Pakistani banks struggle to enhance financial crime tech: PwC

Banks in Pakistan are still facing challenges in reaching a steady and high-performing stage with respect to financial crime technologies, PwC Pakistan Anti-Financial Crime Survey 2024 has found.

The survey results indicate that Chief Compliance Officers (CCOs) of the majority of banks perceive risk of major types of financial crime typologies including cyber crime, fraud, Terrorism Financing (TF), Money Laundering (ML), tax evasion and sanctions, has increased significantly as compared to 2022.

“This may be due to increasing digital adoption, economic vulnerabilities, resultant higher inflation levels and rise in terrorism risk in the country.”

According to Haroon Khalid, Group Head – Compliance & Business Solutions, Bank Alfalah Limited, quoted by PwC, “Ever-evolving terrorism financing risk, substantial informal economy, prevalence of cash transactions and inflationary conditions, heavily impact the financial crime risk landscape in Pakistan.”

Banks in Pakistan are operating in an evolving financial crime compliance ecosystem. With criminals quickly adopting new techniques and means to exploit vulnerabilities in banking technologies and processes, there is an even greater need for institutions to remain vigilant and up-to-date in their fight against financial crimes.

More than 60% of the CCOs and heads of business and enabling functions view technology, data, HR and cost constraints as top challenges in financial crime compliance.

"Their views are relatively aligned on most of the challenges except for cost implications, which has been identified by a higher number of CCOs may be due to budget constraints as compared to business functions," the survey report noted.

PwC Pakistan suggests increasing digital adoption in Pakistan necessitates robust financial crime risk assessments to address growing complexities of digital financial landscape.

Ensuring that banks identify and effectively mitigate financial crime risks is vital as the industry embraces shifts in customers’ preferences.

Haroon Khalid said that it is extremely important for compliance functions to optimally utilize available data by leveraging data science and analytical capabilities. “It is critical that the banks collaborate both locally and globally to proactively identify and effectively mitigate risks.”

Regular validation of financial crime technologies and related models is crucial to ensure ongoing effectiveness and optimized performance. Though there is some improvement in this area compared to 2022, banks in Pakistan may consider more investments in line with global best practices, PwC noted.