Pakistan has improved its ranking in the global Anti-Money Laundering (AML) and Terrorists Financing index, but is still on the list of countries that have a significant risk of AML and TF, according to the Basel AML report 2018 released on October 9.
Pakistan improved its ranking by 0.08 points to finish at the 6.49-point level this year on the Basel AML Index, an independent annual ranking that assesses the risk of money laundering and terrorist financing around the world.
Among 129 countries assessed for the 2018 report, Pakistan ended up among 83 countries with a risk score of 5.0 or above. These were the countries that could be loosely classified as having a significant risk of money laundering and terrorist financing, the report said.
With 2.57 points, Finland has the lowest level of risks while Tajikistan faces the highest risk with 8.30 points.
“Money laundering and terrorist financing continue to cripple economies, distort international finances and harm citizens around the globe,” says the report. It estimates the amount of money laundered worldwide ranges from $500 billion to a staggering $1 trillion.
Most countries are making little to no progress towards ending corruption. Less than 4% of countries in the ranking have improved their scores by one point or more in the last year.
Despite the recent surge in reporting on high-profile corruption and money laundering schemes, such as the Panama Papers investigation, indications are that global press freedom has declined to its lowest point in 13 years. These factors are known to impact negatively on the risk of ML and TF.
The downward trend is striking as 42% of the countries have worsened their risk scores between 2017 and 2018 but Pakistan is not among them.
The report says the apparent low level of effective enforcement of AML and TF measures is the biggest problem identified in the AML index.
The Basel index uses Financial Action Task Force (FATF)’s Mutual Evaluation Reports as a key indicator for its report. The FATF’s evaluation report assesses a country’s legal and institutional AML and TF framework and its implementation in line with 40 recommendations. These recommendations are designed to improve AML and TF legislation, law enforcement, and international cooperation.
The Basel AML report was released a day after an FATF team arrived in Pakistan to assess the progress Islamabad has made on money laundering and terrorist financing regulations since it was put on the grey list in June last year.
Based out of Paris, the FATF is an inter-governmental body that combats money laundering, terrorist financing and threats to the international financial system. It placed Pakistan on its grey list, which means it is among countries that have deficiencies in their AML and Countering of Terrorist Financing (CTF) regulations.
The FATF team is in Pakistan for two weeks to hold consultation meetings with senior Pakistani officials and assess the country’s progress on compliance with the AML and CFT standards.
A 2009 APG report says, “There is evidence that criminals laundering funds in Pakistan are purchasing real estate, abusing corporate entities to access the financial sector, laundering money through trade and abusing formal channels in Pakistan.”
Funds for terrorism came from proceeds of crime including robbery, kidnap for ransom and proceeds of drugs flowing Afghanistan with cases of cash couriers and misuse of charities facilitating terrorist financing.
Pakistan has criminalised both money laundering and terrorist financing but it has not been able to enforce these laws effectively. If Pakistan doesn’t improve its AML and CFT regulations, it faces the risk of being put on FATF’s black list, which might come with sanctions.
Overseas Pakistanis will face higher scrutiny when sending remittances, our banks will be poorly treated by international financial institutions that will either charge more or simply not do business with us, which will affect our importers and exporters. The government may not be able to get loans from international investors or pay higher premium if it does get one.