S.M Khurram
From paper to Nowhere S M Khurram


We, Pakistanis, are suffering due to following the outdated model of regulatory compliance. Despite having the tools we are unable to capitalize on our resources. Ever since the arrival of the internet in Pakistan, we have adapted it well for leisure reasons. But things are changing quickly. Pakistan is now one of the largest IT hubs, generating precious revenue for the economy.

With the recent news of several IT firms getting investments from foreign backers, the scenario seems to be improving. This is a healthy injection of flow to the economy; a sign of relief for a country that was facing a swift decline in economic growth.

The service sector is gaining momentum mostly due to outsourcing by European and American countries. On the flip side, the other major sectors of the economy have failed to become a part of this trend. Fintech is the case in point. In Pakistan, the number of mobile phone users has crossed the 80 million mark but Pakistan has been unable to transform itself into the virtual market.

We have been unable to utilise technology to improve customer satisfaction. The financial sector has failed miserably in fulfilling regulatory requirements. Despite the availability of tools and framework, implementation is nowhere to be seen. Banks are still using manual outdated methods of KYC/AML process. Due diligence is entirely dependant on manual work with very low standards, which are frequently bypassed.

No wonder Pakistan is still in the FATF watchlist. Financial institutions always fall short of compliance requirements, as the local staff demonstrates rent-seeking behaviour. It seems like the FI’s are not aware of the gravity of the situation. Many institutes might not even be aware of Know Your Customer (KYC) or Anti Money Laundering (AML), despite ML being a hot topic for the last two decades.

FI’s in Pakistan are not only failing in terms of regulations but also losing a significant chunk of their revenue for paying penalties for not meeting compliance measures. Over 11 banks have been fined this year. The funny thing is that one particular bank has been fined multiple times in the current year. Even India and Afghanistan have higher standards for their financial sectors.

The root of this failure is clear; despite appropriate tools available in the market banks don’t want to increase the operational costs of Compliance and AML/CFT department. With proper integration and use of technology, identity verification can be done in seconds (not in hours like the current practice). The feasible way is that banks should adopt third-party tools for these solutions.

By incorporating these tools banks and FI’s can easily fulfil the requirements issued by the Standard Bank of Pakistan. Besides fulfilling compliance, other benefits such as tech improvement and smooth on-boarding will enable banks to reach the unbanked market.

The unbanked is a huge population in Pakistan. Digital identity verification can also help prevent fraud. Over 20 sectors in Pakistan can benefit from it if taken seriously. This cost-saving will enable banks to strategise and have extra cash and resources. Lastly, this can help win the battle against corruption as Digital KYC/AML solutions can be useful in the war on terror.

The majority of local analysts, writers, journalists, and economists tend to dwell on problems rather than giving solutions. Pakistan has all the resources it needs to disentangle from the major economic issues it faces now.

With digital profiling and utilising the national databases, it will be much easier to perform checks and maintain a record of a natural person. Issues like SMS scams, cons, and electronic fraud can be easily prevented.

Unfortunately, most startups in Pakistan are clones. As far as the regulations and compliance go, they rely on the notorious copy-paste tactics. For these reasons, they do not stay for long. The economy looks on to these startups for a breath of fresh air and a new influx of money but lately, they have only disappointed.

Establishing a platform for digital identification can be extremely beneficial. It can not only solve security and regulatory requirements but it can also become a complete solution for commerce, by eliminating the menace of ML through efficient KYC/AML checks.

Empowering Reg tech in Pakistan can have a tremendous social impact. It can also help to get rid of the looming cloud of FATF’s grey list. Digital identification can be the catalyst toward compliance with FATF recommendations 10 and 11 if the country’s lawmakers and regulators can help to get the right person to do the right job.



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