Challenges faced by financial institutes before onboarding politically exposed persons in undocumented Eastern economies: a case study of Pakistan

Purpose - This study aims to evaluate and investigate the existing process of establishing a banking relationship with politically exposed persons. Design/methodology/approach - This study used qualitative techniques of semi center dot structured interviews with senior compliance officers of financial institutes in Pakistan. Findings - This study found that the existing mechanism of identification and verification of politically exposed persons (PEPs) is ineffective. Financial institutes face challenges like the quality of name screening data sets. cost of identification and verification, role and control of the regulator, the influence of politically exposed persons. the opaqueness of laws and international connections of the politically exposed persons. Further, financial Institutes are burdened by regulators to perform robust PEP customer due diligence but do not guide and provide the right tools. Originality/value - This paper aims to find challenges faced by financial institutes before onboarding the PEPs. Further. very limited studies on this topic have been conducted in Pakistani context.

Automated summary

This study evaluates the process of establishing a banking relationship with politically exposed persons (PEPs) and finds that the existing mechanism of identifying and verifying PEPs is ineffective. Financial institutes face challenges such as the quality and cost of data sets, regulatory control, influence of PEPs, opaque laws, and international connections. Limited studies have been conducted on this topic in the Pakistani context.