PRESSED by the IMF and other international agencies, the government is

seeking amendments to anti-money laundering and counter financing of

terrorism (AML/CFT) laws for effective deterrence against terror financing, tax
avoidance and corruption.
The IMF has asked Pakistan for a broader tax administration reform strategy,
including the use of technology, to improve tax compliance and enforcement by
using anti-money laundering tools.
The IMF `staff encourages the authorities to continue enhancing the
effectiveness of the AML/CFT framework to detect and disrupt proceeds of
crimes, including corruption`.
This will not only improve the tax-toGDP ratio and create resources to finance
much-needed spending on fixed investment and social development, but also
make the taxation system more efficient, transparent and equitable, the IMF
said.
The government obliged, and intro-duced the Anti-Money Laundering
(Amendment) Bill 2014 in parliament to include tax crimes in the schedule of
offences of the Anti-Money Laundering Act (AMLA) 2010. It has promised to
implement the AML framework in letter and spirit to facilitate the detection of
potential cases of abuse of investment schemes to launder criminal proceeds.
The anti-terrorism amendment ordinance has also been enacted as a permanent
law in line with the action plan agreed with the Financial Action Task Force
(FATF).
While efforts on the legal side have been encouraging, their implementation on
the ground has always been far from satisfactory, notwithstanding occasional
rhetorical statements by some ministers and the country being in the middle of
a fight against terrorism for almost 15 years now.
This is evident from the fact that state institutions froze just around Rs1bn
belonging to proscribed organisations in almost a decade. According to official
record presented to the parliament, the financial monitoring unit received 5,775
reports of suspicious transactions (STRs) or currency transaction reports
(CTRs) from financial institutions, of which it passed over 1,000 to four law
enforcement agencies, including 350 to the FIA, which took action and arrested
270 peo-ple and froze 200 bank accounts.

However, only a few among these have reached courts.

No wonder then, Pakistan was included among 11 countries that had not made
sufficient progress or committed to an action plan developed with the FATF
toaddress deficiencies related to AML/CFT.
Established in 1989 at a G-7 summit in Paris to examine and develop measures
for combating money-laundering, the FATF is an inter-governmental body that
sets standards and promotes effective implementation of legal, regulatory
andoperational measures for combating money-laundering, terror-financing and
other related threats to the integrity of the international financial system.
The government has now decided to bring all domestic and international flows
of funds to suspected terrorist entities under AMLA to avoid adverse
international reaction. It says the proposed amendments in the AMLA 2010 are
necessary to avoid international financial isolation and ease operational
difficulties being faced by law enforcement agencies.
For this, the definition of financing of terrorism for the purpose of starting
probe into STRs is being amended to include `funds collected, provided, used
or meant for, or otherwise linked or related to terrorism, terrorist act or
organisations and individuals concerned with terrorism`.
Unless Pakistan`s laws conformed to these international standards and it made
efforts to combat terror financing, the international community, under the
banner of the FATF and AML/CFT, could declare it high-risk and noncooperative, leading to international sanctions.
The amendments were also being made in AMLA to ensure domestic and
international cooperation among agencies for investigating terror financing.
The new law proposes due diligence of customers and requires regulatory
agencies like the SECP and the SBP to maintain a record of transactions. This
was not cov-ered in the previous law, which caused operational difficulties in
its implementation, as law enforcement agencies had been sitting on the STRs
for months and years in the absence of clarity regarding their responsibilities.
It was not surprising that even the freezing of Rs1bn had been done under
resolutions 1267 and 1371 of the United Nations against proscribed
organisations.
Financial institutions have also been advised that they could be slapped with

fines because of non-compliance with AMLA and ineffective efforts against

AML. Pakistan is counted among countries where AML laws are not strong and
its financial transactions are thus kept in a sub-category for extra due diligence
(EDD). The minimum fine for non-compliance with FATF in Europe is $5m a
substantial risk for smaller banks.
While strengthening the law, the government and the parliament would be
expected to be extra-careful in dealing with funding flows, which may divert
more transactions outside official banking channels and go against the critical
objective of bringing in more people into the formal economy.
The law should also be improved so it protects the interests of the customers
and to see that investigations by agencies do not lead to unfair treatment of the
innocent.

Anti-money laundering laws and

Pakistan

Columns

APRIL 12, 2012 BY FAISAL ZAMAN

Money laundering is a global menace sans boundaries, faith or ideological frontiers.

