Money Matters

Before the watchdog bites

Money Matters
By Mehtab Haider.
Mon, 02, 20

The Financial Action Task Force’s (FATF) decision to keep Pakistan in the grey list for the next four months till June 2020 demonstrates the fact that risks of falling into the undesirable blacklist are not yet over for the country.

The Financial Action Task Force’s (FATF) decision to keep Pakistan in the grey list for the next four months till June 2020 demonstrates the fact that risks of falling into the undesirable blacklist are not yet over for the country.

Although, the international watchdog for combating money-laundering and terror-financing is a technical forum for ensuring compliance on UN Security Council Resolutions 1267 and 1373 in the aftermath of 9/11 attacks, its geopolitical objectives could not be ignored at all that involve fulfilling the agenda of US and its western allies.

All things are happening on FATF front but its linkages with ongoing US and Taliban talks for striking peaceful solutions for Afghanistan are closely interlinked as Washington desires Islamabad to play its role to find out permanent and peaceful solutions so that US could exit from Afghanistan ahead of upcoming presidential elections.

So smooth sailing on FATF front and trouble-free completion of International Monetary Fund (IMF) programme will largely depend on Pakistan’s role in helping striking a truce between US and Afghan Taliban that ensures long-lasting peaceful solution to the conflict that has been plaguing the war-ravaged country for decades.

The FATF itself describes its mandate by stating that it monitors the progress of its members in implementing necessary measures, reviews money-laundering and terror-financing techniques and countermeasures, and promotes the adoption and implementation of appropriate measures globally. In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.

Pakistan was placed on the grey list in May/June 2018 when FATF’s plenary committee found Islamabad noncompliant and handed Pakistan a 27-point action plan to be complied in a period of just one year. It was a period of political transition that witnessed three different political regimes i.e., the outgoing Pakistan Muslim League-Nawaz led government, then caretaker setup, and finally the Pakistan Tehreek-e-Insaf-led regime that took over reins of power after winning last elections.

After one year, when the FATF plenary, in its meeting in October 2019, found Pakistan compliant on 5 points out of total 27, it granted first extension of three months, tasking Islamabad to ensure compliance on the remaining 22 points till February 2020. Now the FATF plenary again met in Paris from February 16 to 21 and found that Pakistan was compliant on 14 points. Pakistan has now obtained a breather of four months up to June 2020 for abiding by the remaining 13 points. However, the FATF also warned that if progress was not made it would take action, which could include the watchdog’s calling on its members and urging all jurisdictions to advise their financial institutions to give special attention to business relations and transactions with Pakistan.

Top Pakistani officials, who were part of official delegation of recently held plenary session in Paris, said Pakistan’s progress on immediate outcomes (IOs) of 9 and 10 was necessary for gauging the future performance of the country related to terrorist financing offences. Furthermore, it also depended on ensuring that such activities were investigated and perpetrators prosecuted and subjected to effective, proportionate, and dissuasive sanctions, the officials added. Moreover, they said it also involved counter-actions that prevented terrorists, terrorist organisations, and their financiers from raising, moving, and using funds, and from abusing the nonprofit organisations. Effective prosecution and conviction of terror financing network and their affiliates will be crucial for assessing the country’s performance in future.

The FATF in its findings argued that since June 2018, when Pakistan made a high-level political commitment to work with the FATF and Asia/Pacific Group on Money Laundering to strengthen its AML/CFT (anti money-laundering and combating financing of terror) regime and to address its strategic counter-terrorist financing-related deficiencies, Pakistan’s political commitment has led to progress in a number of areas in its action plan, including risk-based supervision and pursuing domestic and international cooperation to identify cash couriers.

Pakistan should continue to work on implementing its action plan to address its strategic deficiencies by: (1) demonstrating that remedial actions and sanctions are applied in cases of AML/CFT violations, relating to TF (terror-financing) risk management and TFS (Targeted Financial Sanctions) obligations; (2) demonstrating that competent authorities are cooperating and taking action to identify and take enforcement action against illegal MVTS (money or value transfer services); (3) demonstrating the implementation of cross-border currency and BNI (bearer-negotiable instrument) controls at all ports of entry, including applying effective, proportionate, and dissuasive sanctions; (4) 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; (5) demonstrating that TF prosecutions result in effective, proportionate and dissuasive sanctions (6) 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; (7) demonstrating enforcement against TFS violations including administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases; (8) demonstrating that facilities and services owned or controlled by designated person are deprived of their resources and the usage of the resources.

The anti terror-financing watchdog said, “All deadlines in the action plan have expired. While noting recent and notable improvements, the FATF again expresses concerns given 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 largely addressed 14 of 27 action items, with varying levels of progress made on the rest of the action plan.” The FATF said Pakistan was strongly urged to swiftly complete its full action plan by June 2020; otherwise, should significant and sustainable progress especially in prosecuting and penalising TF not be made by the next plenary, the FATF would take action.

Now is the time for coordinated efforts to combat terror financing, so there is need to focus upon approving required legislations, strengthening institutional and regulatory framework, and ensure effective prosecution. In addition, a strong judicial conviction also needs to be ensured so that Pakistan is out of the danger of falling into the FATF blacklist on permanent basis. Otherwise the international community will unanimously label us as a liability and a burden and no respectable nation likes to be known as being a part of problem instead of solution.


The writer is a staff member