Pakistan faces risk of corruption-related money laundering

The Express Tribune: The International Monetary Fund has said that Pakistan faces significant risks of corruption-related money laundering, while accountability remains weak, as high-profile or politically sensitive cases often face external interference that limits the independence of investigations.

“Pakistan faces significant risks of corruption-related money laundering. High-risk sectors include banking, real estate, construction, politically exposed persons, and public procurements,” states the Governance and Corruption Diagnostic Report released by the Ministry of Finance on November 19.

The report added that the misuse of corporate vehicles, shell companies, and informal value transfer systems are common techniques used to conceal the origins of corruption proceeds in Pakistan.

The International Monetary Fund (IMF) said judicial constraints have further weakened enforcement outcomes, with delays in prosecution, lengthy trial processes, and low conviction rates reducing the deterrent effect of anti-money laundering (AML) enforcement.

While highlighting the persistent and corrosive nature of corruption in Pakistan, the IMF also acknowledged that shifting demographics — with 60% of the population under the age of 30 — and disruptive communication technologies are reshaping public tolerance for corruption.

“Politicians are recognising that addressing corruption is crucial to addressing citizens’ concerns for better service delivery,” the report noted.

The Fund added that over 60% of Pakistan’s 247 million people are below the age of 30, increasingly urbanised, and active on social media. This emerging demographic is less deferential and more sceptical of government institutions.

“Young people are increasingly likely to vote. These changing dynamics are focusing attention on service delivery, how services are delivered, and who has access to them.”

The IMF said Pakistan has taken some steps to enhance financial sector oversight in line with AML and counter-terrorism financing priorities. Reforms have improved risk-based supervision by financial regulators through targeted on-site and thematic inspections to assess banks’ compliance with AML obligations, particularly in high-risk areas such as Politically Exposed Person (PEP) onboarding and Suspicious Transaction Report (STR) generation.

However, it said “high-profile or politically sensitive cases often face external interference, limiting the independence of investigations and undermining public confidence in accountability mechanisms.”

For corruption-linked money laundering complaints, NAB’s turnaround time is four months just to open a formal enquiry. A complaint must first undergo a rigorous administrative vetting process before an investigation can be launched — a process that often results in complaints not being pursued, the report noted.