Mitigating Financial Crime in Pakistan – The Post-FATF Road to Sustainability

By Tufail Ahmed Khan

The history of financial crime is as old as the inception of the currency itself. Over time, as transactional ecosystems evolved, the channels for illicitly siphoning funds advanced as well.

Of the range of financial crimes that exist today, money laundering alone costs more than $2 trillion in damages globally. To put this into perspective, the amount translates to 3% to 5% of the worldwide GDP.

Financial crime ranges from basic theft or fraud committed by ill-intentioned individuals to large-scale operations masterminded by organized criminals and syndicates with a foot on every continent.

These are serious criminal activities whose importance should not be underestimated, as over and beyond their social and economic impact, they are often closely linked to violent crime and even terrorism.

Recent findings published by the World Economic Forum revealed that $2.4 trillion originating from activities such as forced prostitution, human trafficking, drug trafficking, and terrorism are laundered through global banking systems and financial markets.

Similarly, between $7 and $23 billion a year from wildlife trafficking is moved across the world through existing channels. These sums are often used to fund other, sometimes more heinous crimes, as well.

In modern times, as financial systems have become extensively digitized, cybercrime has become one of the leading causes of financial losses to individuals, organizations, and governments around the world.

The extent of these illegal activities is massive, with careful estimates placing overall monetary damages from cybercrime alone in the vicinity of $7 trillion in 2022. From hacking to social engineering and phishing, cybersecurity breaches have become a nightmare for entities all over the planet.

Additionally, cryptocurrency markets, which garnered a lot of hype over the years due to exceptionally high returns have crashed drastically owing to elaborate scams.

Recently, FTX which rose to become one of the biggest crypto exchanges in the world collapsed due to criminal misconduct committed by Sam Bankman-Fried, the founder of FTX, and others.

The U.S. attorney’s office for the Southern District of New York charged Bankman-Fried with eight criminal counts including wire fraud, commodities-fraud conspiracy, and securities-fraud conspiracy.

At present, Pakistan is placed at number 28 on the Transparency International Corruption Index and number 22 on the World Governance Indicator – Control of Corruption where being closer to the top translates to a worsening financial crime landscape in the country.

As such, Pakistan is no stranger to financial crimes. It is an ugly beast that recurrently rears its head, damaging not just the country’s global reputation but also its economic growth and standing.

As per estimates, illicit financial flows put over $10bn as escaping taxation and being siphoned off outside the country. This is with nearly one-third of the population living below the poverty line.

This is besides the millions that individuals and organizations in the country lose to sophisticated cybercrimes. These sums eventually end up being used in other criminal activities including terrorism, a fact that has put the country on numerous global watch lists.

Having recently escaped the FATF Grey List, mitigating financial crime in Pakistan on the post-FATF Road to Sustainability must remain a high priority for the government and indeed for all stakeholders.

Bearing these realities in the mind, the recently concluded 4th Annual Financial Crime Summit in Karachi was organized to bring together on one platform, national and international stakeholders and experts, to share their insights, knowledge, and expertise, with a view to enhancing collaboration and interworking between all stakeholders and developing future-proof solutions.

The panelists and speakers at the Summit discussed how the latest technologies that enable the hyper-connected world today can enable Pakistan’s financial sector to establish transparency, customer convenience, and data-sharing protocols.

These thought leaders stressed the need for a centralized digital KYC system for addressing the nation’s low financial inclusion ratios. This tech-based system can easily mitigate the loopholes that criminal elements exploit to defraud individuals and organizations alike.

The President of Pakistan was the Chief Guest at the Summit, and he also shed light on the effectiveness that data-sharing within the financial sector can allow the system to always stay a step ahead of criminal elements, allowing the country to achieve its true economic potential.

He stated that with effective collaborations between various stakeholders, data-sharing protocols can enable us to ensure sustainability and progress in the times to come.

In conclusion, the Summit agreed that Pakistan has always been a late adopter of revolutionary opportunities. It is now time that through cumulative efforts from all stakeholders, the country becomes proactive, rather than reactive.

This simple change, for which an abundance of resources is available in the country, can not only allow us to navigate future sanctions but enable the nation to join the ranks of some of the leading economic powers in the world.

Speaking on the relevance of the Summit, Ibrahim Amin, Chairman Dellsons stated, “Pakistan has taken great strides in addressing the FATF action plan and coming out of the grey list, with the State Bank of Pakistan and numerous other government bodies playing a key role to achieve the target.”

“Real challenge now is to continue with the momentum, particularly in these times of economic and political vulnerabilities, and ensure Pakistan does not become a target of FATF increased monitoring list in the coming years.”

“As a nation, we have to ensure that the commitments made to FATF are strictly met and there is a robust post-FATF Financial Crime Action Plan in place so that Pakistan never again risks being placed on the grey list,” he added.

Tufail Ahmed is the COO of Dellsons Associates. He is highly growth-focused and an articulate professional with progressive experience in managing events, conferences, webinars, and client-side training operations to achieve business milestones.