ISLAMABAD: Pakistan’s monthly trade-based money laundering (TBML) related suspicious transaction reports (STRs) volume increased by an average of 398 percent, says Asian Development Bank (ADB).
“From July 2023 to June 2024, the FMU recorded a monthly average of 191 STRs related to suspicious trade transactions, whereas the monthly average pre-pilot was just 38,” the bank stated in a brief “transforming the fight against trade-based money laundering: New Data and Partnerships.”
This brief presents the results of a TBML pilot conducted by ADB Trade and Supply Chain Finance Program. The pilot introduced new data, training, and collaboration in Bangladesh, Mongolia, Nepal, Pakistan, and Sri Lanka to enhance the detection and investigation of TBML crimes. This initiative was a joint effort with the United Nations Office on Drugs and Crime (UNODC) goAML team, and the FIUs of these five countries.
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The brief noted that Pakistan’s monthly TBML-related STRs volume increased by an average of 398 percent after the pilot and the resulting implementation activities, based on data provided by Pakistan’s Financial Monitoring Unit (FMU).
From July 2023 to June 2024, the FMU recorded a monthly average of 191 STRs related to suspicious trade transactions, whereas the monthly average pre-pilot was just 38. Ten of the largest banks in Pakistan participated in the pilot.
The pilot numbers are still conservative given that only 10 out of the 40 banks in Pakistan were included in the pilot. The FMU observed that during the pilot, banks provided more detailed reasons for reporting each TBML-related STR, which suggests that they conducted closer scrutiny of trade documents.
The pilot provided greater ease for banks in Pakistan to choose from a dropdown selection of TBML indicators. With the enhancements in goAML data elements and the STR format, Pakistan’s FMU saw increased filing of TBML-related STRs by banks and other reporting entities.
Furthermore, the FMU received more information requests from law enforcement agencies in Pakistan to collect cross-border data to aid TBML investigations. Pakistan’s FMU identified the types of goods commonly linked to suspicious trade as follows: solar panels, textile, chemicals, rice, and industrial equipment.
The FMU found that TBML could be used by criminals to move contraband, such as illegal drugs, across borders, but that activity is commonly disguised as other goods linked to legitimate trade. From pilot data, the FMU saw how criminals resort to “underinvoicing” to evade customs duties and taxes while settling remaining balances through accounts maintained abroad.
According to the FMU, banks provided overwhelmingly positive feedback on the enhanced functionality and related processes, citing the ease of reporting trade-related suspicions through the 16 Pakistan’s FMU is the FIU of Pakistan. It acts an independent intelligence service department of the Government of Pakistan.
The director general of the FMU leads this autonomous government body, focusing on anti-money laundering, countering financing of terrorism, and financial intelligence
Specific country TBML routes analysis is available with the FIUs, but for the purpose of this brief, some FIUs provided aggregate data per their preference. new STR-TBML data elements. The law enforcement agencies also praised how the initiative has enabled them to utilize the financial intelligence, which aids in the detection and prevention of illicit financial activities.
The pilot introduced new trade-related data elements into STRs, resulting in countries reporting a significant increase in the number of suspicious trade transactions—for instance, 398 percent higher for Pakistan and 148 percent higher for Bangladesh—and higher-quality information that could translate into increased investigations of potential TBML cases.
The pilot also enabled participating countries to identify which goods and trade routes are more susceptible to TBML. This new insight will help authorities understand the current and evolving modus operandi of suspected criminals involved in TBML.
Copyright Business Recorder, 2024
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