FATF and Pakistan

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FATF

TIC Analysis l

The next meeting of the Financial Action Task Force (FATF) is scheduled to be held in Paris from Oct 12 to 15 and Pakistan has already prepared its compliance report, which will be presented by Minister for Economic Affairs Division Hammad Azhar. The Pakistani delegation is scheduled to leave for France on Oct 13 as Pakistan’s case will be taken up on Oct 14 and 15.

Meanwhile, a report finalised by the Securities and Exchange Commission of Pakistan (SECP) on Wednesday has said that the comprehensive guideline developed by the Commission has helped financial institutions to generate 219 Suspicious Transactions Reports (STRs) in one year, as compared to 13 STRs in eight years. Pakistan was placed on the grey list by the Paris-based watchdog in June and was given a plan of action to complete it by October 2019, or face the risk of being placed on the black list with Iran and North Korea.’ FATF’s regional affiliate Asia-Pacific Group of Money Laundering (APG), has recently released an evaluation report on Pakistan’s compliance vis-à-vis the immediate outcomes and recommendations outlined by FATF a year and a half ago.

The APG report details what keeps Pakistan from achieving full compliance with FATF demands. Though some progress is mentioned as evident, many of the issues are recurring in nature. For instance, the report, on various places, highlights that Pakistani authorities, in general, do not have a comprehensive understanding of risks posed by money-laundering (ML) and terrorist-financing (TF) activities, besides hazards caused by legal persons, trans-national risks, new technologies, and terrorist groups.

The report identifies a number of priority actions. These include having better understanding of ML and TF risks, inter-agency dissemination and use of financial intelligence to counter those risks, improving the law enforcement and judicial capacity to catch ML and TF crimes, implementing targeted financial sanctions for TF, monitoring and investigating ‘at-risk’ non-profits, and extending supervisory framework to Pakistan Post, National Savings, lawyers, accountants and real-estate agents, among others.

The report itself mentions that Pakistan had a “mixed level of technical compliance” on a majority of FATF’s 40 recommendations and “minor” or “moderate” technical shortcomings for the remaining. On a majority of recommendations, Pakistan is showing a varying degree of compliance (partially-compliant: 26, largely-compliant: 9), with only four areas that were non-compliant.

Meanwhile, Foreign Minister Shah Mahmood Qureshi has warned that India was trying to push his country on the blacklist of the FATF. His comments came in the wake of the recent remarks by Indian Defence Minister Rajnath Singh that the FATF can any time blacklist the neighbouring country.

Three friendly countries have assured Pakistan of full support at the Financial Action Task Force (FATF) meetings scheduled to take place in Paris. Their backing is expected to thwart India’s designs of trying to get Pakistan’s name placed on the black list.

At this juncture, it isn’t about Pakistan falling short of full compliance on each of those recommendations. What must be noted, instead, is the trajectory of improvements since grey-listing first surfaced in February 2018. Pakistan has repeatedly given high-level political commitments for remedial actions. Regulators are adapting to risk-based approach and enforcement agencies are improving capacity. An 18-month timeframe wasn’t enough to show full compliance. The positive trend towards domestic AML/CFT reforms and multilateral facilitation may help Pakistan remain on the grey list until full compliance can be achieved.