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Dynamics of FATF listing

Dynamics of FATF listing

Indo-US anti-Pakistan nexus is so very obvious, both have in-chorus expressed their joy on Pakistan’s placement on grey list.  Indian Express has reported that “India, US are one in saying Pakistan deserved to be demoted to anti-terror funding group’s ‘grey list’”. “India welcomes the decision of the Financial Action Task Force (FATF) to place Pakistan in its Compliance Document (grey list) for ICRG [International Cooperation review Group] monitoring,” said India’s ministry of external affairs. And; “outstanding counterterrorism deficiencies consistently raised by the Financial Action Task Force and [Pakistan] needs to take actions, including on the raising and moving of funds of UN-designated terrorist groups, a top US official said to news agency PTI”.

Decision is politically motivated and is part of American strategy to pressurise Pakistan to settle some other scores. Pakistan has been placed among the jurisdictions (states) with strategic deficiencies: Ethiopia, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen. FATF has called upon these states to complete implementation of the action plans expeditiously and within the proposed timeframes, vowing to closely monitor the implementation. It was also agreed in February Plenary that an Action Plan would be negotiated between Pakistan and FATF members by June. This has been done.

The FATF has formally placed Pakistan on the grey list due to ‘strategic deficiencies’ in its anti-money laundering and terrorism financing regime. The decision came despite Pakistan had demonstrated reasonable progress in three out of four major areas of FATF concerns. Pakistan’s team led by Finance Minister apprised the plenary about measures that Pakistan had taken to stop money laundering and strangling the terror financing. In prevailing World Order, nothing works better than American pressures. During February plenary, the US and the UK went out of their way to by-pass the standard FATF procedures and jointly arm twist the FATF for nominating Pakistan for the grey list in June, regardless of its February-June period effort and progress; they were also joined by France and Germany.

Pakistan has undertaken to work towards effective implementation of the Action Plan, while staying in the grey list. A similar situation took place in 2011 when Pakistan was included in the grey list and was taken out in 2015 after it successfully implemented the Action Plan. There were tall claims that Pakistan was unlikely to be placed on the grey list of the global financial watchdog as the country had made enough progress to meet international anti-money laundering and terror financing standards, such euphoric environment had been created before and during the previous FATF plenary meeting as well. There is a need to float realistic expectations before such international events.

FATF identifies jurisdictions with strategic AML/CFT deficiencies in its two public documents: FATF Public Statement (call for action)– commonly known as black list—and Improving Global AML/CFT Compliance— nick named as grey list. It is an on-going process; these lists are updated three times a year. Interestingly, FATF does not use grey list/blacklist terminologies.

The ICRG of the APG had identified four key areas of concerns: deficiencies in the supervision of Anti-Money Laundering (AML) and Counter Terrorism Financing regimes; cross-border illicit movement of currency by terrorist groups; progress on terrorism financing investigation and prosecution; and implementation of the United Nations Security Council resolutions 1267 and 1373, for curbing terror financing. ICRG report has shown that Pakistan did show progress on three out of four major areas of concerns. Cross-border smuggling of cash was the only major area where Pakistan admitted deficiencies. Maximum number of conditions – nine to be precise – take into account the concerns of the UNSC resolutions, followed by eight commitments to address concerns regarding terrorism financing prosecution, four are about curbing currency movement across the border and five recommendations relate to improvement in the supervision mechanisms of banks and companies.

Pakistan has undertaken to demonstrate that authorities are identifying cash couriers and enforcing controls on illicit movement of currency and understanding the risk of cash couriers being used for terrorism financing. Remember Ayan Ali case? And who protected her? Carrier is enjoying quality life abroad.

Pakistan has made a “high-level political commitment to work with the FATF and APG to strengthen its Anti-money Laundering (AML)/Countering Financing of Terrorism (CFT) regime and to address its strategic counter-terrorist financing-related deficiencies,” according to FATF announcement. The FATF said Pakistan will also be demonstrating that remedial actions and sanctions are applied in cases of AML/CFT violations, and that these actions have an effect on AML/CFT compliance by financial institutions. “It will be demonstrating that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services.”

During the intervening period Pakistan government did strenuous hard work to plug the gaps. Ambitious laws were enacted. Finance ministry improved institutional mechanisms for handling anti-money laundering and countering financing terrorism issues. Coordination between the State Bank, Banking institutions and law enforcement agencies had also been strengthened to curb money laundering and terror financing. Pakistan has recently addressed issues raised by the FATF through a tax amnesty scheme, while Securities and Exchange Commission has issued Anti-Money Laundering and Countering Financing of Terrorism Regulations (2018). National Security Committee has also reaffirmed its commitment to cooperate with the FATF.

Through its Action Plan, Pakistan has demonstrated to the world that it was ready to go an extra mile to curb money laundering. Pakistan will have to deliver on the first goal by January next year and complete all the 26 actions by September 2019,” it is indeed a tight schedule. One wonders whether Pakistan has requisite mechanisms in place to implement and steer such an ambitious plan.

An expert assessment has it that though Pakistan’s inclusion in the grey list may hurt its image in the international landscape, its economic impact will not be as severe as being portrayed. This is because when Pakistan was part of the grey list/blacklist (2008-2015), it successfully approached multilateral bodies, floated international bonds and had international trades.

Hopefully Pakistan will be able to come out or grey list in September 2019, however it must follow consistent economic policies to remain out of such trouble spots. Caretaker government would do a great service by forming a national commission to identify and punish all those responsible for letting the things reverse back after Pakistan’s previous journey to blacklist was over.

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