4.4 Trade CDD, Monitoring & FMU STR/CTR

Trade-specific CDD on top of Regulation 2

This independent OpenExamPrep section is reporting-and-CDD study material for AD trade officers. It is not an FMU form kit or an SBP inspection manual.

Section 4 of the 2025 TBML/TF framework is additive: ADs still apply SBP AML/CFT/CPF Regulations, especially Regulation 2 (Customer Due Diligence) and beneficial-ownership identification, and they build a trade-specific profile before any trade service. No customer receives LC, collection, FI, or other trade services until that separate profile exists. Profiles are bank-wide when the customer uses several branches. For sole proprietors, CNIC is the primary key.

Due diligence factors in the 2025 text include, among others: legal form; expected annual trade volume; financial worth supported by financial statements and tax records; usual goods/services; key foreign buyers/suppliers and their jurisdictions; usual modes and payment terms; domestic and foreign related entities; chamber or association membership; third-party or third-country payments; historic red flags; ultimate beneficial ownership as in Regulation 2; PKR/FCY account behaviour versus the business; adverse media, intelligence, or proceedings; and periodic on-site visits.

Importers face extra paper. ADs must obtain financial statements duly audited by a chartered accountant or cost and management accountant. Where external audit is not required (individuals, many sole props), ADs obtain assets, liabilities, income, and expenses and examine them, including by on-site visit. ADs also obtain annual income-tax returns (including wealth statements where applicable) from importers obliged to file under the Income Tax Ordinance. No those documents, no trade processing—except federal/provincial government and allied departments.

When processing an import, volume and account activity must be commensurate with the profile and financial position. Exceptions need prior senior-management approval with a written rationale for audit and SBP.

Customers must authorize sharing of overdue trade obligations and default history with other ADs and disclose banks they use or used for trade. The receiving AD verifies overdues from those ADs or other means. Responses to other ADs are due within seven (07) working days, with a retained request/response log. Overdues feed the onboarding decision.

ADs assign a separate trade risk rating in addition to the general AML rating. Higher trade risk means EDD. Profiles refresh on a risk-based cycle, never later than 18 months, and sooner when counterparties, jurisdictions, or goods change materially. Credit officers taking exposure must see the trade rating.

Ongoing monitoring is the TMS in section 5 of the framework plus Regulation 2’s duty to monitor the relationship so that transactions stay consistent with known business and risk. Alerts need a full narrative trail. Repeated FI/GD mismatch after weak explanations is not a “documentation query” forever: reassess, escalate, consider STR, and, if abuse persists, consider ending the relationship (AML Act inability-to-complete-CDD / unwanted-relationship logic in sections 7A/7D as applied through SBP regulations).

STRs to FMU / goAML

Pakistan’s FIU is the Financial Monitoring Unit (FMU), established under AML Act 2010 section 6 and housed in the SBP building but operating as the national financial-intelligence unit. Section 7(1) requires every reporting entity to file with FMU, in the manner FMU prescribes, a report of a suspicious transaction conducted or attempted if it knows, suspects, or has reason to suspect that the transaction or a pattern:

• involves funds from illegal activity or is intended to hide proceeds of crime;
• is designed to evade section 7 requirements;
• has no apparent lawful purpose after examining the facts; or
• involves financing of terrorism.

The statutory adverb is promptly. There is no minimum amount. Attempted LC issuance, refused onboarding, and walk-away customers can be STR-A (activity) rather than STR-F (financial, with from/to legs). FMU’s STR guidelines require a reasoned narrative, indicators that match the suspicion, OCR attachments, and goAML filing. Paper STRs have been discontinued since 1 January 2020 (CTRs since 1 January 2019). A rejected STR is not filed until it is resubmitted and FMU acknowledges acceptance on the message board.

The 2025 TBML framework makes the trade application concrete: if the AD forms a section 7 suspicion, STR filing is mandatory, after enough inquiry to avoid junk reports. Dual-use hits, vessel-origin lies, cash-funded imports, and rebate-driven over-invoicing are STR candidates even when the rupee amount is modest.

