The recent pronouncements by the Asia Pacific Group which regulates the FATF regime for Pakistan portray a number of regional money laundering and terrorism financing threats that confront Pakistan.
According to the APG, these threats pertain to the porous borders with Afghanistan, exposing Pakistan to incoming illicit proceeds from drug trafficking and funds to support terrorist groups operating within Pakistan and along its vulnerable borders.
Even though there is some acknowledgment of the fact, it is glossed over to some degree that Pakistan has had huge success in curbing terrorism. All the official and non official figures show a sharp decline in terrorism, with terrorism on its lowest scale in the country when compared against data from previous years. However, this does not seem to translate into significant dividends when it comes to the FATF.
In fact, as with other previous assertions, the APG cites a significant number of UN-listed terrorist organizations operating in these border regions as a risk for outbound funds supporting terrorist activity in neighbouring countries, with the terror threats relating to the border regions with Afghanistan. Also, Pakistan’s significant diaspora of citizens working in other high terrorism financing regions in the Middle East and remitting funds creates an additional risk.
While the Punjab government has started taking over all the moveable and immoveable assets of the Jamaatud Daawa (JuD) and the Falah-e-Insaniat Foundation (FIF) operating in the province, and amended the Anti-Terrorism Act of 1997 earlier in February 2018, allowing the state to deal with the proscribed organizations on the United Nations list, this does not get much traction at the FATF. Pakistan has also clamped down upon the groups’ networks, arrested their top leadership including Hafiz Saeed, and forfeited all their funds and seized their assets. The recent indictment of Hafiz Saeed by courts made headlines in the country; the APG, however, does not seem to have noticed much.
What the FATF does not indicate is the fact that, pragmatically speaking, it’s not an easy task to dismantle such long established networks. Kinetic operations have broken the back of terrorist outfits, and there will definitely be some time lag before these deeply entrenched groups in society can be weeded out. But, time is not on Pakistan’s side where the FATF is concerned.
This is not the only issue; capital flight associated with illicit proceeds from corruption and other high-risk predicate crimes, including tax evasion, are said to be continuing concerns, with the recovery of illicit funds mentioned as improvement but still not enough. In September 2018 Pakistan and the UK launched a ‘UK-Pakistan Partnership on Justice and Accountability’ to address money laundering issues and recover stolen assets held in the UK.
However, the FATF does not really recommend pragmatic ways to address the problems of porous borders, recovery of stolen assets, and the movement of funds. What it does not seem to, or want to, recognize is that much of Pakistan’s economy is undocumented, which is typical of an agrarian based economy which gets inputs from remittances abroad, sent by many low scale workers who don’t want to send money through banking channels because it costs more, and exposes them to higher taxation in the remitting country and increased stringency in Pakistan.
In response, the FMU Unit has brought down many illegal transfers with the coordination of the Federal Investigation Agency and Provincial Counter Terrorism Departments of Police, with 777 cases against Hawala/ Hundi , 1060 arrests made against these cases, and recovery of Rs1320.705 million in this regard.
Counter-Financial Terrorism investigative units have been established in Police Counter Terrorism Departments, and a Countering Financial Terrorism Directorate established in Nacta for a unified response on the feedback coming from the provinces. This is an evolving regime, and nothing of the kind existed a few years ago. It seems pertinent to point out that such regimes have taken much longer to be established even in much more developed countries.
There is a lot of pressure on Pakistan to implement an effective international cooperation management-framework on mutual legal assistance. Even though Pakistan has a formal extradition law, the FATF cites Pakistan for lacking a formal mutual legal assistive framework, especially for informal cooperation. It seems worthwhile to mention that in extradition cases in the West – such as the famous Pinochet case in the UK – MLA frameworks did not spring up any quicker.
In FATF compliance, Pakistan conducted a national risk assessment exercise in 2015-2017 through its financial monitoring unit, using the World Bank template, which resulted in the document called ‘National Risk Assessment on Money Laundering and Terrorist Financing 2017’. The FATF concluded that Pakistan did not rate its national threats cogently, and did not explain how it categorized both threats from money laundering and terrorism financing as medium level threats.
The FATF noted that Pakistani statements of the current scenario were fuzzy, and there was some confusion regarding corruption, investment by shady persons in real estate and other businesses and from drug and fraud offences. The Counter terrorism Department of the Punjab Police was stated to be better than the FIA in understanding these threats, while NAB ranked higher on the scale of agencies able to respond to threats from their areas of responsibility and understanding of risk with regard to corruption as a predicate offence.
We keep hearing that crime generates money for terrorism in Pakistan, and indeed this has been the subject of much media hype and debate. However, the FATF noted that absence of cogent national crime statistics and tabulation according to the impact of such crime on civil society, or some other justification or combination thereof, was not explained by officials. The FATF also noted that Pakistan could not identify particular terrorism-crime risks associated with, or having, foreign elements within Pakistan.
Even more tellingly, the FATF opined that there was no clear understanding among officials of the risks associated with terrorism financing crimes., and indeed the linkages of terrorism financing and money laundering in Pakistan were said not be expressed clearly by Pakistan.
What does the FATF want from Pakistan? It wants Pakistan to swiftly complete its full National Action Plan by February 2020, notwithstanding that the NAP was a hastily contrived wish-list of aspirations, some of which seemed impossible to achieve in the short term, but work could be done to curb terrorism by kinetic operations, and then medium to long-term plans could be implemented.
There are clear dichotomies on how Pakistan is treated at forums such as the FATF, with action expected to miraculously occur almost overnight. While there is much truth in what the FATF wants, it does not seem to care that Pakistan – as an evolving counter-terrorism regime which was facing almost a few hundred percent more terrorist incidents than today, only a decade ago – has to grapple with deep structural impediments to achieving full compliance.
On the other hand, Pakistani policymakers would be well advised to remember that when a country hastily draws up wish-lists such as the National Action Plan without much thinking going into it about realistic and achievable goals within stipulated longer term timelines, such documents become the rope with which entities like the FATF can try to strangle the country.
The writer is a retired inspector general of police and ex head of Pakistan’s National Counter Terrorism Authority (Nacta).
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