The International Monetary Fund has flagged major shortcomings in Pakistan’s ability to track politically exposed persons (PEPs) and prevent misuse of public office, warning that gaps in the current system are leaving room for corruption to slip through undetected.
These concerns are outlined in the IMF’s draft Governance and Corruption Diagnostic Assessment, which has been shared with Islamabad for review before its formal release later this month. The exercise was part of the $7 billion bailout program and involved consultations with nearly 30 public-sector and regulatory bodies.
Pakistan had originally agreed to make the findings public by July, but at the government’s request, publication has been pushed to the end of August—possibly later—while ministries and agencies debate the recommendations.
PEP Detection Falling Short
At the core of the IMF’s critique is Pakistan’s uneven identification of PEPs—individuals whose political influence and public roles make them high-risk for corruption.
The report says smaller institutions in particular lack automated screening tools and access to comprehensive databases, meaning they often rely solely on regulator-provided lists of public officials. This, according to the IMF, is far from enough to detect sophisticated schemes such as laundering of corruption proceeds.
The Fund also points to the absence of clear, corruption-specific “red-flag” indicators—warning signs like unexplained wealth, suspicious procurement patterns, or unusual financial behavior tied to public contracts.
Global Models as Examples
To illustrate what’s missing, the IMF highlights examples from other countries.
- Canada publishes targeted red-flag indicators for government tenders, municipal procurement, and PEP-linked activities—like sudden asset accumulation by low-salaried public servants.
- Colombia has sector-specific monitoring for high-risk areas such as healthcare procurement, state-owned enterprises, and construction.
The IMF suggests Pakistan adopt similar measures, issuing detailed guidelines on spotting unusual transactions involving PEPs and state contracts.
Some Efforts in Place—But Not Enough
Pakistan’s State Bank (SBP), Securities and Exchange Commission (SECP), and Federal Board of Revenue (FBR) have issued baseline requirements for financial institutions and designated non-financial businesses. These include enhanced due diligence, senior management approval for risky accounts, verifying sources of wealth, and ongoing monitoring.
The FBR even runs an online platform to screen customers against official lists of senior public officials and lawmakers. But without detailed typologies of how corruption proceeds are typically moved, these tools have limited impact.
Next Steps and Political Friction
The Ministry of Finance has asked all relevant departments to respond to the IMF’s draft. Some agencies are reportedly on board, but others have pushed back against certain findings. Sources suggest the review process could delay publication beyond August.
While the IMF’s assessment stops short of accusing Pakistan of deliberate negligence, it makes clear that unless screening and red-flag systems are significantly upgraded, large parts of the economy will remain vulnerable to corruption risks—especially in public procurement and politically influenced sectors.