Tipping-off is prohibited by section 34: directors, officers, employees, and agents must not tell a person involved that an STR or CTR has been reported (group disclosures only as the Act allows). The amended Act’s section 34(2) treats violation as a criminal offence with imprisonment up to five years or a fine up to two million rupees, or both. Section 33(1) penalizes willful STR failure or false information with imprisonment up to five years or a fine up to five hundred thousand rupees, or both, plus possible licence action. Section 12 is the good-faith safe harbour for furnishing information required by the Act.

Suspicious Transaction and Currency Transaction Reporting Regulations, 2025 (FMU notification, 6 November 2025, in force at once) repeat: examine facts, file STRs promptly on goAML, keep risk-based detection procedures, and allow a reporting entity that suspects property needs immediate freeze to write to the Director General for action under section 6(6). They repeal the Anti-Money Laundering Regulations, 2015, with savings for past acts.

CTRs: threshold, timing, and what 2025 does (and does not) print

AML Act section 7(3) requires CTRs to be filed immediately, not later than seven working days after the currency transaction, in the manner FMU prescribes. Section 2 defines a CTR as a report on currency transactions exceeding the amount the National Executive Committee (NEC) specifies by official Gazette.

The 2025 Reporting Regulations, regulation 7, say: when the reporting entity engages in a cash transaction equal to or exceeding the specified threshold as defined by the NEC, it shall file a CTR on goAML immediately but not later than seven working days. Regulation 7 does not reprint a rupee figure. Exemptions cover cash between financial institutions under the same AML/CFT regulator and federal/provincial departments, local government, statutory bodies, and utility-bill payments to listed utility entities. Discretionary “qualified business customer” exemptions need the Director General, NEC approval, and regulator consultation.

Current official confirmation: FMU Circular No. 01 of 21 March 2025, on CTR reporting for interoperable transfers and related channels, expressly describes PKR 2.0 million as the CTR threshold and uses a PKR 2.5 million cash-deposit example. That is consistent with SRO 73(I)/2015 dated 21 January 2015, FMU’s Guidelines for filing CTRs (2021), and the FMU CTR FAQs, which state a minimum of two million rupees (and the foreign-currency cash equivalent). The 2021 guidelines also distinguish CTR (all REs, single-currency cash at threshold) from CTR-A (exchange companies, multi-currency aggregate). The FAQ states that each cash transaction at or above threshold is reportable and that same-day aggregation is not required for ordinary CTRs—while structuring to stay under the threshold is an STR issue.

Because the 2025 regulations point to the NEC-specified threshold rather than reprinting it, combine the sources in an exam answer: file a CTR on goAML for a cash transaction at or above PKR 2.0 million, immediately but not later than seven working days. The amount comes from the NEC notification and is expressly used again by FMU Circular No. 01 of 2025; the filing timing comes from AML Act section 7(3) and regulation 7 of the 2025 Reporting Regulations. Do not treat a blog’s “USD 7,000” conversion as the legal test.

Record retention

Hold three clocks and apply the longest that binds an SBP AD:

Operate to the ten-year SBP and section 7(4) standard. The FMU CTR FAQ’s older “five years” line for CTR files is out of date against the amended section 7(4). Keep records reconstructable (date, nature, amount, account identifiers) for courts and FMU section 6(4)(b) information requests. Litigation or a competent-authority order can require longer.

Trade scenario. Cash of PKR 2.1 million is deposited into an importer’s PKR account and, the same week, an advance-import FI is requested for a new supplier in a high-risk jurisdiction. The cash leg meets the PKR 2.0 million CTR threshold, as confirmed in FMU Circular No. 01 of 2025. The trade pattern—cash-funded advance, new high-risk supplier—is EDD plus STR analysis regardless of whether the FI amount is large. Do not tell the importer that a CTR or STR was filed.

Traps

• Processing importer trades without audited (or examined) financials and required tax returns
• Using only the general AML rating and skipping the separate trade rating / 18-month cap
• Waiting seven working days to “think about” an STR; that seven-day clock is for CTRs, while STRs are prompt
• Treating CTR as a suspicion report, or STR as a two-million-rupee report
• Quoting a converted dollar CTR threshold
• Keeping CDD for only five years when SBP Regulation 8 says ten after the relationship ends
• Tipping off a customer who asks “did you report me?”