By June 2018, Pakistan will be asked to submit its report to FATF (Financial Action Task Force), the watchdog for money laundering to assist terrorism; failing which the country will be blacklisted. Going by the past experience of having been grey-listed from 2012 to 2015; Pakistan may feel it can overcome the impending danger as well. But this will simply be a complacent approach, which may cost Pakistan and the unsuspecting public dearly.
How does the Blacklisting affect common people and large cap companies?
Let’s explain it with an individual’s or a proxy organisation’s bank accounts, whose money is suspected to be used to fund militant organisations.
Let’s take the live example of how Hafiz Saeed’s bank account can affect the common people of Pakistan if the nation fails to blacklist his accounts? Failing to blacklist means the particular bank fails to monitor the various transactions including fund’s origin and destination.
Such a practice will result in stricter scrutiny by financial watchdogs of any overseas bank transactions leading to
- Unwanted delays in settlement
- Outright rejection.
Almost all banking transactions including that of individuals or legitimate trading companies may fall in the category of being dubious.
The money transferred to your account either by your relative, trading accounts & even donation to NGOs; all such transactions will fall prey to vigorous investigations. This would result not only in delays that you absolutely don’t want but also cancellations. The latter will happen more often as your bank doesn’t do the documentation work it’s supposed to and when that happens and there’s no proven record of where the money is coming from, or where it’s going, the transaction is dropped.
Thus a failure to blacklist shady accounts will cause trouble for all.
Now, what about the trading powerhouses involved in large investment in Pakistan? Obviously, they cannot be left in a lurch about their financial dealings, resulting in distrust for the nation and withdrawal from any future projects. This will hit the country’s economy in the hardest manner possible.
How is the present Blacklisting situation worse?
The problem, unlike in 2012-2015 when Pakistan was grey-listed, will aggravate many folds as a result of current financial sanctions by IMF and USA. With this happening, so-called ‘improved investment climate’ that the government has been touting and selling wherever it can be sold, will go up in a puff. This would especially take a hit when international banks don’t consider it worth the hassle to put any significant amount of business in Pakistan, resulting in further economic disconnect.
The final nail in Pakistan’s economic coffin
So, is Pakistan facing a banking isolation akin to political isolation internationally? How much I may like to say no, but I fear that is the bitter truth and blacklisting by FATF in Jun 2018 may prove to be the final nail on Pakistan’s economic coffin.
Last year, the New York State Department of Financial Services (DFS), had fined Pakistan’s Habib Bank Limited (HBL) $225 million for infringing laws designed to combat illicit money transfers that opened the door to the financing of terror. Not surprisingly, that particular door opened to a Saudi bank which has for long been believed to be affiliated with al-Qaeda. DFS for the first time had ordered a bank to shut down in the US because HBL had failed to correct serious weaknesses first identified more than a decade ago.
Going by the same logic, if Pakistan fails to bring transparency in their financial transactions and do not submit the required feedback to FATF, country may face an extraordinary economic enigma jeopardising it’s very sustenance in near future.
Therefore, Pakistan needs to act and act fast enough to identify Hafiz Saeed’s like accounts; connected with or suspected to be connected in money laundering; and freeze them to ensure financial freedom for all others.
15 Mar 18/Thursday.