By The South Asia Times

ISLAMABAD - Pakistan’s government has approved changes to its anti-money laundering framework, including revisions to currency transaction reporting thresholds and the inclusion of the country’s virtual assets regulator in the legal framework governing efforts to combat money laundering and terrorist financing.

Finance Minister Muhammad Aurangzeb chaired the 19th meeting of the National Executive Committee on Anti-Money Laundering and Countering the Financing of Terrorism (AML-CFT) in Islamabad on Tuesday, where officials reviewed progress in strengthening the country’s financial monitoring and regulatory systems.

According to a Finance Division statement, the committee approved a proposed revision to the thresholds for Currency Transaction Reports (CTRs), which financial institutions use to report transactions meeting specified criteria. The statement did not disclose the revised thresholds.

The committee also approved adding Section 28 of the Pakistan Maritime Zones Act, 2023, to Schedule I of the Anti-Money Laundering Act, as well as including the Pakistan Virtual Assets Regulatory Authority (PVARA) in Schedule IV of the legislation.

The government did not provide further details on the practical implications of the approved changes.

The meeting reviewed the performance of Pakistan’s Financial Monitoring Unit (FMU), institutional capacity and the potential use of artificial intelligence and machine learning to strengthen financial analysis.

Aurangzeb called for better coordination among government institutions and timely implementation of decisions. He also stressed the need for a clear roadmap, with defined deadlines, to improve the FMU’s analytical and operational capabilities.

Senior officials attending the meeting included the law minister, the governor of the State Bank of Pakistan, the finance secretary, the chairman of the Securities and Exchange Commission of Pakistan and the director general of the AML-CFT Authority.

- Pakistan’s history of international scrutiny

The latest measures come against the backdrop of Pakistan’s long-running efforts to strengthen its systems for detecting illicit financial flows and preventing the financing of terrorism.

Pakistan has been placed on the Financial Action Task Force’s (FATF) list of jurisdictions under increased monitoring, commonly known as the “grey list,” on several occasions. It was listed in 2008, removed in 2015, placed back on the list in 2018 and removed again in October 2022.

The grey-list designation is not, in itself, a formal sanctions regime. It signals that a jurisdiction has strategic deficiencies in its efforts to combat money laundering and terrorist financing and is required to work with FATF to address them. The designation can nevertheless increase scrutiny of financial transactions, raise compliance costs and create reputational risks for businesses and the wider economy.

During its 2018–2022 period on the list, Pakistan faced pressure to improve its legal and regulatory framework, strengthen investigations and prosecutions, address terrorist financing risks and enforce targeted financial sanctions.

In October 2022, FATF announced that Pakistan had completed the requirements of its 2018 and 2021 action plans, covering a total of 34 action items, and removed the country from increased monitoring.

The decision marked an important milestone in Pakistan’s efforts to improve its international financial standing. However, removal from the list did not eliminate the need for continued oversight or mean that all money laundering and terrorist financing risks had disappeared.

- New financial risks and emerging technologies

The government’s latest focus on virtual assets and data-driven financial monitoring reflects the challenges regulators face as financial services and payment systems evolve.

Virtual assets can create additional challenges for authorities seeking to identify the origins and destinations of funds, particularly when transactions cross borders or involve complex networks. Artificial intelligence and machine learning may help financial intelligence agencies identify suspicious patterns, although their effectiveness depends on data quality, technical capacity and appropriate oversight.

The proposed changes to currency transaction reporting thresholds could also affect how financial intelligence is collected and analysed. Their precise impact will depend on the thresholds ultimately adopted and how the relevant rules are implemented.

For Pakistan, the challenge will be to sustain the progress acknowledged by FATF while ensuring that financial intelligence leads to effective investigations, prosecutions and enforcement.

The effectiveness of the framework will ultimately depend not only on legislative amendments and institutional coordination, but also on consistent implementation and the ability of authorities to respond to evolving financial risks.