Money laundering, terror financing : Pakistan does better on FATF conditions

By Mehtab Haider

PARIS/ISLAMABAD: Pakistan made progress on countering money laundering and terror financing as the Asia/Pacific Group on Money Laundering (APG) has highlighted Pakistan’s progress positively with compliance on 36 of the 40 parameters, while the Joint Working Group (JWG) has categorised Islamabad as compliant on 10 points out of total 27 points of action plan.

The APG on Money Laundering on Saturday published its report on money-laundering and terror-financing in Pakistan, a week before its Paris-based G7 counterpart, the Financial Action Task Force (FATF), is set to announce its decision to remove or retain Islamabad in its grey list, Geo News reported.The long-awaited 228-page report, titled “Mutual Evaluation Report 2019,” would provide a basis for the FATF — the international money-laundering and terror-financing watchdog — to make its decision in an upcoming Paris meeting scheduled for October 13-18, keeping in view Pakistan’s compliance with the parameters it had set earlier.

Earlier in August it was reported in the media that out of 40 universal recommendations of FATF, Pakistan’s rating was partially and non-compliant on 30 recommendations and performance was also below par on 10 as against 11 Immediate Outcomes.

Out of total 11 Immediate Outcomes -which determine the effectiveness of the AML and CFT frameworks, only on one indicator was effectiveness was found moderately effective and on rest of 10, the rating was ineffective.

The APG report states that Pakistan has largely but partially complied with 36 of the 40 parameters set by the FATF at the time of the country’s inclusion in the grey list.

However, it pointed out that Islamabad only missed four of the total 40 parameters that it was to follow in order to be effectively removed from the list.

The four missed parameters comprise:

1. DNFBPs (designated non-financial businesses and profession): Customer due diligence.

2. Transparency & BO (beneficial owner/ownership) of legal arrangements.

3. Regulation and supervision of the DNFBPs.

4. Mutual legal assistance: freezing and confiscation.

The report further said Pakistan’s performance on international cooperation was moderate.

It stressed on the country’s weakness pertaining to risk policy, supervision of coordination, preventive measures, legal personnel arrangements, financial intelligence, money-laundering and terror-financing (TF) investigations, prosecution and confiscation, production of TF preventive measures and proliferation-financing (PF) financial sanctions.

Last month, a high-level Pakistani delegation led by Economic Affairs Minister Hammad Azhar had attended a two-day meeting with the APG to discuss Islamabad’s progress on the FATF action plan.

Meanwhile, the FATF Joint Working Group (JWG) has conveyed to Pakistan that it has categorised Islamabad as compliant on 10 points out of total 27 points of action plan.

Just ahead of next review meeting of the FATF scheduled to be held in Paris from Oct 14 to 18, the findings of the JWG have been shared with Pakistani authorities, which disclosed that out of total 27 action plans, Pakistan was largely found compliant on 10 points, remained partially compliant on another 10 points and was categorised as non-compliant on seven points. Pakistani team had defended its position in last face-to-face meeting in Bangkok in September, 2019 for hours’ long scrutiny and demonstrated that the country made progress in last one year.

Pakistan’s five-member delegation led by Minister for Economic Affairs Hammad Azhar will participate in the upcoming FATF review meeting in Paris along with top military officials, DG FMU and one representative from Foreign Office.

Hammad Azhar, who is also leading FATF-related issues, said while talking to The News that there was need to differentiate APG’s Mutual Evaluation (ME) and FATF’s review undergone through the JWG. These two processes are underway separately, he added.

The minister said that Pakistan made good progress in last four to 12 months period and it seemed that it successfully convinced assessors at FATF’s JWG level that Pakistan was moving towards full compliance. “Our hectic efforts had exposed Indian lobby which was using the FATF for launching propaganda against Pakistan,” he said, and concluded with hopes that Pakistan would not be downgraded into FATF review meeting after making progress in last one year.

The FATF review had placed Pakistan into grey list in June 2018 and had given 27 action plans till September 2019 to comply for coming out from the grey list. This upcoming review of the FATF meeting going to be held in Paris will now decide the fate of the country with three possibilities — excluding it from grey and put into green list, continuing it into grey list with extended period of nine to 12 months and thirdly in worst case scenario putting the country into blacklist, having dire consequences for the country’s economy.

Pakistani authorities are taking stance that the country’s top military brass and civilian side put a lot of efforts to comply with all 27 action plans within the envisaged deadline and made good progress. The authorities are confident that the FATF will not give new action plan. There are no chances that they decide to further downgrade Pakistan and put it into blacklist. It could be wish of Israel or India, but on merit it should be failed. If US backed any such move then putting into blacklist for short period cannot be ruled out in totality.

On merit, they argued that Pakistan should be excluded from grey list and put into green or white list as Islamabad made impressive progress on at least 20 points out of 27 action plan.

However, official sources said the FATF might decide to continue Pakistan putting into grey list for extended period of six to 12 months but in such scenario there will be no new action plan.

Islamabad might be asked to continue compliance on 17 points where the country made partial compliance or could not make much progress for next one year.

“We need mustering up diplomatic support as vote of Malaysia, China and Turkey could avoid us falling into blacklist,” said official sources, and added that Indian lobby might table a resolution into review of 39-member FATF meeting, but with diplomatic and political support it could be defeated. But Pakistani side will have to ensure that the representatives of its supporting countries should remain present at time of voting on any resolution in case of Pakistan.

Out of total 27 action plans, the JWG of FATF has found Pakistan fully compliant on these 10 points.

1). Activation of Nacta website to place proscribed persons; real time access to all and continuous updation.

2. Precautions in SBP regarding Know Your Customers KYC; biometric verification of accounts etc.

3. Dissemination of suspicious transaction reports (STRs) by FMU to all law enforcement agencies.

4. Dissemination of reverse feedback and intelligence reports by law enforcement agencies to SBP and FMU.

5. Risk assessment of cash smugglers particularly with special reference to terrorist financing.

6. Integration of Customs controls at all entry and exit points of land, air and sea.

7. Effective utilisation of domestic agencies against terrorist financing.

8. Regulation of private banking system by the regulatory framework of SBP.

9. Investigation mechanism on risk-based approach against terror financing.

10. Awareness campaign to all stakeholders regarding terror financing.