Pakistan’s latest National Risk Assessment (NRA) for 2023 confirms that the country’s overall money laundering (ML) risk persists at a medium-high level, driven by persistent threats and sectoral vulnerabilities. Despite exiting the FATF grey list in 2022 after extensive reforms, inherent risks from predicate offenses like corruption and hawala continue to pose challenges. This assessment, conducted by the National FATF Secretariat, guides stakeholders in prioritizing AML/CFT measures under a risk-based approach.
Key ML Threats from Predicate Offences
The NRA 2023 evaluated 21 predicate offences, rating corruption & bribery, illegal MVTS/hawala/hundi, tax crimes, smuggling, and cash smuggling as ‘Very High’ ML threats. High-risk categories include narcotic trafficking, human trafficking, frauds & forgeries, and cyber-crimes, generating substantial illicit proceeds laundered through cash couriers and informal channels. These threats are amplified by sophisticated criminal actors exploiting Pakistan’s undocumented economy and porous borders.
Major channels for laundering include illegal hawala networks, benami accounts, shell companies, real estate investments, and trade-based transfers. Under-reporting of business income and offshore hiding further fuel ML, with sectors like construction and precious metals serving as key conduits. The assessment used incident data, proceeds estimates, and criminal sophistication to derive these ratings, highlighting sustainable crime operations.
Sectoral Vulnerabilities
Financial sectors show banks as ‘Very High’ vulnerable due to high-value transactions and cash exposure, while microfinance banks and exchange companies rate ‘High’. DNFBPs face acute risks: real estate agents ‘Very High’ from anonymous cash deals and non-centralized registries; dealers in precious metals & stones (DPMS) ‘High’ owing to smuggling and hawala links. Accountants and lawyers rate ‘Low’, limited by low-volume TCSP services.
Legal persons like private limited companies and foreign companies are ‘Very High’ vulnerable for shell use, while trusts and waqfs are ‘Medium’. Virtual assets emerge as unregulated risks, with cryptocurrency noted in ML channels. Geographic factors, including border areas with Afghanistan, exacerbate vulnerabilities in cash-intensive urban and rural transactions.
| Sector | Risk Rating | Key Vulnerabilities |
|---|---|---|
| Banks (SBP) | Very High | Cash transactions, PEPs, HNWIs |
| Real Estate (FBR) | Very High | Anonymous deals, land registry gaps |
| DPMS | High | Smuggling, hawala integration |
| Private Ltd Cos (SECP) | Very High | Shell/front companies |
| Lawyers/TCSPs | Low | Limited high-risk services |
Consequences and Economic Impact
High ML/TF risks led to a USD 38 billion GDP loss during FATF greylisting (2018-2022), reducing remittances, trade, and investments. Social fallout includes corruption-fueled instability, while TF threats cause displacement and sectoral disruptions like tourism decline. Reputation damage hampers business, with lowered tax revenues perpetuating undocumented flows.
Reforms and FATF Progress
Pakistan completed FATF action plans by 2022, achieving 38/40 recommendations compliant, enabling grey list exit. Legislative changes, like AMLA 2010 amendments, enhanced investigations, sanctions, and DNFBP oversight. NRA 2023 builds on 2017/2019 assessments, incorporating LEA data and workshops for better threat profiling. Ongoing efforts target beneficial ownership transparency in LPLAs.
Basel AML Index scores improved to medium-risk (6.11-6.16), reflecting technical gains but highlighting effectiveness gaps. Regulators like SBP, SECP, and FBR enforce risk-based supervision, with FMU analyzing STRs.
Challenges Ahead
Despite progress, very high threats in hawala and real estate persist, demanding enhanced monitoring and digital land registries. Emerging cyber-crimes and virtual assets require new controls, amid low NPO risks (6.75% high). International cooperation is vital for cross-border cash smuggling.
Stakeholders must integrate NRA findings into AML policies, prioritizing high-risk sectors. As of March 2026, no 2025 NRA update alters the medium-high profile, underscoring sustained vigilance.