Technological advancements and economic interests have reduced this world into a global
village thereby providing massive opportunities for criminals to manipulate otherwise
eroding jurisdictional barriers in their favour with relative ease. By carefully using legal
money transmission channels the proceeds of a crime perpetrated in a remote area in South
America may easily land up unnoticed in Dubai en-route to Europe. The frequency and
relative ease in laundering money shook the global conscience. As events unfolded it became
apparent to the world that money laundering was directly connected with terrorist financing.
This deadly combination posed a grave and imminent danger to world economy, stability and
above all world security. This imminent global danger demanded a swift global response.
The United Nations as flag bearer of the comity of nations took upon itself to introduce and
enforce various legal instruments to fight corruption in any form. Money laundering and

terrorist financing captured the concern of the United Nations. An appropriate and strong
message was sent out by the United Nations and an evolving strategy was formulated.
Even before 9/11, the United Nations had embodied the money laundering aspect in its 1988
United Nations convention against the Illicit Traffic in Narcotics Drugs and Psychotropic
Substances, the United Nations Convention against Transnational Organized Crime and
United Nations Convention against Corruption and the International Convention for the
Suppression of the Financing of Terrorism.
After 9/11, enough evidence was available that established the links between terrorism,
transnational organized crime, the international drug trade and money laundering. In
September 2001, the United Nations Security Council unanimously adopted wide-ranging
anti-terrorism Resolution No 1373. This resolution in essence is the backbone of international
response to counter terrorism and terrorist financing. Another important international
development in combating money laundering was the establishment of Financial Action Task
Force (FATF) in the year 1989. This is an inter-governmental policy making body, comprised
of over 30 countries, that has a ministerial mandate to establish international standards for
combating money laundering and terrorist financing.
The primary functions of FATF are: It sets international standards to combat money
laundering and terrorist financing; assessing and monitoring compliance with the FATF
standards; conducting typologies studies of money laundering and terrorist financing
methods, trends and techniques; responding to new and emerging threats, such as
proliferation financing.
Initially FATF had given 40 recommendations to counter money laundering. After 9/11, FATF
gave another 9 recommendation to counter terrorist financing. Collectively these
recommendations prescribed the measures to be adopted by the member states and other
jurisdiction to counter money laundering and terrorist financing. Some of these key measures
include: Introduction of legal and regulatory regimes to check money laundering; following
Customer Due Diligence (CDC) /Know Your Customer (KYC); proper record keeping;
reporting of suspicious transactions; establishment of competent authorities, their powers and
resources; freezing of funds and confiscation of terrorist assets; and establishment of asset
forfeiture fund.
Over 180 jurisdictions including Pakistan have joined FATF or an FATF style regional body
to implement the FATF standards and having their anti-money laundering/counter terrorist
financing (CFT) systems assessed. Some of these regional bodies are: Asia Pacific Group on
Money Laundering (Pakistan is a member of this group); Caribbean Financial Action Task
Force; Eurasian Group; Eastern and Southern Africa Anti Money Laundering Group; The
Council of Europe Committee of Experts on the Evaluation of Anti Money Laundering

Measures and the Financing of Terrorism; The Financial Action Task Force on Money
Laundering in South America; Inter-Governmental Action Group against money laundering
in West Africa; Middle East and North Africa Financial Action task Force.
Anti-Money Laundering Act, 2010 is one of the measures taken by the government of
Pakistan to fulfill its international obligations. This law has provided the basic legal
framework to counter money laundering and terrorist financing. The legal structure is similar
to the one prevailing in different countries. A powerful Financial Monitoring Unit (FMU) has
been established under section 6 of the Act. National Executive Committee to combat money
laundering has been established under section 5 of the Act. This is a high powered body that
comprises of four federal ministers, Governor State Bank of Pakistan, Chairman Securities
and Exchange Commission of Pakistan and Chairman National Accountability Bureau.
The role of this committee is to develop a national strategy to fight money laundering,
determine offences that may be considered as predicate offences, making recommendations
to the federal government for effective implementation of the Act, issue directions to the
agencies involved in the implementation and administration of the Act and take measures for
development of investigating agencies.
Offences under the Act have been made non-bailable and non-cognizable. Provisions have
been made in sections 26 and 29 of the Act for seeking mutual assistance of other states as
well as for reciprocal arrangements for processes and assistance for transfer of accused
persons. Mandatory disclosure requirements have been placed on the directors, officers,
employees and agents of reporting entities, financial institutions and non-financial business
or profession.
The writer is a lawyer
faisalzamanadv@yahoo.com

based

in

Islamabad.

