ISLAMABAD: The International Monetary Fund (IMF) has acknowledged Pakistan’s progress on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime and encouraged the country to ensure the sustainability and effectiveness of the efforts to mitigate significant ML/TF [money laundering & terrorist financing] risks including from tax evasion, corruption, and other financial crimes.
In its combined seventh and eighth reviews of the Extended Arrangement under the Extended Fund Facility (EFF) for Pakistan, the IMF noted that the Pakistani authorities have demonstrated a high level of commitment to working closely with the Financial Action Task Force (FATF) and the Asia Pacific Group (APG) on money laundering.
To this end, it added that Pakistan has successfully completed all action items in its 2018 Action Plan, including the last item on terrorist financing investigations and prosecutions of senior leaders of UN-designated terrorist groups, paving the way for the country’s exit from the FATF list of jurisdictions with serious deficiencies.
In parallel, it added that the authorities have also completed all the 7 action items in its 2021 AML/CFT Action Plan, ahead of the committed deadlines. “They will continue to ensure the sustainability and effectiveness of AML/CFT efforts in addressing the ML/TF risks in the country,” the report stated.
Moving forward, it added that the Pakistani authorities are encouraged to ensure the sustainability and effectiveness of their efforts to mitigate significant ML/TF risks including from proceeds of corruption.
Pakistan and FATF: the next steps
“Staff also welcomed the completion of the AML/CFT 2018 and 2021 Action Plans and urged the authorities to sustain their efforts to mitigate ML/TF risks, including from tax evasion, corruption, and other financial crimes,” it added.
With respect to the tax amnesty program for the construction sector and the AML/CFT thematic inspection, it noted that the State Bank of Pakistan (SBP) carried out field inspections of 710 of the 19 participating financial institutions with respect to their compliance with AML/CFT obligations (such as customer due diligence, recordkeeping, and suspicious transaction reporting including random sampling of beneficiaries), which covers 80 percent of the designated bank accounts opened under the program.
The thematic inspection report has been completed in June 2022, with strategic analysis inputs from the Financial Monitoring Unit (FMU). By end-September 2022, the SBP will share the key findings and recommendations of the thematic inspection with the banking sector through the compliance forum and relevant competent authorities through the General Committee under AML Act, and implement enforcement actions including changes in regulatory framework, as appropriate.
On maintaining financial stability warrants close oversight of financial institutions and decisive action to address undercapitalized financial institutions, the IMF stated adding that the SBP should accelerate the recapitalization process using their existing powers to strengthen financial sector resilience.
Moreover, lending targets on housing present risks to financial stability and the prudent allocation of credit, it added. The report stressed that strengthening the bank resolution and crisis management frameworks should be a key priority to safeguard financial stability and welcomed the adoption of amendments to the SBP Act as an important step toward strengthening the central bank’s independence, governance, and mandate.
It added that the new Act will enable the SBP to move closer to formally adopting an inflation target regime.
On enhancing the use of AML tools to support anti-corruption efforts, the Pakistani authorities assured that they will continue to support financial institutions and other reporting institutions in improving their capacities to identify politically exposed persons and apply enhanced due diligence measures.
The Pakistani authorities further informed the IMF that the resources of the FMU have been augmented with additional analyst positions to process the increasing numbers of suspicious transaction reports received through the IT system.
To enhance financial investigation capacities of law enforcement agencies, the Fund was further informed that training is being provided on mutual legal assistance and trade-based money laundering. The Fund has also been informed that Pakistan continues to pursue its application for membership in the Egmont Group of Financial Intelligence Units.
To further advance transparency, accountability, and integrity in the public sector, it added that Pakistan has informed that it will issue regulations to establish an electronic asset declaration system that is comprehensive, covering assets beneficially owned or located abroad, centrally-held with the FBR, covering federal civil servants of Basic Pay Scale (BPS) 17 to 22, accessible to entities authorized by law (including banks for the limited purposes of conducting customer due diligence as required for the provision of banking services), and effectively verified.
Pakistani authorities further assured the Fund that the country will also institutionalize public access for annual declarations for all members (elected and unelected) of the federal government Cabinet of Pakistan.
The report noted that the Finance (Supplementary) Act of 2022 authorizes the FBR to provide access to asset declarations of politically exposed persons and public servants in BPS-17 and above (including their spouses, children, Benamidars, or when they are the beneficial owner).
Copyright Business Recorder, 2022
Comments
Comments are closed.