Pakistan submitted on Monday a report on strengthening of its anti-money laundering and combating the financing of terrorism framework to the Financial Action Task Force, according to sources within the Ministry of Finance.
A 15-member Pakistani delegation submitted the report during the talks with FATF officials in Bangkok, the sources said. The negotiations between the two sides will continue until September 13.
Minister for Economic Affairs Hammad Azhar is leading the Pakistani side at the talks. Officials of the State Bank of Pakistan, Ministries of Finance and Interior, Federal Investigation Agency, Securities and Exchange Commission of Pakistan, Federal Board of Revenue, National Counter Terrorism Authority and the Financial Monitoring Unit have also been part of the talks.
The report submitted by Pakistani officials detailed the steps taken by Islamabad in the light of FATF’s recommendations.
During the ongoing negotiations, the FATF will be apprised of measures taken by Pakistan to prevent suspicious transactions. Pakistani officials will respond to FATF’s queries about restricting illegal activities and freezing the assets of proscribed organisations and groups.
The officials will also brief the anti-money laundering watchdog on the legislation with regard to foreign currency regulations.
The FATF will evaluate the report submitted by Pakistani officials. It will make a final decision on whether to exclude Pakistan from its grey list, keep it or place it on the black list at a meeting in Paris on October 16-18.
Earlier on August 22, the FATF’s Asia Pacific Group had adopted Pakistan’s third mutual evaluation report, which identified a number of areas where further action was required to strengthen anti-money laundering and combating the financing of terrorism framework.
The APG adopted the report during its 22nd annual meeting in Canberra from August 18 to 23. A high-level Pakistani delegation, headed by State Bank of Pakistan Governor Dr Reza Baqir, attended the meeting.
During the discussions, Pakistani officials welcomed engagement with the international community in its efforts to counter terror financing and money laundering.
The delegates briefed the APG on the steps taken in recent times for improving Pakistan AML/CFT framework, as well as the actions for ensuring effective implementation of the FATF action plan.
In June, the FATF had given Pakistan four months (till October) to improve its counter-terror financing operations in accordance with the agreed plan.
In a statement on its website, the FATF had expressed concern that “not only did Pakistan fail to complete its action plan items by January deadline; it also failed to complete its action plan items due in May, 2019”.
“The FATF strongly urges Pakistan to swiftly complete its action plan by October, 2019 when the last set of action plan items are set to expire,” the FATF statement said. “Otherwise, the FATF will decide the next step at that time for insufficient progress.”
Pakistan was told to block financial loopholes, terror financing and money laundering by implementing the 27-point action plan.
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 put Pakistan on its grey list in June 2017 because of deficiencies in the country’s anti-money laundering and countering of terror financing regulations.
Being on the grey list doesn’t come with any sanctions. However, if Pakistan remains on this list, it faces the risk of being put on the black list. This is where it gets problematic.
Being on the black list means its banking system will be regarded as one with poor controls over AML and CFT standards — forget bringing PayPal to Pakistan, expatriates will find it difficult to send remittances and traders’ cost of business will increase because local banks will face higher scrutiny in international payments and foreign banks might not even do business with Pakistani banks.
The government, too, will struggle to raise funds from international markets if the country is placed on the black list.