Matrix Report
Ever since the Financial Action Task Force (FATF) placed Pakistan on its “grey list” and handed it a 27-point Action Plan, FATF has become a household name here. It resonates across Pakistan, more so in public and TV discourse, whenever FATF or its sub-groups gather to review and assess performance of countries under its watch.
Again, between 19-21 February 2020, FATF was part of the conversation when more than 800 delegates, representing the global network of 205 countries and jurisdictions, as well as international organizations, met in Paris.
President Xiangmin Liu of the People’s Republic of China, chaired this second plenary to discuss inter alia issues such as “mitigating the money laundering and terrorist financing risks of virtual assets.”
Pakistan was again part of the review agenda. The plenary noted that the country has largely addressed 14 of 27 action items, with varying levels of progress made on the rest of the action plan.
As expected, the FATF decided to keep on its ‘grey list’ of countries with inadequate control over curbing money laundering and terrorism financing until the next review in June, according to an official FATF announcement.
During the plenary, the global watchdog identified Albania, Barbados, Jamaica, Mauritius, Myanmar, Nicaragua and Uganda as jurisdictions with strategic AML (anti-money laundering) and CFT (countering terrorist financing) deficiencies.
Republic of Korea received similar advice, while Iran’s failure to enact the “Palermo and Terrorist Financing Conventions in line with the FATF Standards”, caused it to remain on the FATF statement on [High Risk Jurisdictions Subject to a Call for Action – Black List) ] until the completion of full 2016 Action Plan.
CALL ON PAKISTAN
Pakistan remains part of a group of 18 countries categorized as “jurisdictions with strategic deficiencies.”
That is why the FATF plenary advised Pakistan to continue “implementing its action plan to address its strategic deficiencies, including by:
- demonstrating that remedial actions and sanctions are applied in cases of AML/CFT violations, relating to TF risk management and TFS obligation
- demonstrating that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services (MVTS)
- demonstrating the implementation of cross-border currency and BNI controls at all ports of entry, including applying effective, proportionate and dissuasive sanctions
- demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of TF activity and that TF investigations and prosecutions target designated persons and entities, and those acting on behalf or at the direction of the designated persons or entities
- demonstrating that TF prosecutions result in effective, proportionate and dissuasive sanctions
- demonstrating effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services
- demonstrating enforcement against TFS violations including administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases
- demonstrating that facilities and services owned or controlled by designated person are deprived of their resources and the usage of the resources
These conditions certainly amplify the urgency that Pakistan faces right now. Most of them are technical in nature.
Often, critics decry them as instruments of blackmail. It is partially true as well given India’s relentless lobbying to get Pakistan black-listed – evident from the hype that the Indian media creates before, during and after every FATF Plenary of the Asia Pacific Group’s review.
But largely, Pakistan’s banking system has been like a fractured bucket – which vested interests used to funnel their ill-gotten money or transact finances for activities that fall under the ambit of terrorism and are now under increased surveillance.
Interestingly, the plenary also reviewed United Arab Emirates’ compliance and concluded that “the country has implemented many recent measures to strengthen its system to combat ML and TF, including by developing a national risk assessment, AML/CFT strategy and effective measures to investigate and prosecute TF.”
The plenary noted that the country still needs to “refine its understanding of ML/TF risks, enhance ML investigations and prosecutions, and international cooperation.”
On the contrary, many businessmen and industrialists operating in the UAE, point out that Dubai in particular, had been serving as a magnet for all sorts of black and grey money from all over the world, including also from European countries. It hardly found any mention in FATF.
“We assume the UAE has come up with extremely smart and efficient presentation of its financial systems to receive accolades from FATF,” remarked a South Asian businessman, during a meeting back in December 2019.
Moreover, obviously, UAE ruler currently stands out for their geo-political and commercial affair with both India and the USA. That “strategic support” always comes in handy for the Gulf countries. For several reasons, Pakistan lacks that geo-political support and hence remains under the continued microscopic scrutiny of FATF.
However, whatever the exogenous factors are, Pakistan needs to be smart and cooperative in implementing FATF guidelines for its own progressive future, as in contemporary times of ours, a country cannot live in isolated financial system of its own.
