Money Matters

On the dark side of the grey list

Money Matters
By Mehtab Haider.
Mon, 08, 19

The International Monetary Fund (IMF) has warned of choking projected inflow of dollars in case of Pakistan’s failure to come out from the grey list of Financial Action Task Force (FATF), the inter-governmental body set up for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system.

The International Monetary Fund (IMF) has warned of choking projected inflow of dollars in case of Pakistan’s failure to come out from the grey list of Financial Action Task Force (FATF), the inter-governmental body set up for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system.

In the meanwhile, a US experts’ team last week visited Pakistan to assess the country’s progress independently on FATF action plan and held meetings with top guns of military and political leadership and other departments. They clearly conveyed that for Washington to extend its support in FATF review, expected in October, Islamabad would have to move ahead against banned outfits with full force.

The US team also asked Pakistan to ensure implementation on key FATF conditions to avoid any untoward consequences in the review.

“It’s all a political issue as if we help US for striking peaceful settlement in Afghanistan then Washington will help us get off the FATF’s grey list,” said top official and added that Pakistan has demonstrated its political will to go ahead against those involved in money laundering and terror financing.

According to an FATF document, since June 2018, when Islamabad had made a high-level political commitment to work with the FATF and Asia/Pacific Group on Money Laundering (APGML) to strengthen its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regime and to address its strategic counterterrorist financing-related deficiencies, Pakistan has taken steps towards improving its AML/CFT regime. These steps include the recent development of Pakistan’s terror financing (TF) risk assessment addendum; however, it does not demonstrate a proper understanding of Pakistan’s transnational TF risk.

Pakistan should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) adequately demonstrating its proper understanding of the TF risks posed by the terrorist groups , and conducting supervision on a risk-sensitive basis; (2) demonstrating that remedial actions and sanctions are applied in cases of AML/CFT violations, and that these actions have an effect on AML/CFT compliance by financial institutions; (3) demonstrating that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services (MVTS); (4) demonstrating that authorities are identifying cash couriers and enforcing controls on illicit movement of currency and understanding the risk of cash couriers being used for TF; (5) improving inter-agency coordination including between provincial and federal authorities on combating TF risks; (6) demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of TF activity and that TF investigations and prosecutions target designated persons and entities, and persons and entities acting on behalf or at the direction of the designated persons or entities; (7) demonstrating that TF prosecutions result in effective, proportionate and dissuasive sanctions and enhancing the capacity and support for prosecutors and the judiciary; and (8) demonstrating effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services; (9) demonstrating enforcement against TFS violations including administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases; (10) demonstrating that facilities and services owned or controlled by designated person are deprived of their resources and the usage of the resources.

The document says, ”FATF expresses concern that not only did Pakistan fail to complete its action plan items with January deadlines, it also failed to complete its action plan items due May 2019”.

“The FATF strongly urges Pakistan to swiftly complete its action plan by October 2019 when the last set of action plan items is set to expire. Otherwise, the FATF will decide the next step at that time for insufficient progress,” the document adds.

Now Pakistan will have to implement the 10-point agenda to enforce the FATF action plan as it would determine the fate of the country in the October review. The National Assembly’s Standing Committee on Finance and Revenue had approved amendments into Anti Money Laundering (AML) and Foreign Exchange Regulation Act (FERA) to align it with FATF requirements. In a bid to comply with FATF conditions, the government had constituted special teams.

An Office Order has been issued whereby joint teams, comprising officials from the relevant Preventive Collectorates and the regional Directorates of Intelligence & Investigations — Customs have been constituted at seven border crossing points viz. Torkham, Ghulam Khan, Kharlachi, Tank, Chaman, Taftan, and Wagah. One of the members of the team has also been made the focal person for coordinating with other LEAs.

Further, other LEAs, such as Federal Investigation Agency (FIA), Provincial Counter Terrorism Departments (CTDs) and Frontier Corps Khyber Pakhtunkhwa and Balochistan, would also nominate a representative from their ranks for the joint team to be deployed at the border points.

This team has been tasked with monitoring the movement of persons across the border and detecting as well as investigating the cases of illicit movement of currency related to suspected terror financing. This initiative, would synergise the efforts of the LEAs working in anti money laundering and counterterrorism financing area and improve information sharing mechanism, as well as contribute towards effective investigation and prosecution of currency smuggling cases.

It is time to deliver on the ground by demonstrating our agencies have what it takes to tear apart the networks of banned outfits and guide the country out of the AML/CFT compliance-related tight spot to avoid any further economic distress especially in the shape of a loan suspension by the IMF.

The writer is a staff member