Unknown billionaires

What does a faluda wala and rickshaw driver in Karachi, a teenager in Jhang, and a labourer in Sialkot have in common? The correct answer is — bank accounts with billions of rupees. Bank accounts that none of these people ever opened or knew about!

Given the fact that these few cases only came into the limelight in the last week or so, if we wait for another few months, I’m sure that we’ll unearth another dozen or so unknown billionaires across Pakistan. And these would probably be the most unfortunate billionaires in the country, because in addition to the hard work they have to do to earn their living, these people will now have plenty of trips to make to the FIA, NAB, FBR and other agencies over the next few months to prove their innocence.

So what is really happening here? Why would someone put so much money in another person’s account and not his own? Well, these are classic cases of using somebody’s account without his knowledge, for the purpose of money laundering or terrorist financing or fraud. Either a brand new account is opened or a bank account opened many years ago and lying dormant is used for this purpose.

Is it this easy to open a bank account in someone’s name? Well yes, until mid-2016 it was a simple process of using an NIC number to open a bank account, entirely at the discretion of the bank officer. In June 2016, the State Bank of Pakistan mandated all banks to use biometric verification from NADRA to open new accounts. This biometric verification, alongside strict bank controls can enable banks to trace back all fraudulent accounts to the bank employee who opened the account or who converted the account from dormant to active.

The good news is that the SBP is considering forcing all banks to carry out a complete biometric verification of their accounts. This is similar to what the mobile cellular operators were asked to do after the Army Public School Peshawar incident and over 150 million SIMs were verified over the next few months. A lot of SIM cards which could not be verified were shut down as well. This is exactly what needs to be done across all banks for their bank accounts. And any account which cannot be verified must be suspended immediately till the time the account owner provides biometric verification. Perhaps an even more intelligent approach would be to start with accounts that have higher deposit amounts or higher transaction sizes first and then eventually covering all bank accounts. In addition to that, the SBP must encourage all banks to put even stricter processes and controls in place to ensure absolute customer consent before a bank account is opened.

Another important step is to raise awareness on the customer side and to build some sort of a mechanism for customers to find out if they have bank accounts opened on their CNIC. One example would be the SIM ownership service that Pakistan Telecommunication Authority (PTA) operates, where any person can send a SMS message to 668 with their CNIC number to get a list of all mobile phone SIMs issued against their CNIC. A web service for this service also exists at http://cnic.sims.pk/.

A similar service can be built easily to find out all bank accounts opened on a particular CNIC. Banks can provide a weekly report of all their accounts and CNIC numbers to the SBP which can be put into a database and then queried over web or SMS. Over time, banks can build real-time processes for looking up a particular CNIC directly from the banking databases. Once this service is up and running, all the banks and the SBP need to join hands in a massive customer awareness drive and get all customers to check all the bank accounts opened against their CNICs. Any unauthorised bank account needs to be reported to a helpline at SBP immediately.

The SBP must act fast and make examples out of banks and their employees who have led to discrediting the banking system. Unauthorised personnel operating these accounts must be tracked and punished. Examples need to be made so that poor people are not taken advantage of for illegal money laundering.

This is not just an important issue for the banking industry. This is actually a crisis. In a country with more than 120 million adults, only 25 million have a bank account. And one of the reasons behind this low financial inclusion is ‘very low trust in the banking sector’. So while most of us are simply amused over finding out about new unknown billionaires every day, the fact is that whatever little trust people have in the banking system is being eroded and the banking sector is becoming a joke.

Published in The Express Tribune, November 2^nd, 2018.

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