Pakistan’s FATF compliance

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Pakistan has committed to an ambitious 26-point action plan spanning a period of 15 months to avoid being blacklisted by the Financial Action Task Force.

The plan envisages choking the financing of terrorist groups like Da’ish and the Haqqani network.

The FATF Plenary – the global intergovernmental body working to combat money laundering and terrorist financing, on Tuesday began discussions on the action plan, said sources in the Ministry of Finance. 

A formal announcement about Pakistan’s fate is expected on Friday. This is for the first time that all 26 actions have been published in detail.

The plan that the International Cooperation Review Group (ICRG) of Asia Pacific Group (APG) submitted to the FATF Plenary also requires Pakistani authorities to proactively cooperate with counterpart bilateral agencies to choke financing to Da’ish, Al Qaeda, Jamaatud Dawa and its affiliate FIF, LeT, JeM, the Haqqani Network and persons affiliated with the Taliban.

The sources said that the plan was quite ambitious and added that the 

country was committed to proving to the world that it was ready to go an extra mile to curb money laundering, despite its reservations that the plan was politically motivated.

“Pakistan will have to deliver on the first goal by January next year and complete all the 26 actions by September 2019,” the sources explained.

In February 2018, the FATF approved the nomination of Pakistan for monitoring under its International Cooperation Review Group (ICRG) commonly known as Grey List.

If the FATF endorses the 26-point Action Plan, it will formally announce to place Pakistan on the list. In case the FATF rejects the Plan, Pakistan will be on FATF’s Public Statement, being called the Blacklist.

The ICRG of the APG has identified four key areas of concerns, including 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.

The sources said that the 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.

Concern Area 1

During various reviews, the global bodies found deficiencies in supervision and enforcement of the AML and the CFT controls by financial institutions, including money service businesses. The ICRG also found deficiencies in imposing sanctions against financial institutions for AML/CFT violations.

However, Pakistan informed the FATF that it imposed roughly Rs1.7 billion in penalties since 2015 on 31 banks for violating the AML and CFT regimes.

“Also, Pakistani banks are no longer providing financial services to designated entities and individuals,” the sources said.

Concern 2

“Lack of progress on terrorism financing investigations and prosecutions, including the necessary coordination with provincial authorities remain the key concern of the global bodies,” the sources said.

They said the ICRG assessment was that Pakistan did not demonstrate cooperation between the federal and provincial authorities to prosecute terrorism financing commensurate with its terrorism financing risks.

Its assessment was that terror financing risks in Pakistan were high but Pakistan has not provided any information on how it assesses these risks. It has also not provided details on whether the decline in terrorist attacks has any bearing on the increase or decrease in terrorism financing risks.

To address those concerns Pakistan has committed that by January 2019, it will identify, assess and understand both domestic and transnational terrorism financing risks to guide such investigations.

It will also improve inter-agency coordination, including between provincial and federal authorities on combating financing risks.

By January, Pakistan will start proactively initiating financial inquiries of terrorist groups and their members.

By September 2019, Pakistan will address the key concern of identifying and investigating the widest range of terrorism financing activities like the collection, movement or use of funds by September next year.

It will give special focus to curb cash smuggling, narcotics trafficking, misuse of non-profit organisations, particularly funding of the terrorist groups including Da’ish, Al Qaeda, JuD, Faleh-e-Insaniat Foundation, Lashkar-e-Taiba, Jesh-e-Mohammad, Haqqani Network and persons affiliated with the Taliban.

“While giving a big commitment, Pakistan has assured the world that it will proactively request and provide international cooperation in cases of targeting, investigating and prosecuting terrorist financing cases,” the sources said.

“The country will also demonstrate that it has included police-to-police, customs-to-customs, Financial Investigation Unit-to-Unit and formal cooperation in the Mutual Legal Assistance regime,” the sources said.

In yet another important promise, which will address the US concerns, Pakistan will also demonstrate that terrorism financing investigations and prosecutions target designated persons and entities like Da’ish, AQ, JuD, FiF, LeT, JeM, HQN and persons affiliated with the Taliban.

More importantly by May, Pakistan will show that terrorism financing prosecutions successfully result in effective, proportionate and dissuasive sanctions against natural and legal persons convicted of terrorism financing offences.

It will also proactively provide international cooperation in cases of targeting, investigating and prosecuting terrorism financing cases.

The sources said that Pakistan has committed that by January 2019 it will demonstrate that terrorism financing risks are properly identified, assessed and understood by the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan and this includes obtaining up-to-date and region-specific risk information from law-enforcement agencies.

By May next year, Pakistan will also conduct ongoing outreach to financial institutions to promote a clear understanding of their AML and CFT obligations and will also demonstrate that supervisory activities are applied on a risk-sensitive basis to banks and exchange companies.

“By May it will also have to show the world that it has imposed penalties for such violations of the AML and the CFT regimes,” the sources said.

By September, Pakistan will be required to show that after these remedial measures the banks are compliant.

Concern 3

The global bodies also showed concerns over lack of measures to prevent illicit cross-border transportation of currency, and lack of cooperation with the customs on preventing illicit cross-border movement of cash.

“The global body’s assessment was that there was a serious risk of bulk cash smuggling across the borders, including related to the existence and operation of UN-designated individuals and groups,” the sources said.

Pakistan has committed that within six months it will make sure that the nature of risks of cash couriers being used for terrorism financing are fully understood and taken care of.

“Within 15 months, it will implement stringent cross-border currency controls at all ports of entry, including applying effective, proportionate and dissuasive sanctions when there are instances of false declaration or failure to declare,” the sources said.

Concern 4

The sources said that the ICRG also showed concerns about lack of implementation of targeted financial sanctions under the UNSC Resolutions 1267 and 1373.

The ICRG’s concern was that Pakistan was not able to freeze the property of UN-designated groups. The ICRG’s views were that Pakistan needed to demonstrate that it was applying administrative sanctions against all UN terrorist groups.

The sources said that the ICRG also wanted that Pakistan should deprive the UN-listed entities, operating charities and network of social services of funds and resources.

The sources said Pakistan has committed that in six months it will address concerns regarding delays in the freezing of assets and prevent the raising and moving of funds by the UN-designated persons.

In almost one year, the risk assessment-based guidelines will be issued and duly enforced to stop banks and other financial institutions from indulging in financing to those organisations.

By January next year, Pakistan will publish updated lists of persons and entities proscribed under the Anti-Terrorism Act and the UN-designated entities.

It will also show to the world within a year that Pakistani financial institutions take immediate actions against designated persons and entities. This includes systematic screening against their customer base and ongoing transaction monitoring.

Pakistan has also committed that supervisory activities are applied on a risk-sensitive basis to financial institutions. It will also demonstrate effective implementation of TFS against the assets of 1267 and 1373-designated persons and entities and their affiliates including Da’ish, AQ, FiF, JuD, LeT, JeM, HQN and persons affiliated with the Taliban.

Pakistan will also prevent the raising and moving of funds and curb activities designed to evade effective implementation.

The sources said that Pakistan will also show that facilities and services owned or controlled by designated persons and entities are deprived of their resources and their usage.

The Express Tribune

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