Abstract:
This research tends to find the risk based approach and its impact on bank’s potential risk. Risk based
approach can mitigate the bank’s reputational or legal, customer and service risk. The implementation of
risk based approach in banking institution is one of the big challenges for bank. The continuing threat of
money laundering through financial institutions is most effectively managed by good understanding and
addressing on right time the potential money laundering risks that are associated with customers and their
transactions, therefore risk based approach have developed to address all these risks. FATF and
Wolfsberg have done excellent work in this regard and have given true direction to overcome money
laundering risk. SBP AML/CFT regulations and guidelines for risk based approach also covers all
potential money laundering risks. MLRO of all banks are more concerned for RBA. All banks operating
in Pakistan need to understand the importance of RBA and they must implement it in all branches. They
need to categorize all customers as per the RBA approach and segregate all customers as per their
appropriate risk.
This research is totally based on qualitative interviews being conducted with MLRO, CCO and
AML/CFT Analysts, bankers working in branches, BM, OM and RM. Detailed questionnaires have also
been circulated and authentic results have been enclosed.
Pakistan is a cash-based economy therefore, the chance of money laundering is very high. All bankers are
not taking these issues seriously, that’s why they do not focus on KYC. If they properly fill customer
KYC, then money laundering risk can be reduced.
As per FATF, Pakistan is in high risk jurisdiction due to lack of implementation of anti money laundering
measures and does not pass act through Parliament. Pakistan needs to pass AML ordinance through
assembly. Pakistan has to work out more if Pakistan needs to enhance risk category in front of
International standing.
