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PAKISTAN AND FATF

Would All Efforts to Wriggle Out of Grey List Go in Vain?

When Marshall Billingslea, the outgoing President of the Financial Action Task Force (FATF) asserted on 21st Jun 2019 at Orlando, Florida that there is a strong possibility of Pakistan getting blacklisted in Paris where next meeting of International Financial Watchdog’s is scheduled to be held, he threw cold water on expectations of Pakistani authorities and populace.

Matter-of-factly made comments at end of the FATF meeting, the gist of which was gleaned out of the transcript of the audio call released on 24th Jun 2019 could have major repercussions on the international standing of the land of pure.  What did Billingslea mean when he emphasized that Pakistan had significant work to do and was lacking in almost every respect vis-a-vis the action plan agreed upon, in Jun 2018?

Mutually Agreed Points of Action

Pakistan has been on the FATF’s grey list since last year.  In June 2018, Islamabad had committed itself to strengthen its anti-money laundering and terror financing mechanisms.  Pakistan and the FATF had then mutually agreed on a 10-point action plan with specific deadlines.  A ready reckoner is appended below:

  • To demonstrate that Terror Financing risks are properly identified, assessed, and that supervision is applied on a risk-sensitive basis.
  • To demonstrate that remedial actions and sanctions are applied in cases of Anti Money Laundering/ Combating Financing of Terror (AML/CFT) violations and that these actions have an effect on AML/CFT compliance by financial institutions.
  • To demonstrate that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services (MVTS).
  • To demonstrate that authorities are identifying cash couriers and enforcing controls on illicit movement of currency and understanding the risk of cash couriers being used for TF.
  • To improve inter-agency coordination including between provincial and federal authorities on combating TF risks.
  • To demonstrate that law enforcement agencies (Leas) are duly identifying and investigating the widest range of TF activities, TF investigations and prosecutions target designated persons and entities, and persons and entities acting on behalf or at the direction of the designated persons or entities.
  • To demonstrate that TF prosecutions result in effective, proportionate and dissuasive sanctions and enhancing the capacity and support for prosecutors and the judiciary.
  • To demonstrate that targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists are effectively implemented.
  • To demonstrate that enforcement against Targeted Financial Sanctions (TFS) violations including administrative and criminal penalties are being duly carried out and provincial and federal authorities are cooperating on enforcement cases.
  • To demonstrate that facilities and services owned or controlled by designated persons are deprived of their resources and the usage of the resources.

Deliberations with Shamshad Akhtar

The Pakistani delegation was led by caretaker Finance Minister Dr.Shamshad Akhtar along with officials from the Ministry of Finance, Ministry of Foreign Affairs, State Bank of Pakistan and Financial Monitoring Unit.

On the sidelines of FATF and International Co-operation Review Group (ICRG) meetings, the Pakistani delegation held bilateral meetings with several FATF members to ensure their support for Pakistan in the FATF process.  FATF members were intimated that the government had already sent its commitment letter to the FATF President on the Policy Action Plan on 22nd June 2018.

A special intervention to FATF/ICRG was made by Dr. Akhtar where she emphasized that Pakistan was steadfast in upgrading the AML/CFT standards and ensuring their enforcement.  She reiterated Pakistan’s strong resolve to strengthen its countermeasures against terrorism and terrorism financing and to implement the action plan by adopting a “whole-of-government” approach.

She brought forward that this was a golden opportunity to display Pakistan’s commitment to the world for compliance of international standards.  Exhibiting increasing effectiveness of its regulatory and enforcement regimes would also add to the country’s stature.

Time Period

Government of Pakistan had pledged to put in place a strategy to implement the Action Plan.  Owing to complexity and size of the action plan, the Minister for Finance had established a high-powered, inclusive and robust institutional coordination and monitoring mechanism to ensure that the Action Plan is implemented within time and the country is brought out of FATF’s grey list.

Ironically Pakistan could not implement its ‘to do’ list commensurate with January 2019 deadlines.  It again also failed to complete its action plan by May 2019.  Now FATF has granted it time till October 2019.

Viewpoint

“The measures taken by Pakistan so far are cosmetic in nature… Pakistan does not either appreciate or chooses not to acknowledge the transnational, trans-border terrorist financing risk they face. Even though they did issue an addendum, an annex, to their national risk assessment following the February discussion.  There are also a number of other structural and legal changes that have to be undertaken, including the successful prosecution of terrorist financing cases.”

                       Mr. Billingslea expressed with dismay.

Pakistan needs the support of at least 15 of FATF’s 36 voting members to move out of the ‘grey list’ and it needs three votes to prevent blacklisting.  Ramifications of Pakistan remaining in the ‘grey list’ could be devastating.  It would culminate into increased difficulty by the government to muster foreign investments.  Pakistan desperately needs foreign investments to slither out of its prevailing economic crisis.

“IMF is an observer organization to the Financial Action Task Force and so they have complete visibility into everything that occurs within the task force, including a very detailed understanding of what the Pakistani action plan is. The decision, however, to condition fund disbursement under an IMF programme based on structural benchmarks that might be associated with the Financial Action Task Force is purely an IMF decision.”

                                                 said outgoing President FATF.

On the other side, Pakistan has exhibited firm commitment to comply with the dictum of FATF.  It has already chalked out plans to shift the students of Mumbai attack mastermind Hafiz Saeed’s Jamaat-ud-Dawa (JuD) and Falah-i-Insaniat Foundation (FIF) to the government-run schools.

Moreover, the Pakistani government has sealed and took over administrative control of several establishments run by the proscribed Jaish-e-Mohammad (JeM), the JuD and the FIF.  Pakistan’s government initiated action against these organizations after notifying a 2019 order of the United Nations Security Council that provides a legal basis for freezing or seizure of properties owned by individuals and organizations designated by the council as terrorists.

If everything goes well and Pakistan is able to adopt concrete measures including putting Jaish-e-Mohammad kingpin behind bars, Inshaallah, it will be out of greylist sooner rather than later.

25 Jun 19/Tuesday                                                          Written by Naphisa

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