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Pakistan to stay on FATF’s grey list with ‘increased monitoring’

International body wants the country to counter money laundering

SAMAA | - Posted: Jun 25, 2021 | Last Updated: 4 months ago
SAMAA |
Posted: Jun 25, 2021 | Last Updated: 4 months ago

Photo: File

The Financial Action Taskforce has decided to keep Pakistan on its grey list while recognising the country’s efforts and progress in combatting terror financing.

“The Pakistani government has made substantial progress in making its counter-terrorist financing systems stronger and more effective. It has largely addressed 26 out of 27 items on the action plan it first committed to in June 2018,” the forum’s president, Dr Marcus Pleyer said in a press conference Friday.

Pakistan will remain under “increased monitoring”.

Highlighting a key item that the country needs to meet is the investigation and punishment of senior leaders and commanders of terror organisations.

As compared to 2019, Pakistan has made substantial improvement in countering terrorist financing and money laundering, Dr Pleyer added.

“Pakistan is still failing to effectively implement the global FATF standards across a number of areas. This means the risks of money laundering remain high which in turn can fuel corruption and organised crime.”

The forum insisted on ensuring the implementation of the United Nations Resolution 1373 and tracking of assets of elements involved in money laundering.

New areas to work on

These are the areas FATF has highlighted Pakistan needs to work on:

  • Enhancing international cooperation by amending the MLA law
  • Demonstrating that assistance is being sought from foreign countries in implementing UNSCR 1373 designations
  • Demonstrating that supervisors are conducting both on-site and off-site supervision commensurate with specific risks associated with DNFBPs, including applying appropriate sanctions where necessary
  • Demonstrating that proportionate and dissuasive sanctions are applied consistently to all legal persons and legal arrangements for non-compliance with beneficial ownership requirements
  • Demonstrating an increase in ML (money laundering) investigations and prosecutions and that proceeds of crime continue to be restrained and confiscated in line with Pakistan’s risk profile, including working with foreign counterparts to trace, freeze, and confiscate assets; and
  • Demonstrating that DNFBPs are being monitored for compliance with proliferation financing requirements and that sanctions are being imposed for non-compliance

Pakistan to complete new agendas within 12 months: Hammad Azhar

There were 82 agendas on the action plan Pakistan received in 2018, which was on controlling terror financing,” Power Minister Hammad Azhar said. “We have completed 75 of these conditions.

“This makes Pakistan the only country that has worked at this pace, considering the plan was very difficult.”

Out of the 27 agendas of that plan, 26 conditions have been met.

He said that the new seven-point action plan focuses on countering money laundering, which is relatively easy than the previous one.

“We have set a target to meet this in 12 months.”

The minister assured that there’s no danger of the country being placed on the blacklist.

“In 2020, we passed 17 laws against terror financing and money laundering in the Parliament,” Azhar pointed out. “Dozen of rules and regulations were formed and multiple compliance efforts were made.”

He credited the progress to FBR officials, security officials, ministries of foreign affairs, and finance, courts, prosecution, and police.

“There’s a small journey remaining to come out of the grey list but by the next FATF meeting, we will [hopefully] complete all the conditions,” the minister added.

What is FATF?

The FATF is an inter-governmental body that combats threats to the international financial system. A potential downgrade to the FATF blacklist has serious implications for Pakistan.

Being on the blacklist means the country’s banking system will be regarded as one with poor controls over Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT).

FATF doesn’t impose any sanctions directly, but its guidelines are taken seriously by global financial institutions. This means overseas Pakistanis who send remittances to Pakistan will be subject to more scrutiny. The traders who deal in imports and exports will suffer because they have to make and receive payments with the help of international banks that may either increase the cost for Pakistani banks or simply not do business with them.

The implications for the economy as a whole can be far more serious. Being placed on FATF’s blacklist can affect capital inflows and lower investment in Pakistan, thus hurting the ongoing IMF programme. Raising funds from global capital markets will be difficult, which will undermine the country’s ability to pay foreign debt.

In February 2020, the FATF expressed concerns over “Pakistan’s failure to complete its action plan in line with the agreed timelines and in light of the Terrorist Financing risks emanating from the jurisdiction,” it said in a report.

The global watchdog for illicit financial activities had put Pakistan on its grey list in June 2018 because of weaknesses in the country’s AML and CFT regimes.

The grey list refers to countries or jurisdictions under increased monitoring because of strategic AML and CFT deficiencies. After being placed on the grey list, Pakistan had developed an action plan with the FATF to address those deficiencies, but fell short of targets.

The deadline was initially June 2020. But it was first extended to September 2020, then to February 2021, then June, and now to its next session.

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