KARACHI: The National Bank of Pakistan (NBP) is building an automated system for detecting trade-based money laundering, according to an official document issued by the bank’s compliance group.
The bank said it plans to move away from the largely manual controls it currently uses to monitor trade-based money laundering risk and instead deploy a comprehensive monitoring system covering price due diligence, vessel and container tracking, screening for dual-use goods, validation of trade documents, and integration with the bank’s existing systems.
The bank said the move is meant to align its practices with a State Bank of Pakistan circular issued in August 2025 and with the country’s 2019 framework for managing trade-based money laundering and terrorist financing.
A Persistent National Problem
Pakistan continues to face scrutiny over trade-based money laundering, a technique in which criminals disguise illicit funds by manipulating invoices, over- or under-valuing goods, or misrepresenting the quantity and description of shipments to move value across borders undetected.
Much of the concern has centered on trade with China. Trade publication Coastline Solutions has estimated that Pakistan loses the equivalent of up to $3 billion a year to trade-linked financial crime tied to Chinese goods, driven largely by under-invoicing, mispricing and misdeclaration.
The Financial Action Task Force (FATF), the Paris-based global watchdog on money laundering and terrorism financing, has flagged trade-based laundering as an under-addressed risk in a series of reports dating back nearly two decades, warning that criminal and terrorist financing networks exploit the complexity of global trade and gaps in customs oversight across jurisdictions to move illicit proceeds.
Watchdogs Keep Pakistan Under Watch
Pakistan spent four years, from 2018 to 2022, on the FATF’s so-called grey list, a designation reserved for countries judged to have serious weaknesses in their anti-money laundering and counterterrorism financing regimes.
That stretch of heightened scrutiny is estimated to have cost the country roughly $38 billion in lost economic output, according to a national risk assessment cited by the AML Network, an industry publication, with remittances, trade and foreign investment all taking a hit.
Pakistan exited the list in 2022 after coming into compliance with the vast majority of FATF’s recommendations.
Even after being removed from the list, Pakistan has not fully shaken off international concern. The FATF said last year it would keep the country under continued follow-up review despite the delisting, citing lingering doubts about Pakistan’s ability and willingness to rein in money laundering and terrorism financing.
Because Pakistan is not a full FATF member, that monitoring falls to the Asia-Pacific Group on Money Laundering. FATF President Elisa de Anda Madrazo has cautioned publicly that exiting the grey list is no guarantee against continued abuse by criminal or terrorist networks.
Analysts point to Pakistan’s heavily cash-based, informal economy as a persistent vulnerability. An estimated 85% of transactions in the country are conducted in cash, and the informal hawala money-transfer network has proven difficult to regulate or dismantle.
A separate national risk assessment rated corruption, illegal hawala operations, tax evasion and smuggling, including the smuggling of cash, as carrying the highest money-laundering threat levels, alongside serious concerns over narcotics trafficking, human trafficking and financial fraud.
The International Monetary Fund (IMF) has also pressed Islamabad on the issue, according to the industry outlet Fincrime Central, arguing that Pakistan’s current oversight framework does not adequately capture the scale of suspicious trade-linked activity and pushing for tighter scrutiny of cross-border transactions and trade documentation as part of broader financial-sector reforms tied to the country’s IMF program.
Business groups and compliance officials have long argued that unchecked trade-based laundering distorts competition for legitimate importers and exporters, who absorb the full cost of customs duties and taxes while mispriced or misdeclared shipments undercut them on price.
The practice has also been linked to lost tax and duty revenue for the government, since manipulated trade values understate the true base for assessment, and to added reputational risk for Pakistani banks, which face closer scrutiny from international correspondent banks when a country’s anti-money laundering controls are seen as weak.
Against that backdrop, the National Bank of Pakistan, one of the country’s largest state-owned lenders, is looking to bring in outside technology rather than continue relying solely on manual review. An official said the project would be implemented through an outside company selected through the standard bidding process.
