Anti Money Laundering (AML) in Pakistan
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Money laundering in Pakistan is a pervasive problem. Financial crimes related to narcotics trafficking, terrorism, smuggling, tax evasion, and corruption remain a significant problem in Pakistan. The proceeds of narcotics trafficking and funding for terrorist activities are often laundered by means of the alternative remittance system called hawala. This system is also widely used by the Pakistani people for legitimate purposes.
The State Bank of Pakistan (SBP) has in the past issued detailed AML/CFT regulations, as well as guidelines on a risk-based approach in 2012. The SBP is the regulator for AML controls for banking and related services while the Securities and Exchange Commission (SECP) is the regulator for all other entities. Other regulatory authorities include the National Accountability Bureau (NAB), the Anti Narcotics Force (ANF), the Federal Investigative Agency (FIA), and the Customs Authorities oversee Pakistan’s AML law enforcement efforts.
The major laws in these areas include:
All these laws include provisions to allow investigators to access financial records and conduct financial investigations.
In 2007, Pakistan enacted the AML Ordinance, establishing regulations for AML and combating the financing of terrorism and criminalizing money laundering. Under the Ordinance, the Financial Monitoring Unit (FMU) is created. The FMU serves as Pakistan's FIU and is in charge of handling Suspicious Transaction Reports (STRs). In 2010, the SBP passed the Anti-Money Laundering Act, replacing the 2007 AML Ordinance.
The FMU works with several Pakistani law enforcement agencies that are responsible for enforcing financial crime laws, including the National Accountability Bureau (NAB), the Anti-Narcotics Force (ANF), the Directorate of Customs Intelligence and Investigations (CII), and the Federal Investigative Agency (FIA).
The FIA deals with crimes relating to money laundering, terrorism, human smuggling and trafficking, and cybercrime, among others.
The State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) are the primary financial regulators. Notwithstanding the absence of standalone AML legislation, the SBP and SECP have independently established AML units to enhance their oversight of the financial sector. The SBP has introduced regulations intended to be consistent with the Financial Action Task Force’s (FATF) recommendations in the areas of a Know Your Customer (KYC) policy, record retention, due diligence of correspondent banks, and the reporting of suspicious transactions.
AML Training in Pakistan
In accordance with Pakistan’s 2007 AML Ordinance, a General Committee must be in place to review all training programs related to Anti-Money Laundering (AML). An ongoing comprehensive training program is essential for the continued growth and success of financial institutions in Pakistan.
The Economy of Pakistan
Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, since 2001, International Monetary Fund (IMF) approved reforms, most notably, privatization of the banking sector, bolstered by generous foreign assistance and renewed access to global markets, have generated macroeconomic recovery. Poverty levels have decreased by 10% since 2001. Inflation remains the top concern among the public, jumping from 7.7% in 2007 to more than 11% during the first few months of 2008, primarily because of rising world commodity prices.
Banking in Pakistan
The State Bank of Pakistan is the Central Bank of the country. The State Bank of Pakistan performs both the traditional and developmental functions to achieve the country’s economic goals. One of the fundamental responsibilities of the State Bank is the regulation and supervision of the financial system to ensure its soundness and stability as well as to protect the interests of depositors.
Additional functions of the State Bank of Pakistan include:
The State Bank also has been playing an active part in the process of Islamization of the banking system.
The basic unit of the Pakistani currency is the Rupee (R). The rupee is divided into 100 paise. Denominations for coins are 1Rs, 2Rs, 5Rs, and 10Rs. Denominations for banknotes are 10Rs, 20Rs, 50Rs, 100Rs, 500Rs, 1000Rs and 5000Rs.
Other Key Statistics of Pakistan
Time Zone: PKT (UTC+5).
Location: Southern Asia, bordering the Arabian Sea, between India on the east and Iran and Afghanistan on the west and China in the north.
Population: 196,174,380 (2014 estimate.).
Languages Spoken: Punjabi, Sindhi, Siraiki (a Punjabi variant), Pashtu, Urdu (official), Balochi, Hindko, Brahui, English (official; lingua franca of Pakistani elite and most government ministries) and Burushaski.