Regulatory compliance of Financial Action Task Force through Risk Assessment as Anti-Money Laundering measures: An evaluation of Banking Sector of Pakistan

Abstract

Money Laundering is one of the worst crimes against humanity because it opens new pathways for more severe crimes. Unlike other crimes, it has multifaceted effects on society via genocide of innocent human beings through terror financing. The loss of one life not only affects a single person but the entire family faces the dire consequences or aftermaths especially if the victim is an ‘only bread winner’ of the family. Money laundering as a White-Collar crime has emerged with the passage of time and widely spread around the globe. Pakistan is one such country that is trying to comply the regulations and guidance provided by the Financial Action Task Force (FATF). In compliance of their recommendations, the Government of Pakistan, and the Central Bank of Pakistan (State Bank of Pakistan) have more focused on risk assessment of the banking sector in Pakistan. This timely study helps to identify the Regulatory Compliance and Risk Management as well as Commercial Banks Customer Due Diligence policies to combat Money Laundering in Pakistan. The study found that the commercial banks’ practices of Regulatory Compliance and risk assessment are up to the mark as they have adopted the appropriate system for the reporting of suspicious/ financial transactions. They are also focusing on red flag indicators to overcome Trade based Money Laundering by following the Anti Money Laundering Guidelines provided by the State Bank of Pakistan to comply the recommendations of Financial Action Task Force