ISLAMABAD: A recent draft report by the International Monetary Fund (IMF) has highlighted significant gaps in Pakistan’s mechanisms for detecting corruption, particularly regarding the identification of politically exposed persons (PEPs). The IMF mission, sent under a $7 billion agreement, noted that PEP detection remains inconsistent across sectors, primarily due to limited access to comprehensive data, lack of automated screening tools in smaller institutions, and an absence of red-flag indicators tailored to detect corruption.
The IMF shared its draft findings and recommendations with the Pakistani government for review before the full Governance and Corruption Diagnostic Assessment Report is published by the end of August. While some regulatory frameworks exist—issued by the State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP), and the Federal Board of Revenue (FBR)—implementation by smaller entities remains weak. These institutions often lack internal systems and clarity on corruption-related risk typologies.
Enhanced due diligence, such as verifying sources of wealth and gaining senior management approval, is required when dealing with PEPs. However, smaller financial institutions and designated non-financial businesses do not apply these measures effectively. The FBR has developed an online platform to help institutions screen public officials, but broader adoption and understanding are limited.
The IMF cited international examples from Canada and Colombia, recommending Pakistan adopt similar targeted red-flag indicators and sectoral risk monitoring. These include indicators for government contracts, rapid contract turnovers, unusual wealth, and PEP-related financial behaviours.
The Ministry of Finance gave departments a deadline to respond to the IMF’s feedback, with some agreeing to the observations and others requesting changes. Given the detailed review required, there's a possibility the report’s publication could be delayed beyond August.
