The International Monetary Fund (IMF) has urged Pakistan to strengthen monitoring of suspicious financial activities in the real estate sector while improving coordination among institutions to curb money laundering and misuse of legal entities.
According to a report, the IMF expressed concern over the low number of Suspicious Transaction Reports (STRs) generated by designated non-financial businesses and professions (DNFBPs), especially in the real estate sector, where untaxed and undocumented money is widely believed to be invested.
The development came after the IMF approved the release of the fourth tranche worth $1.1 billion to Pakistan under the Extended Fund Facility (EFF).
IMF Raises Concerns Over Real Estate Sector
Official sources said the IMF observed that Pakistan’s real estate sector remains vulnerable to money laundering risks due to weak reporting mechanisms and limited compliance from property-related businesses.
The Federal Board of Revenue (FBR) recently conducted raids on two major housing societies over allegations of concealing sales and hiding income. However, authorities have not yet disclosed how much evidence was collected during the operations.
The IMF reportedly questioned the effectiveness of the existing monitoring system established for DNFBPs. Under this framework, real estate businesses are required to report suspicious financial activities to the Financial Monitoring Unit (FMU), similar to the reporting obligations imposed on banks.
Despite these regulations, the number of STRs submitted by the sector remained significantly low.
Government Promises AML Reforms
Pakistani authorities informed the IMF that the government remains committed to strengthening Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) measures.
Officials shared updates regarding the National Risk Assessment (NRA) and coordination efforts with the National AML/CFT Authority.
The government also pledged to improve the accuracy of beneficial ownership information, particularly within the Securities and Exchange Commission of Pakistan’s (SECP) central registry. The move aims to prevent the misuse of companies and legal entities for illegal financial activities.
Sources said the Directorate General of DNFBPs, the FBR, real estate agents, and the FMU would work together to improve suspicious transaction reporting through reforms, registration requirements, and stronger reporting frameworks.
IMF Flags Trade-Based Money Laundering Risks
Apart from the property sector, the IMF also highlighted concerns regarding trade-based money laundering (TBML), which has become an increasing challenge for Pakistan’s financial system.
During the third review talks, the IMF asked Pakistani authorities to improve monitoring of import payments, customs declarations, and foreign exchange transactions.
The State Bank of Pakistan (SBP) informed the IMF that it had already introduced a framework in August 2025 to help authorised dealers identify and monitor TBML-related risks in customers and transactions.
Officials said the FMU has been sharing financial intelligence with relevant agencies, including customs authorities, to strengthen enforcement actions.
Going forward, Pakistan and the IMF agreed to improve inter-agency data sharing related to customs data, forex reporting, and import payments to reduce the risk of illegal money flows through trade channels.
IMF Reviews Banking Sector Risks
The IMF also reviewed the condition of Pakistan’s banking sector and discussed the issue of non-performing loans (NPLs).
Pakistani authorities informed the IMF that the ratio of NPLs declined to 6.1% by the end of 2025. Commercial banks have also submitted plans aimed at reducing bad loans and improving financial stability.
The SBP assured the IMF that it would continue monitoring banks closely and take immediate supervisory action if any institution faced capital shortages.
Officials further disclosed that one private bank had been identified as undercapitalised in March 2025. The SBP implemented a multi-step recapitalisation plan, and the bank is now fully compliant with regulatory requirements.
The central bank also committed to ensuring that all financial institutions maintain adequate capital buffers to protect the stability of the banking system.
Pakistan Faces Pressure for Financial Transparency
The IMF’s latest observations reflect increasing international pressure on Pakistan to improve financial transparency and strengthen anti-money laundering mechanisms.
Experts believe the real estate sector has long remained one of the least documented segments of Pakistan’s economy, often criticised for facilitating tax evasion and undocumented investments.
The government now faces the challenge of implementing stricter oversight measures while ensuring coordination among regulatory institutions to satisfy IMF conditions and maintain investor confidence.