He

can

be

contacted

at

Faisal Zaman

The writer is an advocate and can be reached at: faisal.zaman@corporatilaw.com.

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Comments (4)
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Munir Ahmad 129 weeks ago

Good write up. What changes law brought in Pakistani society or economy. Do U belive that the transfer of
huge funds out of Pakistan would be stopped soon
Report
Reply

She 126 weeks ago

But Pakistan is in blacklist territories of FATF and wikipedia shows it in the list countries not committed to
action, ''High risk and Non-Cooperative''?
Report
_____________________________________________________________________________

Pakistans Legal Framework to Combat

Money Laundering and Counter
Terrorist Financing
Pakistan faces significant risks of money laundering and even more
significant risks of terrorism financing. Aware of the prevalence of
corruption, narcotics trafficking and terrorism, the authorities have
focused on tackling these predicates. Pakistan has however not yet
sufficiently taken into account money laundering and terrorism
financing associated with these and other predicate crimes.
Criminals launder funds in Pakistan and reportedly are purchasing
real estate, abusing corporate entities to access the financial sector,
laundering money through trade and abusing informal channels in
Pakistan. Funds for terrorism came from proceeds of crime (including
bank robbery, kidnap for ransom, and proceeds of drugs flowing from
Afghanistan), with cases of cash couriers and misuse of charities
facilitating terrorist financing.
Pakistan has criminalized money laundering (ML) and terrorism
financing (TF). Pakistan set up its Financial Intelligence Unit (FMU) in
December 2007. Pakistan has taken steps to make the FMU
operational. In this background, the present legal set up of AML
regulations has been reviewed in this article.
For prevention of money laundering and forfeiture of property derived
from, or involved in, money laundering and for matters connected
therewith or incidental

thereto; the Government of Pakistan enacted, The Anti-Money

Laundering Ordinance, 2007 (AMLO), it came into force with effect
from 4th day of October 2007. 1 The said Ordinance lost its legal
authority in 2009,2 consequently, the parliament enacted the new law,
namely, the Anti-Money Laundering Act, 2010(AMLA). 3
For carrying out the operation of Anti-Money Laundering law and to
meet its purpose, the Financial Monitoring Unit (FMU) stands
established with the approval of National Executive Committee, and
the said institution issued the Anti-Money Laundering Regulations,
2008.4
Among other things, the Act defines the legal terms such as
attachment,5 CTR,6
financial institutions,7 foreign serious offences,8 FMU,9 non-financial
business
and
professions,10 offence
of
money
11
13
14
12
laundering, person, proceeds of crime, property, Suspicious
Transaction Report (STR),15 transfer16 and predicate offence.17
In order to implement the law the Financial Monitoring Unit (FMU) has
been
established in the State Bank of Pakistan (SBP). 18 The main function
of the FMU is to receive suspicious Transaction Reports (STR) and
reports on Currency Transaction (CTR) of specified monetary limit.
The FMU after the receipt of said reports is required to: 19
i)
Analyze the STRs and CTRs;
ii)
Disseminate information to the investigating agencies; 20
iii)
Create and maintain data base of STRs and CTRs;
iv)
To co-operate with FIUs and intelligence agencies of other
countries.
v)
To frame regulations in consultation with SBP.
All financial institutions are required to file with FMU STRs and
CTRs20A where they know or suspect or have reason to believe that
the suspected transaction is an outcome of:
a)
Illegal activities or the same is intended or conducted in order
to hide or disguise proceeds of crime;
b)
An attempt to evade any requirement of Anti-Money
Laundering Law; and
c)
Is an outcome of unlawful purpose; and
d)
Involves financing of terrorism. 21

