Financial Crime World

Banking Industry Compliance Challenges in Pakistan

Pakistan’s banking sector plays a vital role in the country’s economy, directing financial resources to the real sector and facilitating financial transactions. The State Bank of Pakistan (SBP) and Securities and Exchange Commission of Pakistan (SECP) are the apex institutions regulating the financial system.

Compliance Challenges in the Banking Industry

The banking industry is facing significant compliance challenges driven by:

  • Rapid technological advancements
  • Increasing regulatory requirements
  • Need for greater transparency and accountability

In response to these challenges, the SBP has revised its branch-licensing policy, introduced new modes for banking businesses, and established a digital branch as a pilot project.

Prudential Regulations and Supervision

The SBP’s prudential regulations cover various areas including:

  • Corporate governance
  • Capital adequacy
  • Anti-money laundering and combating the financing of terrorism (AML/CFT)
  • Market discipline

To identify potential risks, the SBP relies on its supervisory framework, which includes:

  • Off-site supervision
  • On-site assessment
  • Surveillance
  • Enforcement and resolution

Technology Governance and Risk Management

The banking industry is undergoing significant disruptions due to rapid technological advancements. The SBP has recognized the importance of technology by issuing various guidelines and frameworks for:

  • Enterprise technology governance and risk management
  • Payment systems’ designation
  • Security of internet banking
  • Prevention against cyber-attacks

National Payment System Strategy

The regulator is developing a national payment system strategy to:

  • Modernize the clearing and settlement infrastructure
  • Reduce costs
  • Improve efficiency
  • Enhance security
  • Strengthen regulatory and supervisory oversight

SBP Vision 2020: A Comprehensive Action Plan

The SBP has devised a comprehensive action plan, known as the SBP Vision 2020, which aims to:

  • Improve the efficiency, effectiveness, and fairness of the banking system
  • Strengthen overall financial stability
  • Fulfill its mission of fostering a sound and dynamic financial system