Pakistan is one of the countries that have ongoing problems with money laundering. In addition, financial crimes such as drug and human trafficking, corruption, and financing of terrorism are essential troubles for Pakistan. Pakistan has a defenseless and sensitive location for money laundering; they share the same geography with India, Iran, and China, which are essential players in the drug market. Also, their location is on the critical drug and human trafficking route.
Also, according to the Transparency International Corruption Index, Pakistan has 31st place from 0 to 100. According to the World Governance Indicator, Pakistan has 21st place in controlling corruption from 0 to 100. Location corruption issues are increasing the risk of smuggling, fraud, and kidnapping. The risks arising from the location and corruption show that Pakistan should pursue an effective policy against financial crime.
Primary government authorities for AML/CFT in Pakistan?
According to the Anti-Money Laundering (AML) Act, the Financial Monitoring Unit (FMU) serves as Pakistan's designated Financial Intelligence Unit. Its main responsibility is to act as the central agency in charge of collecting and carefully reviewing Cash Transaction Reports (CTRs) and Suspicious Transaction Reports (STRs) that various reporting entities, including working firms, have submitted. Additionally, FMU is charged with the crucial duty of informing the appropriate investigative and supervisory authorities of pertinent financial information related to suspected proceeds of crime, alleged money laundering activities, and transactions associated with the financing of terrorism. Section 6 of the AML Act (Financial Monitoring Unit) authorizes the creation of the FMU.
Pakistan’s Responsible AML Bodies and Regulators
Several government bodies and regulators have responsibility for detecting and prosecuting financial crimes and imposing requirements for institutions, such as
- National Accountability Bureau
- Federal Investigation Agency
- Directorate General Federal Board of Revenue
- Other Law enforcement agencies
- The State Bank of Pakistan
- The Securities and Exchange Commission of Pakistan
- Federal Board of Revenue
- The ICAP
- The ICMAP
- Pakistan Bar Council and Other independent legal organs
Pakistan’s Anti-Money Laundering Regulations
The Anti-Terrorism Act of 2002: This law defines the offenses of financing terrorism and money laundering as well as the relevant legal framework and punishments. To increase the maximum penalties, it underwent an amendment in October 2004.
According to the 1999 National Accountability Ordinance: This ordinance establishes specialized accountability courts and requires financial institutions to notify the National Accountability Bureau (NAB) of any suspicious transactions.
Act of 1997 to Control Narcotic Substances: This law establishes specialized courts to deal with offenses, including the financing aspect, related to illegal narcotics. It also includes provisions for asset freezing and forfeiture linked to narcotics trafficking. Suspicious transactions must be reported to the Anti-Narcotics Force (ANF) under this law.
In 2007, Pakistan introduced the AML Ordinance, which laid down comprehensive regulations for combatting money laundering and the financing of terrorism. This ordinance criminalized money laundering and led to establishing the Financial Monitoring Unit (FMU), which serves as Pakistan's Financial Intelligence Unit (FIU). The FMU was entrusted with managing Suspicious Transaction Reports (STRs). In 2010, the State Bank of Pakistan (SBP) enacted the Anti-Money Laundering Act, supplanting the 2007 AML Ordinance as the country's primary legal framework governing anti-money laundering efforts.
The FATF has allowed jurisdictions without approaching deadlines to voluntarily report their progress ever since the COVID-19 pandemic began. The FATF has assessed the progress of the specific countries, including Pakistan, as of June 2022.
According to this assessment, the FATF welcomes Pakistan for making noteworthy improvements to its AML/CFT regime. To fulfill the obligations of its action plans regarding the strategic deficiencies that the FATF identified in June 2018 and June 2021, Pakistan has strengthened the efficacy of its AML/CFT regime and addressed technical problems, the latter of which was finished ahead of schedule and included a total of 34 action items. As a result, Pakistan is no longer under the FATF's stricter monitoring regime. Pakistan will keep collaborating with APG to enhance its AML/CFT system.
Anti-Money Laundering Solutions for Pakistan
Money laundering is a pressing issue in Pakistan, as it poses significant challenges to the country's financial stability and security. Pakistan's government and financial institutions are increasingly focused on implementing robust anti-money laundering measures to combat this threat. In response, Sanction Scanner provides innovative AML solutions powered by AI. These solutions offer a progressive strategy for enhancing financial integrity and help organizations effectively fulfill their AML obligations. We invite you to contact us or request a demo for an in-depth presentation if you want to delve into the future of AML compliance!
