A delegation of the Asia-Pacific Group (APG) on money laundering—a regional affiliate of the Financial Action Task Force (FATF)—visited Pakistan to assess if the country has made enough progress on global standards against financial crimes to warrant its exclusion from the watchdog’s grey list.
Meetings took place between the FATF officials and Pakistan government. The APG assessment team also met officials from the State Bank of Pakistan, Securities and Exchange Commission of Pakistan, Election Commission of Pakistan, Ministry of Foreign Affairs, Ministry of Interior, National Counter Terrorism Authority, law enforcement agencies and counter terrorism departments.
Pakistan has claimed to have taken steps to comply with latest instructions to meet various deadlines in order to avoid being included in a blacklist. However, Pakistan has been declared as “high risk” all the eight entities and related elements specifically named by FATF as threats to the global financial system.
The international community had taken an aggressive stance against Pakistan in the FATF. Achieving the 27 targets under a 10-point action plan by Pakistan is now a top priority for the Imran Khan government. In the FATF meetings last month, Pakistan had announced a ban on Jamaat-ud Dawa’ (JuD) and Falah-i-Insaniat Foundation (FiF) in order to address the concerns that Pakistan supported these and six similar organisations, including Jaish-e-Mohammad (JeM).
Pakistan informed the APG of the FATF that all banned organizations are now under greater scrutiny by its institutions regarding their activities starting from registration to operations and from fund collection to bank accounts and transactions.
Pakistan has also fined six banks and has started investigations against 109 bankers for opening ‘fake’ bank accounts. About 8,707 suspicious transaction reports (STRs) were issued last year by the Financial Monitoring Unit (FTU), showing almost 57 per cent growth over the 5,548 STRs issued in 2017.
Pakistan has signed Memorandums of Understanding (MoUs) with the United Kingdom, Qatar, United Arab Emirates and Australia for sharing of intelligence. Pakistan is said to have improved coordination among its different agencies. While all this may be impressive, the FATF reviews processes, systems and weaknesses on the basis of a standard matrix. Pakistan is being monitored on 27 indicators under the 10-point action plan with deadlines.
Pakistan’s performance in recent FATF meetings was not satisfactory vis-a-vis milestones set. FATF had urged “Pakistan to swiftly complete its action plan, particularly those with timelines of May 2019” to address strategic deficiencies. The FATF had noted that Pakistan had revised its terror financing risk assessment, but “did not demonstrate a proper understanding of the terror financing risks posed by Islamic State (IS) group, AQ [Al Qaeda], JuD, FiF, LeT [Lashkar-e-Taiba], JeM, HQN [Haqqani network], and persons affiliated with the Taliban”.
Pakistan has to comply with action plan for which it is required to adequately demonstrate its understanding of the terror financing risks posed by the militant groups. It will have to conduct supervision on a risk-sensitive basis and prove that remedial actions and sanctions are applied in all cases.
Islamabad needs to demonstrate that terror financing prosecutions result in effective and proportionate sanctions, enhancing the support for prosecutors and the judiciary. It must show effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all those designated as terrorists under the UN resolutions 1,267 and 1,373 and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets and prohibiting access to funds and financial services.
The FATF will undertake the next review of Pakistan’s performance in June, which will be preceded by a face-to-face meeting with the Joint Group in May. Only the successful implementation of Pakistan’s strategies in curbing terror-financing and banning of terrorist groups and its verification by the APG could lead the FATF to remove Pakistan from its grey list or move it into the black list category by September this year.
Script: Kaushik Roy, Air: News Analyst