Dr. Ikramul Haq & Abdul Rauf Shakoori
The cancer of money laundering continues to spread across the arteries of the world’s financial system, quietly poisoning markets, distorting economies, and corroding trust in institutions. The practice has infiltrated global financial centers, where trillions of illicit dollars are washed through banks, real estate, trade, and now virtual assets.
The share of different industries involved in laundering is alarming, ranging from construction and luxury goods to shell companies and offshore accounts. New technological innovations have further compounded the challenge, with cryptocurrencies, decentralized finance, mixers, and anonymity, enhancing tools that create layers of complexity. Virtual assets now facilitate moving vast sums instantly across borders with little oversight, bypassing traditional controls and offering criminals fresh avenues to disguise their wealth.
The response to this ever-evolving threat has been led by an ecosystem of international watchdogs. The United Nations, the World Bank, the International Monetary Fund, and regional groups like GIABA in West Africa or MONEYVAL in Europe all work in coordination to strengthen defenses against financial crime. They push states to adopt stronger anti-corruption measures, enhance financial intelligence, and comply with conventions like UNCAC and UNTOC.
They encourage governments to prosecute kleptocrats, confiscate illicit wealth, and tighten oversight over financial institutions. Terrorist financing and proliferation financing have been added to the agenda, with specialized agencies monitoring how rogue actors attempt to fund weapons of mass destruction or violent extremist groups. Yet even as laws are strengthened, criminals adapt, exploiting gaps and inconsistencies between jurisdictions.
The Financial Action Task Force (FATF) stands at the center of this global fight. As the standard-setter, FATF issues recommendations that countries are expected to adopt, covering everything from customer due diligence to beneficial ownership transparency. FATF mutual evaluations measure compliance and expose weaknesses, creating pressure on governments to reform. To support national efforts, FATF has also created toolkits, including the Money Laundering National Risk Assessment (NRA) Toolkit.
The toolkit provides countries with practical guidance on how to identify, assess, and prioritize money laundering risks, particularly in challenging areas like corruption, virtual assets, legal persons, and the informal economy. Rather than prescribing a rigid checklist, FATF’s toolkit offers flexible steps that countries can adapt to their own contexts, ensuring their risk assessments remain realistic and effective. The national risk assessment process begins with an environmental scan.
Countries are asked to take stock of the full range of threats and vulnerabilities they face before analyzing them in detail. Some risks, like corruption or the misuse of shell companies, may be well-known and documented, while others, like decentralized finance or cross-chain transfers of crypto assets, may still be emerging and poorly understood.
FATF encourages countries to acknowledge these blind spots, as admitting a lack of data can itself help shape action plans. The toolkit highlights that NRAs should remain manageable, accessible to policymakers, and useful for both public and private stakeholders. They are meant not just to sit on shelves but to directly inform strategy, enforcement priorities, and reforms.
The assessment of corruption is a key feature of the FATF toolkit. Corruption, after all, generates some of the largest illicit proceeds worldwide, with the United Nations estimating that over US$ 3.6 trillion is lost every year through bribes and stolen funds, equivalent to over 5% of global GDP. FATF’s review of national evaluations shows that corruption ranks as one of the most common predicate offenses for money laundering, often appearing in the top five threats for most countries.
When countries examine corruption risks, they are advised to consider their legal frameworks, governance culture, prevalence of informal economies, role of politically exposed persons, and even media freedom in reporting scandals. They must ask whether public officials are siphoning resources through procurement fraud, whether state capture exists in the form of laws tailored for elites, and how both public and private sector corruption interact to fuel laundering.
Countries should analyze case data, suspicious transaction reports, and procurement anomalies to uncover red flags. In some jurisdictions, unexplained wealth of senior officials, sudden spikes in asset ownership, or shell companies winning large public contracts serve as early warning signs.
The toolkit includes case studies to demonstrate these risks. Indonesia and Malaysia jointly assessed transnational laundering of corruption proceeds, finding that such funds typically flow through banks using legal entities and multi-jurisdictional layering schemes. France undertook a deep analysis of corruption court cases, mapping sectors and regions more prone to abuse.
The Gambia examined how weak salaries and institutions led to systemic corruption, with laundering often tied to political elites. These experiences highlight that corruption-linked laundering is not abstract but deeply rooted in governance and institutional frameworks, requiring countries to blend quantitative data with qualitative insights.
