Pakistan is moving to tighten oversight of dollar transactions by mandating facial recognition verification through Nadra, yet exchange companies caution that the measure alone will not prevent misuse of foreign currency unless a centralised tracking system is introduced. The government and State Bank have been rolling out stricter controls in response to large-scale dollar leakages, estimated to run into hundreds of millions of dollars annually, as pressure mounts to improve transparency across the currency exchange market.
Under a new directive issued by Ministry of Interior and Narcotic Controls, all exchange companies will be required to add facial recognition to existing biometric verification processes that already include fingerprint or thumbprint checks. According to the notification circulated to exchange firms, the aim is to ensure uniform, consistent and enhanced security across identification and verification protocols for all biometric services obtained through Nadra. The dual-modality biometric requirement will come into force from Jan 1, 2026, and exchange companies have been advised to take all necessary administrative and technical steps to ensure compliance within the given timeline. The move is part of a broader push to link all dollar transactions directly with Nadra systems so that customer identities can be authenticated more rigorously and transaction data can be accessed by regulators when required.
Despite welcoming the intent behind the policy, exchange companies say the new system does not fully address structural gaps that allow buyers to obtain excess dollars. Malik Bostan, chairman of the Exchange Companies Association of Pakistan, said Nadra integration would allow authorities to access detailed information about dollar transactions conducted at exchange counters, but would still fall short of preventing repeat purchases across different firms. He explained that a buyer can currently acquire additional foreign currency by signing an undertaking stating that they have not bought dollars elsewhere. Since this undertaking is not shared across the market, the same individual can visit another exchange company and repeat the process without detection. According to him, facial recognition alone does not solve this issue because each exchange operates in isolation, with no shared real-time visibility of a customer’s transaction history.
Mr Bostan has called for the creation of a centralised 1Link-style system for exchange companies, similar to the interbank network used by ATMs, which would allow all firms to see whether a buyer has already purchased foreign currency from another outlet. Under such a system, once a transaction is recorded, the data would be immediately available across the network, preventing multiple purchases beyond permissible limits. He said he plans to formally write to State Bank to push for the development of this infrastructure, arguing that it is the only practical way to plug persistent loopholes in the market.
He also highlighted uncertainty among exchange companies about whether current documentation requirements will continue once the Nadra system is fully implemented. At present, buyers must present their CNIC, travel documents and other relevant paperwork, while exchange companies already capture biometric data and video recordings of customers. This information is stored internally and shared with regulators only when required, such as in response to a complaint from FIA. Transactions themselves are routinely reported to State Bank, but customer-level data remains fragmented across the industry.
Mr Bostan claimed that between $1.1bn and $1.2bn worth of dollars have been purchased so far this year, with an estimated $700m to $800m remaining untraceable. He suggested these funds may have been diverted for unlawful purposes, underscoring the scale of the challenge facing regulators. According to him, without a unified digital backbone linking all exchange companies, even enhanced biometric measures will struggle to deliver the level of oversight the government is seeking.
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