Acquisition, conversion, possession, use or transfer of such property

which is proceeds of crime constitutes the offence of money
laundering.22 The offence is punishable with imprisonment ranging
from one year to ten years, or a fine up to one million rupees or both,
and the property involved in the crime is liable to forfeiture. 23
Where a property is suspected to be an outcome of money
laundering, an officer investigating such matter may make an order
for the attachment of the property, which he believes is the proceed of
crime, after taking permission from the court for a period not
exceeding ninety days. The officer who makes a provisional
attachment of the property is required to file a complaint before the
court against the concerned persons within a period of 30 days. 24
The investigation officer is required to initiate investigation within
seven days after the attachment of the property and where the officer
comes to the conclusion that such property is an outcome of money
laundering, may ask the court to confirm the attachment. 25And where
the attachment of property becomes final, 26 the same shall be
forfeited by the court.27 After forfeiture the property shall rest in the
Federal Government.28
The investigation officer has the power to search, seize and arrest
persons engaged in money laundering subject to taking permission of
the court.29
All courts of sessions established under the Code of Criminal
Procedure, 1898, within its territorial jurisdiction have the power to try
and adjudicate the offences falling within the purview of AMLA. 30
All offences under the AMLA are not cognizable and non bail able.
The court can take cognizance of such offence upon a complaint
made by the investigation officer or by an authorized officer of the
Federal or Provincial government.31
An appeal against any final decision or order of the court established
under the Act lies before the High Court on any question of law or fact
arising out of such decision or order within a period of sixty days. 32

Any investigation office who exercises powers under the Act but acts
without the permission of the court is liable to punishment under the
Act.33 For the purposes of this act, NAB, FIA, ANF or any other law
enforcement agency specified by the Federal Government are the
investigation and prosecution agencies.33A
Tipping of and confidentiality requirements have been defined in the
law.34 The offences falling within the purview of the Act have been
defined.35 The Act is not
applicable in relation to fiscal offences36 except, import prohibitions
act of smuggling, mis-declarations, and fiscal frauds under the
Customs Act, 1969.36A
Specified offences falling within the scope of Pakistan Panel Code,
1860, The Arms Act, 1878, The foreigners Act, 1946, The Copyright
Ordinance, 1965, Securities and Exchange Act, 1969, The Emigration
Ordinance, 1979, The Control of Narcotic Act, 1997, National
Accountability Ordinance 1999, and The Registered Designs
Ordinance, 2000 have been made predicate offences under the Act. 37
The contravention of the provisions of AMLA, if committed by a
company or person engaged with the company who, at the time the
contravention was made, was associated with the company, shall be
deemed to be guilty and shall be punished. 38
For making or submitting STR, and CTR, FMU is the only designated
agency.39 The Director General of FMU can direct an NFBP to submit
STRs or CTRs.40 The
Director General FMU is authorized to freeze a suspected property
on the compliant of a financial institution or NFBP for a period of 15
days.41
The following are examples of potential suspicious transactions for
both money laundering and terrorist financing. The lists of situations
given below are intended mainly as a means of highlighting the basic
ways in which money may be laundered.42
1.
Transactions which do not make economic sense.43
2.
Transactions inconsistent with the customers business. 44
3.
Transactions involving large amounts of cash.45
4.
Transactions involving structuring to avoid reporting or
identification requirement. Transactions involving forcing

currency exchanges that are followed within a short time by

wire transfers to locations of specific concern (for
example,countries designated by national authorities, or FATF
as non-cooperative countries and territories, etc.). 46
5.
Transactions involving accounts.47
6.
Transactions involving transfers to and from abroad should
state occupation of the sender is not commensurate with the
level or type of activity (for example, a student or an
unemployed individual who receives or sends large numbers of
wire transfers, or who makes daily maximum cash withdrawals
at multiple locations over a wide geographic area). 48
7.
Investment related transactions.49
8.
Transactions involving unidentified parties.50
9.
Transactions involving insurance.51 A customer obtains a credit
instrument or engages in commercial financial transactions
involving movement of funds to or from locations of specific
concern when there appears to be no logical business reasons
for dealing with those locations.
10.
Transactions involving embassy and foreign consulate
accounts.52
(Mr. Zafar Iqbal,* Managing
Law

Associates

Partner Azimuddin
Karachi
Pakistan).

______________________________________________________
_________
*
1.

2.

