Pakistan’s ability to combat corruption-linked money laundering is being undermined by weak enforcement of its beneficial ownership rules, the International Monetary Fund (IMF) has warned.
In a draft Governance and Corruption Diagnostic Assessment, the IMF noted that despite introducing ownership transparency laws in line with FATF requirements, Pakistan is not making full use of this data to stop illicit financial flows and prevent front companies from securing public contracts.
The report said there is “little evidence of routine coordination” between the Securities and Exchange Commission of Pakistan (SECP) and law enforcement bodies. It called for an institutionalised multi-agency group to share and analyse beneficial ownership information during corruption investigations.
Under Section 453 of the Companies Act 2017, all companies must record and maintain details of their ultimate beneficial owners — including names, identification numbers, addresses, and ownership changes — to prevent fraud and money laundering. However, the IMF found significant gaps in registry verification, enforcement, and timely access for all relevant agencies.
Pakistani officials disputed the findings, insisting that agencies, including the Financial Monitoring Unit (FMU), already use SECP’s online ownership database to track suspicious transactions. They acknowledged, however, that Designated Non-Financial Businesses and Professions (DNFBPs) — such as lawyers, real estate dealers, and jewelers — lag behind in compliance.
The IMF stressed that beneficial ownership transparency is essential for exposing conflicts of interest in government procurement, particularly where public officials have hidden stakes in competing firms. It also warned that collusive practices can only be curbed if contracting bodies and investigators can cross-check ownership data with procurement records.
While banks have improved due diligence, especially on politically exposed persons, the IMF said uneven implementation in high-risk sectors continues to limit the effectiveness of Pakistan’s anti-money laundering framework.
Strengthening inter-agency cooperation, closing legal loopholes, and improving enforcement in the DNFBP sector are key to making ownership transparency a powerful tool against corruption, the IMF concluded.