the World over.

12.6. Inward Foreign Remittances
The term “inward remittance means purchase of foreign currencies in whatever form and including M.T., T.T., draft, travelers cheques, drafts under travelers letters of credit, bills of exchange, currency notes and coins and debit to foreign banks’ non-resident Rupee accounts in Pakistani Banks. A Rupee account opened by Standard Chartered London in the books of Standard Chartered Lahore is called Vostro account.

There is no restriction on receipt of remittances from abroad either in foreign currency or by debit to non-resident Rupee accounts of banks’ overseas branches or correspondents. Banks may freely purchase T.Ts, M.Ts, drafts, bills etc., expressed and payable in foreign currencies or drawn in Rupees on banks’ non-resident Rupee accounts.

(AS WE HAVE SEEN EARLIER THERE ARE RESTRICTIONS ON REMITTANCES TO BE SENT ABROAD AND THE EXCHANGE MANUAL ISSUED BY STATE BANK OF PAKISTAN LAYS DOWN THE PARAMETERS IN THIS REGARD. HOWEVER REMITTANCES FROM ABROAD INTO PAKISTAN ARE ALLOWED WITHOUT RESTRICTIONS AS THE COUNTRY GETS FOREIGN EXCHANGE THROUGH INWARD REMITTANCES)

12.7. Outward Foreign Remittances
The term “outward remittance” means sale of foreign exchange in any form and includes T.Ts, M.Ts, drafts, travelers cheques, travelers letters of credit, foreign currency notes and coins etc and credit to non-resident Rupee account. Foreign outward remittances are subject to foreign exchange regulations of State Bank of Pakistan.

12.8. Mode of Remittances
The Exchange Control Manual lays down that where remittances can be effected by MT or TT the issuance of draft should be avoided. However, where this course of action will cause inconvenience or hardship to the remitter, demand draft crossed “Payees A/c only” may be issued. Advice of draft issued should be dispatched promptly. Delay in this regard may put the beneficiary to considerable inconvenience. Generally, the correspondents also hold instructions that in case of payment of a draft of large amount, a cable should be sent to the issuing branch if the draft advice is still unreceived.

12.9. Cancellation of foreign Remittances

12.9.1. Cancellation of Outward Remittances
In the event of any outward remittance which has already been reported to the State Bank being subsequently cancelled, either in full or in part, Authorised Dealers must report the cancellation of the outward remittance as an inward remittance. The return in which the reversal of the transaction is reported to SBP should be supported by a letter giving the following particulars:

(a) The date of the return in which the outward remittance was reported.
(b) The name and address of the applicant.
(c) The amount of the remittance as effected originally.
(d) The amount cancelled.
(e) Reasons for cancellation.

12.9.2. Cancellation of Inward Remittances

In the event of any inward remittance which has already been reported to the State Bank, being subsequently cancelled either in full or in part, because of non-availability of the beneficiary, Authorized Dealers must report the cancellation of the inward remittance as an outward remittance on form ‘M’. The return in which the reversal of the transaction is reported to SBP should be supported by a letter giving the following particulars:

(a) The date of the return in which the inward remittance was reported.
(b) The name and address of the beneficiary.
(c) The amount of the purchase as effected originally.
(d) The amount cancelled.
(e) Reasons for cancellation.

Reporting of Incoming and Outgoing Foreign Remittances
to State Bank of Pakistan
Now we discuss the Purpose and System of Reporting of Incoming and Outgoing Foreign Currency Remittances to and from the people, government and businesses in Pakistan to the Statistics Department in State Bank of Pakistan.

In order to decide the Import Export policy, determine budget allocations to various sectors of the economy, make decisions regarding monetary policy, fiscal policy, trade policy, customs duties, etc., the State Bank of Pakistan and the Government of Pakistan specially the Ministry of Finance and Ministry of Commerce need STATISTICS of values and volumes of Visible and Invisible Imports and Exports of Pakistan.

To gather such statistics the SBP has laid down a detailed system for strict compliance by virtue of which, whenever any commercial bank receives foreign currency for any purpose or sends out foreign currency for any purpose the bank prepares details of each transaction specially giving the PURPOSE OF INWARD OR OUTWARD REMITTANCE, VALUE AND NATURE OF GOODS IMPORTED OR EXPORTED. Depending upon the amount the bank also gives the name and address of the customer involved.

Following Forms are used for Reporting inward and outward foreign currency remittances:-

Supporting Form Purpose
E Form All remittances coming into Pakistan showing inward receipt of proceeds of export of goods from Pakistan are reported on E form.

R Form All incoming remittances showing amounts received for invisible exports, Remittances from Pakistani expatriates, etc.

I Form All remittances going out of Pakistan being payments for goods imported into the country.

M Form All remittances going out of Pakistan for invisible imports, travel, education, holiday, etc.

Such comprehensive statistics has to be sent by each bank to the state bank of Pakistan on the 3rd day of each month relating to the full previous month.
Heavy penalties are levied if the bank delays in conveying this information.
This statistics is important for the Financial Managers of the country.

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“Whenever you find yourself on the side of the majority, it is time to pause and reflect.” -Mark Twain