LL.B (Punjab) MPA (USC) LL.M (TJSL) JSD (CAN) (TJSL), Managing Partner
Azimuddin Law Associates Karachi Pakistan.
See Notification No. SRO 83 (KE) 2007 dated 4.10.2007: The text of the aforesaid
Notification reads as under:In exercise of the powers conferred by sub-section (3) of section 1 of the Anti-Money
Laundering Ordinance 2007 (XLV of 2007), the Federal Government is pleased to
appoint the 4th day of October, 2007, as the date on which the said Ordinance shall
come into force.
AMLO was issued as a presidential ordinance in exercise of the extraordinary powers
assumed by the president pursuant to the Proclamation of Emergency of 3 rd November
2007. According to Article 89 of the Constitution of Pakistan 1973, all ordinances must be
introduced in the National Assembly as a bill and are automatically repealed at the
expiration of a period of four months from their promulgation. By virtue of the Constitution
(Amendment) Order (2007), the President amended the Constitution and Article 270AAA
was introduced. This amendment validated all the ordinances issued under the
Proclamation of Emergency notwithstanding anything contained in the Constitution. It
also provided that such ordinances shall continue in force until altered or repealed or
amended by the competent authority. The Constitutionality of the Constitution
(Amendment) Order 2007 was challenged and the Supreme Court in the case of Tika

Iqbal Muhammad Khan vs General Pervez Musharraf, PLD 2008 SC 178 upheld the
constitutionality of the Order including Article 270AAA. However, in the case of Sind High
Court Bar Association v Federation of Pakistan: PLD 2009 SC 879, the judgment given in
Tika Iqbal Muhammad Khans case was declared unconstitutional as a result whereof
Article 270AAA stood deleted from the Constitution and consequently the Ordinance
issued by the then Government of Pakistan were declared to remain operative within the
framework of Article 89 and 128 of the Constitution, i.e; the Ordinance were to be
validated by the parliament within the specified period. However, keeping in view the
extraordinary circumstances, these laws were given a temporary lease of life up to
31.7.2009 by the Supreme Court through its judgment passed in the Sind High Court Bar
Association supra, and there after the government was directed to get these laws
validated from the parliament within a period of 4 months. As a consequence Constitution
18th Amendment Act, 2010 was passed which authenticated actions of President Pervez
Musharraf taken during 12-10-1999 through 31-10-2003 under Article 270AA(2) of the
Constitution, all subsequent law/ordinances did lost their authority after 31-11-2009.
Consequently, the government enacted the Anti-Money Laundering Act, 2010 and the
new law came into force with effect from March 27, 2010.
3.
The Anti-Money Laundering Act, 2010 came into force on March 27, 2010, see
Notification no. F9(4)/2010-Leqis dated 27-3-210.
4.
See Notification No. SRO 02 (KE) 2009. Under Section 46 of AMLA, the existing rules
have been validated.
5.
Section 2(1)(a), the Anti-Money Laundering Act, 2010: "Attachment" means
prohibition of transfer, conversion, disposition or movement of property by an order
issued under section 8.
6.
Id. Section 2(1)(c). "CTR" means report on currency transactions exceeding
such amount as may be specified by the National Executive Committee by notification in the
official gazette.
7.

Id. See Section 2(1)(f), "financial institution" includes any institution carrying. on any
one or more of the following activities, namely:i) acceptance of deposits and other repayable funds ,from the public;
ii) lending in whatsoever form;
iii) financial leasing;
iv) money or value transfer;
v) issuing and managing means of payments including but not limited to credit and debit
cards, cheques, travelers cheques, money orders. bank drafts and electronic money;
vi) financial guarantees and commitments;
vii) trading in(a) money market instruments;
(b) foreign exchange;
(c) exchange, interest rate and index instruments;
(d) transferable securities; and
(e) commodity futures trading;
viii) participation in shares issues and the provision of services related to such issues;
ix) individual and collective portfolio management;
x) safekeeping and administration of cash or liquid securities on behalf of other persons;
xi) investing, administering or managing funds or money on behalf of other persons;
xii) insurance business transactions;
xiii) money and currency changing; and
xiv) carrying out business as intermediary.
8.
Id. See Section 2(1)(i). "Foreign serious offence" means an offence i.
against the law of a foreign State stated in a certificate issued by, or on behalf of,
the government of that foreign State; and
ii.
which, had it occurred in Pakistan, would have constituted a predicate offence.
9.
Id. See Section 2(1)(h). "FMU" means the Financial Monitoring Unit established under
section 6.

10.

11.
12.
13.
14.

15.
16.
17.

