APG on Money Laundering: Pakistan achieves compliant rating in 31 out of 40 FATF recommendations

ISLAMABAD: The Asia Pacific Group, a regional body of FATF, in its second Mutual Evaluation Report (MER), found that out of 40 recommendations, Pakistan has been declared compliant or largely compliant on 31 recommendations in order to combat money laundering and terror financing.

“Pakistan has 31 Recommendations rated C/LC. Pakistan will move from enhanced (expedited) to enhanced follow-up, and will continue to report back to the APG on progress to strengthen its implementation of AML/CFT measures. Pakistan submitted its third progress report in February 2021,” the MER released by APG report stated on Friday.

The Asia/Pacific Group on Money Laundering (APG) is an inter-governmental organization consisting of 41 members in the Asia-Pacific region, as well as organizations and observers from outside the region.

Pakistan was rated PC in its 2019 MER for R.1. While Pakistan had conducted a National Risk Assessment (NRA) on ML and TF in 2017 (2017 NRA), the MER identified gaps in the process of developing and identifying threats, vulnerabilities and risks. The assessment of TF risk was identified as ‘perfunctory only’.

The MER also found that the 2017 NRA had not yet been widely circulated to private sector stakeholders and that sectors assessed as higher risk or higher vulnerability in Pakistan were not yet subject to comprehensive AML/CFT measures. The February 2020 FUR found that Pakistan had made progress to identify, assess and promote an understanding of ML/TF risks and align resources and implementation accordingly, however moderate deficiencies remained in relation to obligations for Designated Non Financial Business and Professionals (DNFBPs), Pakistan Post and CDNS, and there were minor deficiencies remaining in c.1.1, 1.5, 1.8, 1.9 and 1.12. 17. Since the February 2020, FUR Pakistan has amended the AMLA to include general obligations for reporting entities (REs), including DNFBPs, to identify, assess and understand their risks and implement a compliance programme to address those risks.

In addition, Pakistan has issued a number of sector-specific regulations that provide more specific obligations on those sectors to assess and understand their risks and take enhanced measures where required. These sector-specific regulations are enforceable and cover all sectors except lawyers and notaries which are only subject to the general obligation in the amended AMLA.

According to official statement issued here on Friday, the Asia Pacific Group (APG) on Money Laundering has published results of Pakistan’s second Mutual Evaluation follow-up Report on 2 June, 2021. As per the report, Pakistan has achieved compliant/largely compliant rating in 31 out of 40 FATF Recommendations in Technical Compliance. These results prove the sincerity along with resolve of the government in complying with FATF requirements. These results are also a manifestation of the irreversibility and sustainability of the complete process in bringing Pakistan at par with Global AML/CFT standards. These results are manifestation of a whole of government approach adopted to achieve the same. An upgrade of 21 Recommendations within this short period of time remains unprecedented in the FATF history.

The FATF’s Mutual Evaluation Report (MER) of jurisdictions is assessed in two domains i.e. Technical Compliance/Legal Instruments (40 FATF Recommendations) and Demonstration of Effectiveness (11 Immediate Outcomes). Pakistan’s MER was adopted in October 2019 in which Pakistan was rated compliant and largely complaint in 10 out of 40 FATF Recommendations for the Technical Compliance. After adoption of MER, Pakistan was placed under Post Observation Period by FATF, which expired in February 2021. During the said period, Pakistan carried out major legal reforms with the enactment of 14 Federal Laws & 3 Provincial Laws along with relevant rules and regulations. The laws not only strengthened the systems in Pakistan but also brought in the sustainability. Pakistan submitted its report to FATF on its Technical Compliance on 1st October 2020.

The APG has acknowledged that Pakistan has made notable progress in addressing the Technical Compliance deficiencies identified in its MER and has been re-rated compliant/largely compliant in 31 out of 40 FATF Recommendations. Pakistan has also submitted re-rating requests to APG on four more recommendations in next follow-up report which are under review by APG. The technical upgrades achieved will help manifest achievement of effectiveness in 11 immediate outcomes of the APG MER process.

As a result of this substantial progress, APG has decided to move Pakistan from enhanced (expedited) to enhanced follow-up; and Pakistan will continue to report back to the APG on progress to strengthen its implementation of AML/CFT measures.