Will Pakistan be removed from FATF greylist or will the country be black-listed for non-compliance with Paris based organization? The Asia Pacific Group published its report on money-laundering and terror-financing in a week before its the Financial Action Task Force (FATF) is set to announce its decision to remove or retain Pakistan from its grey list.
The 228-page report, titled “Mutual Evaluation Report 2019,” would provide a basis for the FATF — the international money-laundering and terror-financing watchdog — to make its decision in the upcoming meeting scheduled for October 13-18, keeping in view Pakistan’s compliance with the parameters it had set earlier.
The APG report states that Pakistan has somewhat complied with 36 of the 40 parameters set by the FATF at the time of the country’s inclusion in the grey list. However, it pointed out that Islamabad only missed four of the total 40 parameters that it was to follow in order to be effectively removed from the list.
The four missed parameters include:
1. DNFBPs (designated non-financial businesses and profession): Customer due diligence;
2. Transparency & BO (beneficial owner/ownership) of legal arrangements;
3. Regulation and supervision of the DNFBPs;
4. Mutual legal assistance: freezing and confiscation
The report further said Pakistan’s performance on international cooperation was moderate.
The report emphasised on Pakistan’s deficiency concerning to risk policy, supervision of coordination, preventive measures, legal personnel arrangements, financial intelligence, money-laundering and terror-financing (TF) investigations, prosecution and confiscation, production of TF preventive measures and proliferation-financing (PF) financial sanctions.
Pakistan was earlier adjudged as non-complaint in 32 of the 40 compliance parameters. Despite collective efforts, Pakistan could not satisfy the 41-member plenary to upgrade it from grey-list and instead placed the nation under black-list.
The FATF plenary had formally placed Pakistan in the grey list in June 2018 after the country could not secure a minimum of three votes. On May 3, then Indian Finance Minister Arun Jaitley said India will ask the FATF to put Pakistan on a blacklist of countries that fail to meet international standards in stopping financial crime.
Earlier, the FATF said that Pakistan failed to complete its action plan on terror financing. It warned Islamabad to meet its commitment by October or face action, which could possibly lead to the country getting blacklisted.
On September 9 in Bangkok, Pakistan submitted detailed answers to 125 questions posed by FATF on moves taken by it to combat money laundering and terror financing in order to move out of the greylist.
During the Bangkok negotiations, the FATF was notified of measures taken by Pakistan to prevent suspicious transactions and officials were questioned about moves to restrict illegal activities and freeze the assets of proscribed organisations and groups.
The APG report said that in order to avoid blacklisting, Islamabad should “adequately identify and assess” money laundering and terror-financing risks as well as risks associated with the “terrorist groups operating on its soil”.
“Pakistan should adequately identify, assess and understand its ML/TF risks, including transnational risks and risks associated with terrorist groups operating in Pakistan such as Lashkar-e-Tayyiba (LeT), Da’esh, Al-Qaeda, Jamaat-ud-Dawa (JuD), Falah-i-Insaniat Foundation (FIF), Jaish-e-Muhammad (JeM), Haqqani Network (HQN), and this should be used to implement a comprehensive and coordinated risk-based approach to combating ML and TF,” the report stated.
It stated that Pakistan has not taken sufficient measures to fully implement UNSCR 1267 obligations against all listed individuals and entities – especially those associated with LeT/ JuD, and FIF as well as the groups’ leader Hafiz Saeed.
The APG further said that although Pakistan has taken some enforcement actions against hawala/hundi under the Foreign Exchange Regulation Act 1947, the country needs “major improvements”. “Pakistan has a mixed level of technical compliance with relevant FATF recommendations and major improvements are needed in Pakistan’s international cooperation actions against criminals and their assets,” the report stated.
“Due to the significant ML/TF risks posed by hawala/hundi, Pakistan should enhance enforcement actions against hawala/hundi under the Foreign Exchange Regulation Act 1947, and undertake ML and TF investigations and prosecutions of hawala/hundi operators where appropriate,” it said.
The report also said that there are “major technical shortcomings” in Pakistan’s legal framework and called for “fundamental improvements” to diminish the risks of money laundering and terror financing.
“Pakistan’s legal framework on the transparency of legal persons and arrangements has moderate and major technical shortcomings (respectively). Moreover, fundamental improvements are required to Pakistan’s ability to effectively mitigate the risk of ML and TF through the exploitation of those technical weaknesses,” it said.