The International Monetary Fund (IMF) has highlighted serious shortcomings in Pakistan’s ability to detect corruption and identify politically exposed persons (PEPs). In its draft Governance and Corruption Diagnostic Assessment report, the IMF noted uneven identification of PEPs across sectors, limited access to comprehensive data, and a lack of automated screening tools in smaller institutions. It also found insufficient corruption-specific red-flag indicators, which are crucial for spotting the misuse of public office. The report has been shared with the government for review before its expected release by the end of August.
Under the $7 billion bailout agreement, the IMF’s special mission visited Pakistan this year and met with around three dozen government and state institutions. The assessment acknowledged that Pakistan has put in place some basic structures to prevent corruption and misuse of office. However, smaller institutions were found to be ineffective in applying safeguards such as enhanced due diligence, senior management approvals, and continuous monitoring when dealing with PEPs. The IMF has recommended learning from best international practices to strengthen detection systems and oversight.
The draft report stated that regulatory bodies like the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan, and the Federal Board of Revenue have issued guidelines to identify and monitor PEPs. Yet, the IMF found that reporting institutions often lacked clear corruption-specific typologies and risk indicators. Financial institutions and designated non-financial businesses were largely responsible for developing their own systems, beyond the official lists provided by regulators. The IMF observed that these systems often fail to reflect common methods used for laundering corruption proceeds.
To improve detection, the IMF pointed to examples from Canada and Colombia. Canada uses red-flag indicators to monitor suspicious transactions in government contracts, municipal procurement, and PEP-related dealings, including unexplained wealth accumulation in low-salary public roles. Similarly, Colombia’s financial intelligence unit developed sector-specific indicators for areas such as healthcare procurement during the Covid pandemic and laundering through state-owned enterprises. The IMF suggested Pakistan could benefit from issuing similar, targeted guidelines.
The Ministry of Finance has given various departments a deadline to respond to the IMF’s observations and recommendations. Some institutions have agreed with certain points, while others have sought revisions. However, officials warn that the process of reviewing and finalising responses may delay the report’s publication beyond the August deadline. The IMF maintains that full publication of the report was a commitment made by Pakistan in September last year under the bailout terms.