Pakistan has made some efforts lately to avoid a harsh review at the plenary of the FATF (Financial Action Task Force) being held in Paris this week. Back in February, the global multilateral body had asked Pakistan to prepare a comprehensive action plan to improve its anti-money laundering (AML) and combating the financing of terrorism (CFT) laws and implementation capacity by June.
With Pakistan already reported by government officials to be on the grey-list – though, the FATF hasn’t officially placed Pakistan on that watch-list yet – the ongoing plenary will decide whether to keep Pakistan there or move it to the ominous black-list. In its last month in office, the PML-N government presented a preliminary plan to the FATF’s regional Asia-Pacific Group (APG), which reportedly deemed it unsatisfactory.
The issue has fallen in the lap of the caretakers. Few actions have come out in public view. Earlier this month, powers of the FBR’s Directorate General Intelligence & Investigation (DG I&I), Inland Revenue were restored by the government. The DG I&I have the power to proceed on AML issues. As per the AML Act (2010), the NAB, the FIA and the ANF happen to be other agencies that also have a similar mandate.
On June 13, the SECP promulgated AML & CFT Regulations to push corporates, brokerages, commodities, NBFCs and insurance firms to report AML and CFT laws’ violations. All SECP-regulated entities are now required to assess beneficial ownership of their clients; assess AML/CFT risks posed by customers; develop internal control systems to mitigate such risks; and forward suspicious transaction reports (STR) and currency transaction (CTR) reports to SBP’s Financial Monitoring Unit (FMU).
It’s unclear how the FATF will assess these steps. The meeting is taking place after the APG had taken negatively to the broad-based amnesty scheme, which is currently live after receiving judicial nod. Prior actions probably don’t count much. Recall, prior to the February FATF meeting, Pakistan had moved to pass a presidential ordinance automatically proscribing individuals and groups that were designated proscribed by the United Nations Security Council. That couldn’t cut ice with FATF.
The likely bone of contention might still be the lack of strong measures when it comes to beefing up the prosecutorial powers of the federal government agencies on matters of money laundering and terrorism financing. For instance, the latest SECP regulations can, at best, increase the volume of STRs and CTRs landing at the FMU. The difficulties then surface, following them up with investigation and prosecution.
Previously, many observers, including a few (now former) federal ministers among them, rationalized that Pakistan was hard done by Uncle Sam the last time FATF met in Paris. They have alleged that FATF, by ignoring its own rules on mutual evaluation and peer reviews of member countries, may have turned itself into a political platform, instead of a technical platform to help countries achieve AML/CFT compliance.
If indeed it is true, Pakistan may fare better this time than it did back in February. For one, major EU countries, after succumbing to extreme US pressure for placing Pakistan on the grey-list and suffering the other setbacks from Trump lately, may be more receptive to Pakistan’s dilemmas. China, which couldn’t support Pakistan last time, may also like for things to turn out differently this time. Amid a rapprochement in the works between the US and Pakistan, perhaps Uncle Sam, too, would like to go easy this time.
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