4.3 SBP TBML&TF Framework, 2025 Revision & 2026 Price Portal

From FE Circular 04 of 2019 to EPD Circular Letter 08 of 2025

This independent OpenExamPrep section is a working map of those two circulars and the revised annex. It is not an SBP circular reprint.

FE Circular No. 04 of 2019 (14 October 2019), signed by the then Director of the Exchange Policy Department, told all ADs to upgrade systems and bring policies in line with the attached Framework for Managing Risks of Trade Based Money Laundering and Terrorist Financing, immediately except where the framework itself provided otherwise. The 2019 covering letter stressed that the framework adds to existing AML/CFT obligations; it does not replace them. ADs were to educate clients on correct declarations, use of FX only for the purpose obtained (FERA section 4(3) logic), and repatriation of full export value. Material suppression, mis-use of FX, or short repatriation could bring FERA penalties against the customer and reporting to other agencies; AD failures could bring FERA and other AML/CFT action.

EPD Circular Letter No. 08 of 2025 (12 August 2025), from Director Dr. Asif Ali, recalls that 2019 framework and states that, to strengthen effectiveness and keep up with evolving business and emerging risks, SBP is issuing a revised framework. Paragraph 3 is the date candidates must not invent: ADs “are advised to update their policies, processes and systems in accordance with the requirements of the revised framework to ensure meticulous compliance by October 31, 2025.” Failure may attract enforcement under relevant laws. The annex PDF is titled as revised vide that circular letter and, in the header line, even concatenates Terrorist Financing with Proliferation—a signal that PF is in the 2025 scope.

Prefer the 2025 annex wherever 2019 memory differs. Examples: 2025 trade transactions expressly include services remittances and stand-by credits; 2025 defines dual-use goods; 2025 sets a 45-day backstop for delayed price checks; 2025 requires a separate trade risk rating and a review no later than 18 months; 2025 lists vessel tracking among mandatory technology themes.

Governance: Board, IRAR, audit, compliance

The Board of Directors owns oversight of trade-based ML/TF/PF risk. Policies must cover, at minimum: trade-customer risk profiling; price verification of underlying import/export contracts for goods and services; screening of customers, counterparties, and goods including dual-use goods; a transaction monitoring system (TMS) for trade ML/TF/PF; and the AD’s own trade risk profile with periodic review.

The Board reviews that profile through the Internal Risk Assessment Report (IRAR) already required under AML/CFT/CPF Regulations for SBP regulated entities. Senior management implements procedures; a management-level committee oversees trade ML/TF/PF, with compliance in the lead as owner of entity-wide AML processes. Head Office MIS must support portfolio review.

Own-bank TBML risk assessment (documented in IRAR) must consider at least: weighted-average risk rating of trade customers; product risks; red flags / TMS alerts / STRs on trade customers; jurisdictions involved; internal-audit ratings of trade branches and centralized operations; and enforcement actions and FERA/trade penalties already imposed on the AD.

Internal audit reviews framework compliance at least once in two years, with staff who understand trade products and AML. Material control gaps escalate under SBP’s Internal Audit Function guidelines. Risk management reports TBML KRIs under the Operational Risk Management Framework. Compliance runs an independent compliance-risk assessment with trade operations.

Transaction controls the 2025 text actually requires

Screening, goods lists, dual-use / PF

At origination, ADs must scrutinize documents and screen importers, exporters, jurisdictions, goods, vessels, and ports. They must follow Import and Export Policy Orders of the Ministry of Commerce and Control Lists of the Strategic Export Control Division (SECDIV), Ministry of Foreign Affairs. Maintain an HS-code electronic record of licensing, permits, and other requirements. Dual-use goods are defined as goods, software, technologies, etc. that can be used for both civilian and military purposes. Import/export of dual-use goods is an explicit red flag (Annex A, B-xvi) and a Board-level screening topic. That is how proliferation financing enters the 2025 framework: PF is named in objectives and governance; dual-use and SECDIV lists are the operational hook. Do not claim the annex prints a UN 1540 lecture; claim what it prints.

