Crypto ATM / kiosk operator in Pakistan

A standing prohibition by the State Bank of Pakistan (SBP) for regulated financial institutions to deal in or facilitate virtual assets.

SBP BPRD Circular No. 03 of 2018: Issued on April 06, 2018, this circular explicitly prohibits all banks, Microfinance Banks (MFBs), and Payment System Operators (PSOs)/Payment Service Providers (PSPs) from:

Dealing in Virtual Currencies/Coins/Tokens (VCs/VCOs/VCTs).

Facilitating any transaction involving VCs/VCOs/VCTs.

Maintaining accounts of individuals/entities involved in VCs/VCOs/VCTs.

Implication: This circular effectively creates a de facto ban on any regulated financial institution in Pakistan from engaging with or facilitating cryptocurrency activities. This means that:

Cryptocurrency exchanges, custody providers, and payment processors cannot legally operate with bank accounts in Pakistan or integrate with the traditional financial system.

Any individual or entity involved in crypto transactions faces significant challenges in dealing with their funds through regulated financial channels.

State Bank of Pakistan BPRD Circular No. 03 of 2018: "Caution against usage of Virtual Currencies/Coins/Tokens (VCs/VCOs/VCTs)"

Exchanges: No license. Cannot lawfully connect to the banking system.

Custody Providers: No license. Cannot lawfully connect to the banking system.

Payment Processors (Crypto-related): If processing fiat for crypto, no license and prohibited for regulated entities. If purely crypto-to-crypto, it operates outside the formal financial system but still in a legally ambiguous and high-risk environment.

Ongoing discussions and proposed legislative efforts, primarily driven by the need to comply with Financial Action Task Force (FATF) recommendations, to eventually introduce a regulatory framework.

FATF Recommendation 15: Which requires countries to regulate and supervise Virtual Asset Service Providers (VASPs) for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) purposes. Pakistan's compliance with FATF recommendations is critical for its international financial standing.

Proposed Drafts: Various draft bills and frameworks have been reported in the media, suggesting that a future regime might include:

Anti-Money Laundering Act, 2010 (AMLA 2010): This is the overarching legislation that criminalizes money laundering and provides the legal basis for AML/CFT measures in Pakistan. It mandates reporting obligations for financial institutions and designated non-financial businesses and professions (DNFBPs).

Anti-Money Laundering (AML) Regulations, 2015: Issued by the State Bank of Pakistan under the AMLA 2010, these regulations provide detailed guidelines to financial institutions on implementing AML/CFT measures.

SBP CDD / KYC Regulations, 2022 (BPRD Circular No. 04 of 2022): This is a critical development. The State Bank of Pakistan, through its Banking Policy & Regulations Department (BPRD), issued comprehensive Customer Due Diligence (CDD) / Know Your Customer (KYC) Regulations, 2022. These regulations explicitly define and include "Virtual Asset Service Providers" (VASPs) as a type of entity that must comply with AML/CFT requirements, effectively bringing them under the regulatory ambit.

SBP BPRD Circular No. 04 of 2022 (CDD/KYC Regulations, 2022) (PDF link to SBP website)

Identification and Verification of Customer Identity:

Individuals: Obtain and verify full legal name, date of birth, national identity document (e.g., CNIC for Pakistani nationals, passport for foreigners), current address, contact details, and occupation/source of funds. Verification must be performed using reliable, independent source documents, data, or information.

Beneficial Ownership: Identify and take reasonable measures to verify the identity of the beneficial owner(s) of the customer, including for legal persons, trusts, and other legal arrangements.

VASPs must adopt a risk-based approach to CDD. This means applying enhanced CDD measures for higher-risk customers, products, services, transactions, or geographic areas.

Politically Exposed Persons (PEPs): Implement enhanced CDD measures for PEPs, including obtaining senior management approval for establishing business relationships, taking reasonable measures to establish the source of wealth and funds, and conducting ongoing enhanced monitoring.

Sanctions Screening: Screen customers and transactions against national and international sanctions lists (e.g., UN Security Council sanctions lists).

Trigger: Any transaction (attempted or completed) that appears unusual, lacks a clear economic or lawful purpose, is inconsistent with the customer's known profile, or raises suspicion of money laundering or terrorist financing.

Reporting Mechanism: Reports are filed electronically through the FMU's secure reporting portal.

"No Tipping Off": VASPs and their employees are prohibited from disclosing to the customer or any third party that a STR has been or will be filed.

Customer Records: All records obtained through CDD procedures, including identity documents, account files, business correspondence, and analysis of transactions.

Transaction Records: Records of all transactions, including the amount, currency, date, and details of the parties involved (both originator and beneficiary, where applicable).

Entity Targeted: Binance Pakistan (and implicitly, individuals running scam schemes facilitated through Binance). Violation Type: Alleged involvement in multi-million dollar cryptocurrency scam, money laundering, illegal financial transactions, non-compliance with local regulations. The FIA issued a formal notice to Binance's Global Head of Growth for its alleged role in facilitating fraudulent transactions that led to significant financial losses for Pakistani citizens. Penalty Amount: No direct fine was publicly levied against Binance by Pakistani authorities. The "penalty" was primarily investigative pressure, a formal inquiry, and a demand for cooperation, which could have led to further action or reputational damage. The FIA initiated criminal proceedings against individuals involved in the scam. Outcome: The FIA launched an inquiry and issued a formal notice to Binance, demanding details and cooperation. Binance subsequently stated its commitment to cooperate with the FIA and local authorities. The FIA also identified and initiated action against 11 individuals alleged to be masterminds of a multi-million dollar fraud scheme involving Binance. The action highlighted the government's serious concerns about unregulated crypto activities. While Binance itself wasn't fined, the action put significant pressure on the exchange and warned the public.