FATF conditions

Pakistan’s troubles with the Financial Action Task Force (FATF) are not over yet. After a review, the financial watchdog has again expressed its dissatisfaction with actions taken on the ground against banned terrorist organisations. Pakistan must now submit another compliance report on terror financing and money laundering by April 15. The report will be discussed in the next FATF review meeting in mid-May. With the May meeting crucial, Pakistan has little time to show its compliance relating to 15 key conditions, as well as showing action on the ground against proscribed outfits.

The FATF Asia-Pacific Group just completed a three-day review, and will be sharing the first draft of their performance evaluation by April 10, which Pakistan needs to respond to within a week. The APG delegation will be submitting its findings to the general body meeting to be held in August, which is crucial to Pakistan’s hopes of getting out of the grey list. As it stands, it would appear that Pakistani authorities are unsure of what the APG will be reporting, since the assessors did not give away much.

The trouble is that if Pakistan still does not know how far the FATF wants it to go in terms of compliance, the likelihood of running into more trouble with the FATF is high. The noise has been right in terms of actions against proscribed organisations, however, existing actions have been found to be unsatisfactory by the FATF. Pakistan remains in a tricky position, vis-a-vis fulfilling its requirements on the terror finance and money laundering front. The State Bank of Pakistan has completed its national terror financing risk assessment, but the SBP is yet to start its outreach programme to disseminate identified risks and how to mitigate them. Moreover, the SBP needs to demonstrate it has undertaken on and off-site supervision of risk assessment in financial institutions as well as what remedial actions have been taken.

Realistically, it seems that the FATF’s key concern is the implementation of UN sanctions on proscribed organisations in Pakistan. This is an issue that should have been dealt with already under Pakistan’s own National Action Plan. The international concerns about Pakistan effectively revolve around this single question. Once Pakistan shows sufficient action against proscribed organisations, the rest of the concerns should ease. Finance is a key way of crippling the infrastructure of proscribed organisations in the country. It is clear that the actions undertaken till now are not enough for the international community. Pakistan cannot afford to delay decisive action for much longer.