Price-related due diligence

ADs must assess whether document prices correspond to fair market value, using reliable sources: chambers, local business circles, newspapers, historic appraisements, MOC/TDAP, international and local commodity exchanges, Customs Valuation Rulings, web searches, and the AD’s own historical price database. Verification is before execution. Exception: if a benchmark is unavailable or another compelling reason exists, complete verification within forty-five (45) days of approving the FI or disbursing to the exporter. Each AD defines its own acceptable variance thresholds and escalation path—this chapter does not invent a nationwide “plus or minus 10 percent” SBP Incoterm or TBML percentage. Variance beyond the threshold, or suspicion of misrepresentation, requires documented inquiry; post-transaction hits are red flags escalated to senior management. Price checking sits in a function with reporting lines independent of business.

2026 PSW portal overlay. On 20 July 2026, SBP issued EPD Circular Letter No. 13 of 2026, titled Price Verification Portal of Pakistan Single Window. PSW’s official announcement says the portal was developed to strengthen banks’ compliance with the price-related due-diligence requirements in SBP’s TBML/TF framework. The portal is therefore a current operational price-verification input; it does not erase the revised framework’s documented, risk-based checks, independent review, customer inquiry, escalation, or 45-day backstop where the exception genuinely applies.

Financial Instrument due diligence

Prefer centralized FI issuance with dual control. FIs must state precise goods (quality, varieties, sub-categories) and HS codes; discourage generic descriptions and HS “others” without justification; print full names, not abbreviations; avoid units of measure that hide quantity (cartons for countable goods) and follow Customs Valuation Ruling UoM where applicable; do not use a brand name without the generic name; keep FI expiry commensurate with tenor. Export advance payment Appendix V-14 must match the later FI, including consignee. After shipment, corroborate FI particulars with shipping documents and Pakistan Single Window Goods Declarations—quantity, HS, and per-unit price versus Customs assessment. Unsatisfactory mismatch: reassess customer risk, escalate, consider STR; persistent abuse can end the relationship under the AML Act. Multiple GDs under one FI require proof that all shipping documents were routed through the AD.

High-risk jurisdictions, goods, routes, and EDD

The 2025 EDD list is illustrative, not a closed statute. Treat as higher risk, among other things:

• Sole proprietors or thin entities doing high-value trades
• Open account; advance import or export; services; free-of-cost high-value services
• Related parties; third-party or third-country payments or shipments
• High-risk jurisdictions or jurisdictions with lax AML/CFT/CPF regimes
• Imports exempt from duty or dutiable at more than 25 percent
• Exports enjoying rebates/subsidies
• Trade paid from funds deposited predominantly in cash
• Price variance outside the bank’s own acceptable band
• FI particulars that do not correspond with shipping documents, especially GDs

EDD tools include extra documents, independent credit reports (with effort to see sponsors and shareholders of the foreign entity), history and prior alerts, correspondent-bank feedback, and senior-management approval. Third-country payments need a tripartite agreement or other justification of the beneficiary–shipper relationship. If suspicion meets AML Act section 7, filing an STR with FMU is mandatory, after enough inquiry to avoid reckless, empty reports. If senior management finds no STR grounds, the customer still goes on an enhanced-monitoring database.

Vessel and goods-movement checks. Technology clause 7(i)(g) requires vessel tracking to identify potential sanctions breaches. Annex C Case Study No. 8 is the teaching narrative: documents say Middle East shipper and origin; AIS/transponder behaviour and port calls say otherwise; price matches the hidden high-risk origin. Abnormal routing, transshipment without economic reason, and packing inconsistent with the goods are Annex A trade-activity red flags.

TMS must generate trade ML/TF/PF alerts, keep a full trail to closure, and have scenarios reviewed at least every two years. Training must use case studies; Annexes A–C are a non-exhaustive starter kit. ADs are encouraged to share typology experience with each other.

Traps

• Teaching the 2019 covering letter as if it were still the last word on definitions and 45-day price checks
• Missing the 31 October 2025 policy-update deadline in CL 08
• Inventing a uniform SBP price-variance percentage
• Ignoring the July 2026 PSW Price Verification Portal or treating a portal result as a substitute for documented AD inquiry and escalation
• Treating dual-use/SECDIV screening as optional “sanctions only” work
• Issuing FIs with HS “others,” brand-only descriptions, or carton UoM that hide quantity
• Skipping vessel tracking because the LC is “clean on its face”