The State Bank of Pakistan (SBP) has directed banks across the country to adopt stricter compliance protocols under the Anti-Money Laundering Act 2010, with explicit instructions to terminate customer relationships in cases of repeated or unresolved suspicious activities. The central bank’s latest move underscores its resolve to strengthen financial integrity and ensure tighter monitoring of trade-based transactions that may expose the system to risks of money laundering or terrorist financing.
This development comes after SBP unveiled its new Framework for Managing Risks of Trade-Based Money Laundering and Terrorist Financing. The framework requires banks to validate every financial instrument linked to trade activity by cross-checking it against shipping and customs documentation. Specifically, banks must reconcile Goods Declaration (GD) forms and data available via the Pakistan Single Window (PSW) with the details mentioned on financial instruments. Any mismatch in product type, quantity, H.S. codes, or per-unit prices will immediately trigger enhanced scrutiny.
For businesses engaged in import and export, the directive carries far-reaching implications. Whenever discrepancies arise between GD forms and financial documents, banks are mandated to seek clarification from their clients. Unsatisfactory explanations could result in the customer being classified under a higher risk category. In more severe cases, the matter may be escalated to senior management, accompanied by the filing of a Suspicious Transaction Report (STR). SBP has gone a step further by empowering banks to sever ties with clients who demonstrate repeated questionable practices, making termination of banking relationships a last-resort compliance tool under the AML regime.
The framework pays particular attention to cases where multiple consignments are cleared under a single financial instrument. In such instances, banks must ensure that all related documentation is routed through them to prevent loopholes that could be exploited for illicit financial flows. This safeguard is designed to mitigate risks associated not only with money laundering but also with terrorist financing and proliferation financing, areas where global watchdogs like the Financial Action Task Force (FATF) have long pressed Pakistan for improvements.
For Pakistan’s financial ecosystem, this directive is both a challenge and an opportunity. On one hand, businesses—especially smaller importers and exporters—will need to exercise greater discipline in ensuring that their trade documentation aligns perfectly with financial submissions. Any deviation, whether accidental or deliberate, could expose them to stricter scrutiny, delays in processing, or even loss of banking relationships. On the other hand, the move is expected to elevate the credibility of Pakistan’s financial system by plugging regulatory gaps and aligning with global AML and compliance standards.
Industry observers note that these measures may also help build international confidence in Pakistan’s banking sector, an important factor for boosting cross-border trade and investment. By insisting on rigorous documentation checks and giving banks the authority to disengage from high-risk clients, SBP is signalling that it intends to reduce systemic vulnerabilities while meeting international commitments.
Ultimately, the effectiveness of this framework will hinge on how efficiently banks implement these procedures and how businesses adapt to the heightened compliance environment. For now, the SBP’s directive sends a strong message: financial institutions can no longer afford to overlook mismatched paperwork or tolerate repeated suspicious activity, and customers must maintain transparency if they wish to sustain their banking relationships.