Washington: Financial crimes related to narcotics trafficking, terrorism, smuggling, tax evasion and corruption remain a "significant problem" in Pakistan, the US State Department has said.

Pakistani criminal networks play a central role in the transhipment of narcotics and smuggled goods from Afghanistan to international markets, the department said in its annual International Narcotics Control Strategy Report yesterday 9Mar 1, 2004).

The proceeds of narcotics trafficking and funding for terrorist activities are often laundered by means of the alternative remittance system called hawala, it said. A nexus of private unregulated charities has also emerged as a major source of illicit funds for international terrorist networks, the report said.

On December 12, 2003, Pakistan's Central Bank announced that to date it had frozen bank accounts totalling $ 10,780,000 belonging to 27 militant groups as part of a crackdown on terrorist financing.

The Control of Narcotics Substances Act of 1996 criminalises the laundering of narcotics-related proceeds. The Act contains provisions for the freezing and forfeiture of assets associated with narcotics trafficking.

Since 2002, Pakistan's Ministry of Finance has been coordinating an inter-ministerial effort to draft anti-money laundering and antiterrorist financing legislation, it said.