IFMP Anti-Money Laundering (AML/CFT) Certification, Pakistan cheat sheet

Money laundering is the process of disguising the criminal origin of proceeds; the classic three stages are placement, layering and integration, and a single transaction can span more than one stage.

Pakistan's AML statute is the Anti-Money Laundering Act, 2010 (Act III of 2010), as amended; the Financial Monitoring Unit (FMU) is the financial intelligence unit established under it and receives suspicious transaction reports.

The FATF 40 Recommendations set the global standard: criminalise money laundering (Recommendation 3), apply customer due diligence and record-keeping (Recommendations 10 and 11), and require STR reporting (Recommendation 20).

Risk-based approach: higher risk (PEPs, cash-intensive businesses, complex offshore structures, correspondent relationships) attracts enhanced due diligence; lower risk may permit simplified measures, but never zero measures.

Standard CDD elements: identify the customer and verify identity using reliable, independent sources; identify the beneficial owner and take reasonable steps to verify; understand purpose and intended nature of the relationship; conduct ongoing monitoring.

Record-keeping rule of thumb under FATF standards: retain CDD and transaction records for at least five years after the end of the business relationship or the date of the transaction.

Tipping-off: disclosing to the customer or a third party that an STR has been or will be filed is generally prohibited; internal reporting must stay confidential within the compliance chain.

Red flags are indicators, not proof: structuring below reporting thresholds, rapid movement of funds through multiple accounts, unexplained use of shell companies, and mismatches between profile and transaction activity.

Terrorist financing differs from money laundering in source of funds: the money may be legally earned, so intent and destination matter more than origin, and small sums can cause severe harm.

FATF Recommendation 5 criminalises terrorist financing; Recommendation 6 imposes targeted financial sanctions on persons and entities designated under UN Security Council Resolutions 1267 and 1373.

Targeted financial sanctions require freezing without delay and without prior notice, and prohibit making funds or economic resources available to designated persons or their associates.

Pakistan's CFT framework includes the Anti-Terrorism Act, 1997, and the UNSC (Freezing and Seizure) Order, 2019; the National Counter Terrorism Authority (NACTA) coordinates national counter-terrorism efforts.

Charities, non-profit organisations and informal value transfer systems (hawala/hundi) are recognised higher-risk sectors; FATF Recommendation 8 requires NPO supervision that is risk-based and does not disrupt legitimate charitable work.

Structuring and threshold avoidance in cash or bearer-negotiable instruments, and use of accounts of students, low-income individuals or deceased persons, are recurring terrorist-financing typologies.

Sanctions screening must cover customers, beneficial owners, signatories and, where relevant, counterparties; a name match requires investigation and, if confirmed, freezing and reporting, not automatic rejection alone.

Suspicion reporting in CFT focuses on intent, links to designated persons or groups, and unusual fundraising or transfer patterns, even where the amounts are small or the funds are apparently legitimate.