Id. See Section 2(1)(n). "Non-financial business and professions means real estate
agents, jewelers, dealers in precious metals, precious stones, lawyers, notaries and other
legal professionals, accountants, trust and company service providers and such other
non-financial businesses and professions as may be notified by the Federal Government.
Id. See Section 2(1)(0). "Offence of money laundering" has the meaning as defined in
section 3.
Id. See Section 2(1)(p). "Person" means an individual, a firm, an entity, an association
or a body of individuals, whether incorporated or not, a company and every other juridical
person.
Id. See Section 2(1)(q). "Proceeds of crime" means any property derived or obtained
directly or indirectly by" any person from the commission of a predicate offence or a
foreign serious offence.
Id. See Section 2(1)(r). "Property" means property or assets of any description, whether
corporeal or incorporeal, movable or immovable, tangible or intangible, and includes
deeds and instruments evidencing title to, or interest in, such property or assets,
including cash and monetary instruments, wherever located.
Id. See Section 2(1)(y). "Suspicious Transactions Report" means the report on
suspicious accounts transactions specified under section 7.
Id. See Section 2(1)(z). "Transfer" means sale, lease, purchase, mortgage, pledge, gift,
loan, or any other form of transfer of right, title, possession or lien.
Id. See Section 2(1)(s). "Predicate offence" means an offence specified in the Schedule
to this Act.

18.
Id. See Section 6 of the Act read with Notification No. SRO 84(KE)/2007 dated
4.10.2007.
19.
Id. See Section 6(4).
20.
Id. See clause (K) of Section 2.
20A.
Id. See Section 7, as per FE Circular No. 1 dated 6.1.2012. The State Bank of Pakistan
(SBP) has directed all the exchange companies (EC) to meticulously follow the
requirements of Anti-Money Laundering (AML), Countering Financing of Terrorism (CFT)
regime by submitting Suspicious Transaction Reports (STRs) and Currency Transaction
Reports (CTRs) manually or electronically as per Section 7 of AML Act, 2010, directly to
the Financial Monitoring Unit (FMU). Section 33 of the AML Act 2010, inter alia,
specifically provides for criminal sanctions on failure to file required reports and for
providing false information. In case any EC is found to be in violation of legal
requirements, a simultaneous regulatory action shall be initiated against concerned EC
and officials involved as per rules, which may result, among others, in suspension,
cancellation of licenses of the concerned company.
21.
Id. See Section 7.
22.

23.
24.
25.
26.
27.
28.
29.
30.

A person is guilty of offence: a) acquires, converts, possesses or transfers

properknowing or having reason to believe that such property is proceeds of
crime b) renders assistance to another person for the acquisition, conversion,
possession or transfer of, or for concealing or disguising the true nature,
origin, location, disposition, movement or ownership of property, knowing or having
reason to believe that such property is proceeds of crime, or participates in association,
conspires or commits, attempts to comitt, aids, abets, facilitates on conceals the acts of
crime.
Id. See section 4.
Id. See Section 8.
Id. See Section 9.
Id. See clause (b) of sub-section (3) of section 9.
Id. See section 9(6).
Id. See Section 10.
Id. See Sections 13, 14, 15, and 16.
Id. See section 20.

31.
32.

Id. See Section 21.

Id. See Section 23. An appeal can be filed within a period of 60 days from the date of
communication of the decision or order.
33.
Id. See Section 32.
33A.
Id. See Section 2(j).
34.
Id. See Section 34.
35.
Id. See Schedule to the Act.
36.
Id. See Section 41.
36A.
Id. Section 2(g). Act applies to offence under Section 15, 16, 32, 32A of the Customs
Act, 1969 and the powers of search under Section 158 of the Customs Act, 1969 will be
exercisable in relation to offences of money laundering.
37.
Id. See Section 2(s) and (w) read with schedule to the Act.
38.
Id. See Section 37.
39.
See regulation 3 of the Anti-Money Laundering Regulations, 2008.
40.
Id. See regulation 4. As per Circular No. 1 of 2012 dated 22-1-2012, Securities and
Exchange Commission of Pakistan issued instructions to NBFCs, directing that: (a) NBFCs,
being "Financial Institutions" under the Anti-Money Laundering Act 2010, are required to
submit Suspicious Transaction Reports (STRs) and Currency Transaction Reports (CTRs), as
per Section 7 of the AML Act, 2010, to the Financial Monitoring Unit (FMU). The standard
templates for STRs & CTRs are part of the AML Regulations 2008, issued under the AML
Ordinance 2007 and protected under the AML Act, 2010; (b) In this respect, NBFCs are advised
to meticulously follow the requirements of the law, and report STRs and CTRs manually or
electronically, as per Section 7 of AML Act, 2010, directly to the Financial Monitoring Unit (FMU);
(c) It may be noted that Section 33 of the AML Act 2010, inter alia specifically provides for
criminal sanctions on failure to file above mentioned reports and for providing false information.
Furthermore, in case any NBFC is found to be in violation of
above legal requirements, the regulatory authority may also
revoke its license or registration or take such other administrative action as it may deem
appropriate. The same directions were issued to Modarba Companies vide Circular No. 20 of
2012.
41.
Id. See regulation 7.
42.
Id. See regulation 4 and Para 1 of Appendix 1.
43.
Id. Para 2.
44.
Id. Para 3.
45.
Id. Para 4.
46.
Id. Para 5.
47.
Id. Para 6.
48.
Id. Para 7.
49.
Id. Para 8.
50.
Id. Para 9.
51.
Id. Para 10.
52.
Id. Para 11.

