FATF progress

On the FATF front, some good and bad news appear to be going hand in hand for Pakistan. It is good news that the Asia Pacific Group (APG) on money laundering has improved Pakistan’s rating on 21 of the 40 technical recommendations of the FATF against money laundering and terror financing. The flipside is that it has retained Pakistan on ‘enhanced follow-up’ for sufficient outstanding requirements. The second follow-up report on mutual evaluation of Pakistan that the APG released has downgraded the country on one criterion. The APG is a regional affiliate of the Paris-based FATF, and rates countries on their compliant status. The latest report has rerated Pakistan to compliant status on five counts and on 15 others to largely compliant. Moreover, on one count it has given Pakistan a ‘partially compliant’ status. To date, it all adds up to being fully compliant with seven recommendations and largely compliant with 24 others.

With an overall score of 31, the government of Pakistan finds itself at an intersection now. One road goes to a self-congratulatory path where we gloat over our achievements; the second is more advisable and challenging on which we need to tread carefully and try to improve our status on the remaining nine recommendations of the FATF. Being declared non- or partially-compliant should still be a cause of concern, as it may land Pakistan in troubled waters once again. Though Minister for Energy Hammad Azhar, who is also head of the task force on FATF, has reassured the nation that being on the FATF’s blacklist is no longer a possibility, remaining on the grey list will itself mark a failure on the part of the government which has been dilly-dallying on some vital recommendations of the FATF. Being on ‘enhanced follow-up’ is not something to be proud of as we will continue to report back to the APG on progress to strengthen our implementation of anti-money laundering (AML) and combating financing terror (CFT) measures.

When Pakistan submitted its third progress report in February 2021, it hoped to pass with flying colours but as of today the report awaits a final evaluation, meaning the country may still find itself lingering on the grey list rather than moving out of it. One cause of satisfaction is the acknowledgment by the APG that Pakistan has made notable progress in addressing the technical compliance deficiencies that the last Mutual Evaluation Report (MER) had identified. The two recommendations on which Pakistan suffered a downgrade to ‘non-compliant’ relate to insufficient progress pertaining to mutual legal assistance with other countries and freezing and confiscation of assets and accounts. The government needs to work aggressively to improve its effectiveness on the AML/ CFT and other systems. Pakistan also needs to make sure that the progress it has made is irreversible and sustainable so that no unexpected shock pushes Pakistan to a further downgrade on any count.