IMF Calls for Stronger Monitoring in Real Estate

The International Monetary Fund (IMF) has urged Pakistan to improve the reporting of suspicious financial activities in the real estate sector. The concern was highlighted during discussions linked to the release of Pakistan’s fourth tranche of $1.1 billion under the Extended Fund Facility (EFF).

According to official sources, the IMF noted that the number of Suspicious Transaction Reports (STRs) generated in the real estate sector remains very low despite growing concerns over the use of untaxed and illegal funds in property investments.

Real Estate Sector Under Scrutiny

Pakistan’s real estate market has long faced criticism for weak financial monitoring and lack of transparency. Recently, the Federal Board of Revenue (FBR) conducted raids on two major housing societies over allegations related to concealment of sales and income.

Authorities have not yet confirmed how much evidence was collected during these operations, but the development reflects increasing pressure on the sector to improve compliance and financial reporting standards.

IMF Highlights Weak STR Reporting

The IMF specifically raised concerns about the low number of STRs submitted by Designated Non-Financial Businesses and Professions (DNFBPs). These include real estate agents and other businesses required to report suspicious financial transactions to the Financial Monitoring Unit (FMU).

The FBR had already assigned DNFBPs the responsibility of monitoring the real estate sector and forwarding suspicious transaction reports to the FMU, similar to the reporting framework followed by banks.

However, the IMF believes the current reporting levels remain insufficient.

Pakistan Commits to AML and CFT Reforms

Pakistani authorities informed the IMF that the government is working to strengthen Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) measures.

Officials also shared updates regarding the National Risk Assessment (NRA) and efforts to improve coordination with the National AML/CFT Authority.

The government plans to improve the accuracy of Beneficial Ownership (BO) information, especially within the Securities and Exchange Commission of Pakistan’s (SECP) central registry, to prevent misuse of legal entities and hidden ownership structures.

New Measures Planned for DNFBPs

To address IMF concerns, authorities plan to introduce reforms aimed at increasing STR reporting across the DNFBP sector.

These measures include:

• Stronger reporting frameworks
• Mandatory system registration for entities
• Better coordination between real estate agents, FBR, and FMU
• Improved monitoring and compliance mechanisms

The goal is to increase transparency and reduce financial crimes linked to the property sector.

IMF Also Flags Trade-Based Money Laundering

Apart from the real estate sector, the IMF also raised concerns regarding Trade-Based Money Laundering (TBML).

The State Bank of Pakistan (SBP) introduced a framework in August 2025 to help authorized dealers assess and monitor TBML risks in customers, transactions, and trade-related services.

Going forward, Pakistan and the IMF have agreed to strengthen data sharing between agencies involved in forex reporting, customs, and import payments to reduce TBML risks.

Banking Sector and Non-Performing Loans

The IMF also reviewed Pakistan’s banking sector performance, particularly focusing on Non-Performing Loans (NPLs).

Officials informed the IMF that the NPL ratio declined to 6.1% by the end of 2025. Commercial banks have reportedly submitted plans to further reduce bad loan stocks.

The SBP assured the IMF that it would continue monitoring banks closely and ensure that all institutions maintain adequate capital buffers.

One Bank Previously Found Undercapitalised

During the review, Pakistani authorities revealed 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 reportedly fully compliant with regulatory requirements.

The central bank stated it would continue taking prompt supervisory actions whenever any bank shows signs of financial weakness.

Conclusion

The IMF’s latest observations highlight growing international pressure on Pakistan to strengthen financial transparency, improve anti-money laundering systems, and tighten oversight in the real estate and banking sectors.

With reforms underway, authorities are expected to focus heavily on improving suspicious transaction reporting, enhancing beneficial ownership data, and increasing coordination between regulatory institutions.