FBR wants amendments in Anti-Money

Laundering Act 2010
Reported by: `M Arshad November 7, 2014

FBR has moved list of recommendations and it is now up to government and parliament to amend AntiMoney Laundering Act 2010

ISLAMABAD: The Federal Board of Revenue (FBR) has moved a list of amendments to
include fiscal offences in the Anti-Money Laundering Act 2010.

Now it is up to the government and parliament to amend the requisite Anti-Money

Laundering Act, a source at the FBR told Customs Today.
Currently, fiscal offences under Income Tax Ordinance 2001, Sales Tax Act 1990 and
Customs Act 1969 are not part of Anti-Money Laundering Act and Cognisable, whereas
internationally it is an important condition that fiscal offences will be part of anti money
laundering act, he added, saying, Anti-Money Laundering Act 2010 defines fiscal
offence as an offence punishable under specified clauses of the Income Tax Ordinance
2001 (XLIX of 2001) the Federal Excise Act 2005, Customs Act 1969, except Sections -2
(s) 15, 16, 32, 32 and 158, thereof the Sales Tax Act 1990 and not as a whole and it
further says that any other law as the federal government may notify in this behalf.
The source said that unfortunately, Pakistan was one of those countries which had strict
legislation on money laundering but deliberately or internationally fiscal offices were
made part of the said legislation.
Consequently, violators get an easy way out of the jurisdiction of Anti-Money
Laundering Act 2010, the source added.
Moreover, the source said that the Financial Action Task Force (FATF), an intergovernmental body established in 1989 by the ministers of its member jurisdictions, had
also blacklisted the FBR and the Finance Ministry for not making fiscal offence as a
cognisable crime in the Anti-Money Laundering Act.
FTAFs objectives are to set standards and promote effective implementation of legal,
regulatory and operational measures for combating money laundering, terrorist financing
and other related threats to the integrity of the international financial system and it is a
policy-making body which works to generate the necessary political will to bring about
national legislative and regulatory reforms in these areas.
The finance minister his recent most visit to the US, held detailed discussions with
officials of FTAF on the sidelines of negotiations with the World Bank in New York in
the beginning of last month and assured to include the fiscal offence in the anti money
laundering act, the source said.
But, nothing has been done so far in this regard the source adding, This issue was
again discussed in the ongoing negotiations with the International Monetary Fund (IMF)
Dubai on Wednesday and FBR was requested for explanation in this regard.
The source said that IMF was also told that FBR had provided a detailed list regarding
inclusion of fiscal offences as commemorated in all three laws to the Finance Ministry
and it was up to the government and parliament to amend the requisite the Anti-Money
Laundering Act.
Money laundering is the process in which the proceeds of crime are transformed into
ostensibly legitimate money or other assets. However, in a number of legal and regulatory
systems the term money laundering has become conflated with other forms of financial
crime, and sometimes used more generally to include misuse of the financial system
(involving things such as securities, digital currencies, credit cards, and traditional
currency), including terrorism financing, tax evasion and evading of international
sanctions. Most anti-money laundering laws openly conflate money laundering (which is
concerned with source of funds) with terrorism financing (which is concerned
with destination of funds) when regulating the financial system.

Money obtained from certain crimes, such as extortion, insider trading, drug trafficking,
illegal gambling and tax evasion is dirty. It needs to be cleaned to appear to have
derived from non-criminal activities so that banks and other financial institutions will
deal with it without suspicion. Money can be laundered by many methods, which vary in
complexity and sophistication.
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