The emergence of virtual assets and virtual asset service providers presents another critical area of assessment. FATF’s data shows that most jurisdictions are still struggling to fully implement risk assessments for this sector, with 70% failing to meet standards. The challenges lie in the very nature of virtual assets. Their borderless nature, their perceived anonymity, and their volatility.
The NRA guidelines draw clear distinctions between traditional fiat institutions and VA/VASP activity. Similarly, banks are heavily regulated, subject to prudential and consumer protections, and required to perform rigorous know-your-customer checks. VASPs in many jurisdictions remain lightly regulated or entirely unregulated.
Transactions in fiat are recorded and traceable, whereas those in crypto can exploit mixers, tumblers, and privacy coins to hide trails. Traditional banking systems offer established consumer protection, but virtual assets are prone to hacks, rug pulls, and theft. Access to banking requires identity checks, whereas crypto wallets can be opened by anyone online, often without verification.
The NRA emphasizes that countries must understand these differences when evaluating ML risks. They must examine the scope of VASP activity within their borders, including both licensed exchanges and unlicensed operators serving customers online. They must ask how these services interact with the broader financial sector, for example, through bank accounts or remittance providers.
They must consider the drivers of VA growth, such as low financial inclusion, high inflation, or favorable incorporation regimes that attract VASPs. Threat assessments should explore links between crypto and predicate crimes, such as ransomware, fraud, and human trafficking, where payments are increasingly made in digital assets. Vulnerabilities like regulatory arbitrage, where exchanges are relocated to jurisdictions with weaker oversight, must also be considered.
The FATF advises that the private sector should be actively involved in these risk assessments, since exchanges, blockchain analytics companies, and fintech associations often hold critical data on usage and risks. Countries are encouraged to develop red flag indicators to help both regulators and businesses detect suspicious activity, drawing from FATF’s 2020 guidance on virtual asset red flags.
These might include sudden transfers of large volumes of coins, repeated transactions just below reporting thresholds, or use of multiple wallets to fragment flows. Effective communication of NRA findings to VASPs is also highlighted, since many operators may be new to AML obligations and need guidance to comply.
The Case studies show the diversity of country approaches. Luxembourg integrated VAs into its NRA early and later conducted a sector-specific assessment, developing detailed taxonomies and vulnerability maps. South Africa recognized crypto assets as high-risk and by 2025, had created a full risk assessment, reducing its risk level through stricter regulation and supervision.
Egypt chose prohibition but still developed a comprehensive risk assessment to understand emerging threats, train law enforcement, and guide seizures. These examples demonstrate that there is no single model; what matters is that countries conduct realistic assessments based on their circumstances, keep them updated, and integrate findings into supervision and enforcement.
The overall FATF NRA transmits a simple message: risk assessments are the backbone of an effective AML framework. Without a clear understanding of where money laundering is most likely to occur, resources cannot be targeted effectively.
Corruption and virtual assets represent two of the most challenging but urgent fronts. Corruption undermines governance, robs citizens of services, and erodes trust. Virtual assets offer criminals speed, reach, and anonymity unlike any other channel. Both require governments to be honest about their weaknesses, creative in their data collection, and collaborative with international partners.
The lesson for countries is that combating money laundering is not simply about passing laws but about continuously scanning the environment, assessing risks, and adapting strategies. Countries should strengthen their national data collection, integrate corruption and VA analysis into their NRAs, involve both public and private stakeholders, and be transparent about findings.
They should cooperate internationally to close gaps exploited by criminals and avoid becoming safe havens through weak enforcement. They should invest in capacity-building for regulators, FIUs, and law enforcement, especially in the areas of blockchain analysis and digital asset tracing. They should also educate the public and private sectors on emerging risks, ensuring that awareness and compliance are widespread.
The fight against money laundering will never be fully won, but it can be contained and its damage minimized. By rigorously assessing corruption and virtual asset risks, using tools like the FATF’s NRA toolkit, countries can better defend their financial systems, preserve integrity in markets, and protect their citizens from the corrosive effects of illicit finance.
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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He holds LLD in tax laws with specialization in transfer pricing.
He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner. He studied journalism, English literature and law.
He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 3000 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
X (formerly Twitter): DrIkramulHaq
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
X (formerly Twitter): Adbul Rauf Shakoori
The recent publication, coauthored by these writes with Huzaima Bukhari is
Pakistan Tackling FATF: Challenges & Solutions, available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35
https://www.amazon.com/dp/B08RXH8W46