Pakistan’s technical compliance rating upgraded by FATF’s APG

ISLAMABAD: The Asia Pacific Group (APG), a subsidiary body of the Financial Action Task Force (FATF), has released the fourth technical compliance report on the implementation of the FATF Action Plan by Pakistan, in which Pakistan’s technical compliance rating has been upgraded.

Overall, according to the report, Pakistan has made good progress in addressing the technical compliance deficiencies identified in its mutual evaluation report (MER) and has been re-rated on Compliant with R.33, Largely Compliant with R.28 and R.37 and Partially Compliant with R.38.

After the February 2022 review of Pakistan’s performance, Pakistan’s technical rating in Pakistan’s technical compliance has been upgraded. Due to the improvement in the technical compliance rating and implementation on 38 out of 40 points, the APG has expressed satisfaction over Pakistan’s performance and it has been removed from the list of countries under strict monitoring for the implementation of FATF Action Plan (Enhanced Expedited) and added in the list of countries with instructions to improve the performance so far in the future— Enhanced Follow-Up.

The reported noted that Pakistan now maintains comprehensive statistics on matters relevant to the effectiveness and efficiency of their AML/CFT systems, including STRs, received and disseminated; ML/TF investigations, prosecutions and convictions; property frozen; seized and confiscated; and mutual legal assistance or other international requests for co-operation made and received.

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It further stated that since the 2020 FUR Pakistan has amended the MLAA to remove the major deficiency identified with unduly restrictive condition regarding the requirement of notification to the subject of MLA requests. It noted that Pakistan has also issued updated MLA Guidelines to all implementing agencies to support the MLA process. There are however deficiencies in the scheme for providing assistance to obtain restraint orders ex parte in all circumstances, the report further noted.

“This deficiency is principally reflected in R.38 but also creates a minor deficiency in the context of R.37. A minor deficiency remains relating to the coverage of predicate offences. Recommendation 37 is re-rated to Largely Compliant,” it added.

On Criterion 33.1, which is met, the reported stated that Pakistan authorities have made substantial progress on the maintenance and management of comprehensive AML/CFT statistics. Pursuant to the AML Act section 5(2)(f), the NEC is empowered to monitor the collection of statistics and the overall outcomes from FMU, AML/CFT supervisors, LEAs and other AML/CFT competent authorities, it stated.

According to the report, Pakistan has not been able to satisfy the APG in the technical review are; clause 37.1, which deals with the prevention of money laundering and terrorism financing and cooperation with investigative agencies of friendly countries in the investigation of global organized crime. Secondly, clause 38, in which Pakistan is required by the United Nations Security Council and the Government of Pakistan to take into custody and confiscate the assets of persons designated as terrorists and their banned organizations in accordance with international norms.

The APG has expressed satisfaction over Pakistan’s technical compliance in eight difficult clauses after reviewing the technical compliance of implementation of Pakistan’s FATF Action Plan and has upgraded its rating and stated that Pakistan has established Designated Technical Non-Financial Businesses and Professions (DNFBPs) in real estate sector, gold, silver, diamonds, gems, chartered accountants, notaries to prevent money laundering and terrorism financing on behalf of Pakistan, and expressed satisfaction over the steps taken.

The APG has also appreciated the appointment and monitoring of sector regulators over the real estate sector, gold, silver, diamonds, gems, chartered accountants, notaries, stock market, and other sectors, including real estate and others.

However, on Criterion 28.4(b), the reported stated that by amendment to the Federal Board of Revenue AML/CFT regulations for DNFBPs, SRO 128(1)/2022 Chapter 1 regulation 3, sub regulations 4 and 5, criminals and their associates are now clearly restricted from holding a significant or controlling interest of DNFBP; being a beneficial owner of a DNFBP; or being part of the senior management of the DNFBP. These amendments apply to supervision of real estate agents, dealers in precious metals and stones and accountants which are not members of Institute of Chartered Accountants of Pakistan (ICAP) and Institute of Cost and Management Accountants (ICMAP), it added.

It noted that Pakistan has implemented fit and proper controls for DNFBPs, however minor deficiencies remain with respect to the controls for accountants supervised by ICMAP/ICAP and lawyers as they do not extend to cover associates of criminals. Risk-based supervision on DPMS, real estate and accountants is in place and supervision has commenced for lawyers. The remaining deficiencies are weighed as minor, taking into account the overall implementation of supervision of DNFBPs.

In keeping with the APG Mutual Evaluation Procedures, this FUR considers progress made up until 1 February 2022. In line with the ME Procedures and FATF Methodology, the review team analysis has considered progress to address the deficiencies identified in the MER and the entirety (all criteria) of each Recommendation under review, noting that this is cursory where the legal, institutional or operational framework is unchanged since the MER or previous FUR.

Copyright Business Recorder, 2022