Money Matters

Race against time

Money Matters
By Mehtab Haider.
Mon, 10, 19

Pakistan faces a daunting task to comply with Financial Action Task Force’s remaining 22 points on its action plan out of a total of 27 within next 60 days as Islamabad will have to submit its detailed progress report by end December 2019 to avoid getting blacklisted in the upcoming plenary meeting of the terror financing watchdog in February 2020.

Pakistan faces a daunting task to comply with Financial Action Task Force’s remaining 22 points on its action plan out of a total of 27 within next 60 days as Islamabad will have to submit its detailed progress report by end December 2019 to avoid getting blacklisted in the upcoming plenary meeting of the terror financing watchdog in February 2020.

Having only been able to achieve compliance on five points by getting the status of Largely Compliant (LC) nation at FATF plenary meeting after working so hard at both civilian and military side doing good on remaining 22 points in next 60 days is not going to be a cakewalk.

So what will happen if Pakistan fails to comply with the rest of the conditions? With only three or five votes in 39-member FATF, it seems that this sword will continue hanging over Pakistan in the months ahead.

For the time being, Pakistan has managed to foil its rivals’ attempts to have it blacklisted but the FATF has warned Islamabad publicly of a downgrade if no measures were taken till the envisaged deadline.

The FATF has kept Pakistan in its grey list for an extended period up to February 2020. For all practical purpose, now Pakistan will have to submit its compliance/progress report on 22 tasks of the action the plan by end December for the purpose of scrutiny by Joint Group (JG) of the FATF. The JG will hold its meeting by January 2020 that would be followed by plenary meeting of the FATF by February next year. Till face-to-face meeting of the JG in Australia, Pakistan will have to continue updating its progress on compliance report.

Pakistan got one favor as there were two different processes underway: one on FATF review and second on selection of country under Mutual Evaluation of Asia Pacific Group (APG). The observation on account of noncompliance of Mutual Evaluation might have resulted into a new action plan under FATF review; however, the FATF plenary agreed that there would be no new action plan for next 12 months as it would be unfair for Pakistan to pursue two different processes simultaneously.

The FATF stated that since June 2018, when Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) regime and to address its strategic counter-terrorist financing-related deficiencies, Pakistan has made progress towards improving its AML/CFT regime, including the recent development of its ML/TF risk assessment. At the October 2019 plenary, Pakistan reiterated its political commitment to completing its action plan and implementing AML/CFT reforms.

The FATF states that 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; (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 those 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 1,267 and 1,373 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.

According to FATF, all deadlines in the action plan have now expired. While noting recent improvements, the FATF again expresses serious concerns with the overall lack of progress by Pakistan to address its TF risks, including remaining deficiencies in demonstrating a sufficient understanding of Pakistan’s transnational TF risks, and more broadly, Pakistan’s failure to complete its action plan in line with the agreed timelines and in light of the TF risks emanating from the jurisdiction. To date, Pakistan has only largely addressed five of 27 action items, with varying levels of progress made on the rest of the action plan. The FATF strongly urges Pakistan to swiftly complete its full action plan by February 2020. Otherwise, should significant and sustainable progress not be made across the full range of its action plan by the next Plenary, the FATF will take action, which could include the FATF calling on its members and urging all jurisdictions to advise their financial institutions to give special attention to business relations and transactions with Pakistan.

Ministry of Finance said the FATF plenary considered Pakistan’s progress report on the action plan and APG Mutual Evaluation report (MER). Pakistan’s delegation reaffirmed its political commitment to fully implement the action plan, the ministry said, adding that the plenary meeting decided to maintain status quo on the action plan and allow the usual 12 months observation period for the MER.

It said the delegation also met with various delegations on the sidelines of plenary and briefed them about the progress made by Pakistan on the action plan and steps taken for strengthening its AML/CFT framework.

It’s going to be race against time for Pakistan and without putting all its acts together, the success on FATF front will remain a far cry.

The writer is a staff member