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Pakistan’s struggle to remove itself from the list of jurisdictions under increased monitoring is yet to end. We as a nation witnessed this bizarre news when president of the Financial Action Task Force (FATF) announced that Pakistan will remain in the grey list until February 2021 and urged Pakistan to swiftly complete its full action plan by February 2021. However, he (the president) recognizes that Pakistan made progress on numerous points and largely addressed 21 out of 27 actions items.

As we all know that Pakistan’s name was placed on the list of jurisdictions under increased monitoring due to non-compliance with terrorist financing regulations on the motion pushed by the USA and joined by India. The main allegations levelled against Pakistan were support to Islamic militants and failure to take actions against the culprits of the Bombay attacks that killed several people.

In result of the motion, in June 2018, Pakistan agreed with FATF to implement its ten-point agenda to overcome strategic deficiencies with reference to Anti-Money Laundering and Combating Financing of Terrorism (AML-CFT). During that time, Pakistan made significant progress, drafted laws and introduced various regulations to comply with the FATF mandates. However, our progress with reference to technical compliance and its effectiveness was rated poor by the watchdog. In the recent assessment, as per the consolidated rating assigned to us, Pakistan was fully compliant on only two recommendations, partially compliant on twenty-five, largely compliant on nine, and non-compliant on four recommendations respectively.

Whereas, our effectiveness measures were rated on a scale of high, substantial, medium, and low levels of effectiveness based on eleven immediate outcomes (IOs). Pakistan’s levels of effectiveness were rated low on ten and medium for one immediate outcome (IO2), which relates to international co-operation. Unfortunately, Pakistan failed to secure a single substantial or high level of effectiveness rating.

Normally, any jurisdiction that enters the International Co-operation Review Group (ICRG) has a one-year observation period to work with FATF’s regional organ to address deficiencies before public identification and formal review by the FATF. In Pakistan’s case, the FATF informed Pakistan about strategic deficiencies and their consequences in 2016 and the same were duly communicated to Law enforcement agencies (LEAs) by the civil Government. We were supposed to overcome those deficiencies by 2017 so that we could avoid being named as a non-cooperative state. Unfortunately, our civil and military leaders were not on the same page and their internal conflicts exposed this embarrassment which we collectively experienced as a nation.

Unfortunately, we are still using conventional approaches to act against proscribed organizations and targeted individuals. Our measures with reference to terrorist related activities are not satisfying the international community. Therefore, despite efforts for almost thirty-four months, our response did not impress the global watchdog and its member states so that we could be once again considered a responsible state.

After the plenary meeting, an FATF press release highlighted six remaining action items related to terrorists, their activities, financing investigations, execution, and the generation of funds through non-profit organizations and their movements. Though we have arrested some individuals and listed their organizations in the fourth schedule of the constitution, legal proceedings against them have yet to be initiated. On one hand this create doubts in the mind of international community and on the other hand it shows lack of determination to address these serious issues. Moreover, FATF press briefings specifically highlighted that we have to implement U.N resolution 1267 and 1373. These require: targeted sanctions as well as criminalization for terrorist financing, ensuring border security and actions against arms trafficking, freezing of terrorist assets without delay, effective regulations for Money or value transfer services to stop hawala transactions, effective control on cash couriers, and checks on raising funds through non-profit organizations.

The Mutual Evaluation Report 2019 and Follow-up Report 2020 both published by the Asia Pacific Group to assess our compliance level, noted no major progress in complying with FATF recommendations. It highlights that during last year Pakistan did not make enough progress to address these issues. Both reports showed that we are non-compliant with FATF recommendations, 22, 25, 28, and 38. These recommendations relate to Designated Non-Financial Businesses and Professions (DNFBPs) customer due diligence, Transparency and beneficial ownership of legal arrangements, Regulation and supervision of DNFBPs, mutual legal assistance including freezing assets and confiscation. However, to address the compliance of these regulations, FATF requires that a risk-based approach would be applied by countries, competent authorities, and financial institutions to identify, assess, and understand the AML-CFT risks to which they are exposed; and then take appropriate measures to mitigate those risks according to their levels. However, newly drafted legislation negates this principle and assigned powers to those institutions and professional bodies which are considered high risk with regards to AML-CFT.

Our Orthodox and archaic approach to address domestic and global issues is not in line with global standards. Pakistan’s declining economic trends in each sector are impacting the life of its citizens and creating social unrest and political instability in the country. Our person-specific legislation designed for trivial political gains not only undermines Pakistan’s credibility but also fails us at international forums. Let’s prioritize our national interests over personal political gains and try to address all these issues as one nation.

Abdul Rauf Shakoori

The writer is a US-based corporate lawyer, and specialises in white collar crimes and sanctions compliance. He has written several books on corporate and taxation laws of Pakistan. He can be reached at [email protected]


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