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The Financial Action Task Force (FATF) concluded its 5th Plenary presided over by Singaporean President T. Raja Kumar. Delegates from over 200 jurisdictions and international organizations convened in Paris for three days of discussions and collaboration, marking significant progress in the collective war against money laundering, terrorist financing, and proliferation financing.

This gathering displayed substantial strides in cooperation and coordination among participating entities, highlighting the shared commitment to strengthen regulatory frameworks, enhance information sharing mechanisms, and bolster enforcement measures to safeguard the integrity of the international financial system.

In its ongoing commitment to bolstering global transparency and combating illicit financial flows, the Financial Action Task Force (FATF) has unveiled fresh risk-based guidance aimed at fortifying implementation of Recommendation 25 that focuses on enhancing transparency of beneficial ownership, seeking to prevent criminals and terrorists from exploiting intricate company structures and legal arrangements to obscure their activities and financial transactions. By issuing this guidance, FATF intends to introduce robust measures to unveil true ownerships behind corporate entities, thereby curtailing opportunities for illicit activities that threaten the international financial system’s integrity.

FATF employs a rigorous evaluation process to gauge countries’ compliance with its 40 recommendations, resulting in the categorization of nations into distinct groups. Countries falling in jurisdictions under Increased Monitoring, commonly known as the Grey List, undergo intensified scrutiny due to deficiencies identified in their anti-money laundering and counter-terrorist financing frameworks.

Meanwhile, those designated as jurisdictions subject to a call for action, colloquially termed the Blacklist, face urgent calls for remedial measures to address significant shortcomings in their regulatory regimes. On the contrary, countries not included in these classifications are deemed to be in alignment with the prescribed standards, signaling their commitment to international anti-money laundering and counter-terrorist financing benchmarks.

During the current meeting FATF has placed Kenya and Namibia in the list of jurisdictions subject to increased monitoring meaning thereby that these jurisdictions have committed to implement an Action Plan and resolve strategic deficiencies within agreed timeframes.

The United Arab Emirates (UAE) exiting the list of “Jurisdictions under increased monitoring” after a two-year period is a landmark milestone in the global fight against financial crimes. This achievement reflects UAE’s proactive efforts to enhance its regulatory framework and to effectively combat illicit financial activities.

By strengthening its legal and regulatory mechanisms, the UAE has aligned itself with international standards set by FATF. By increasing information exchange with international counterparts, the UAE has strengthened cooperation in combating money laundering and terrorist financing.

Additionally, UAE’s adoption of a risk-based approach and measures to address risks associated with shell companies highlight its proactive stance in mitigating financial threats. Empowering its Financial Intelligence Unit underscores UAE’s dedication to conducting thorough investigations and taking decisive legal action against financial criminals. Overall, the UAE’s exit from increased monitoring status is evident of its dedication to overcome financial crimes on a global scale.

FATF highlights UAE’s commendable strides in enhancing its AML/CFT framework, underscoring the nation’s strengthened commitment to fulfilling its action plan obligations. Noteworthy progress has been made in addressing strategic deficiencies identified by FATF in February 2022, reflecting the UAE’s proactive approach.

Key enhancements include bolstered effectiveness in AML/CFT measures and adherence to action plan commitments, marking significant steps towards regulatory compliance and global financial integrity, increasing outbound MLA requests to facilitate ML/TF investigations, improving comprehension of ML/TF risks of DNFBP supervisors, applying effective and proportionate sanctions for AML/CFT noncompliance involving FIs and DNFBPs, and increasing STR filing for those sectors; developing a better understanding of risk of abuse of legal persons and implementing risk-based mitigating measures to prevent their abuse; providing additional resources to the FIU to increase its capacity to provide financial intelligence to LEA and making greater use of financial intelligence, including from foreign counterparts, to pursue high-risk ML threats; increasing investigations and prosecution of ML; ensuring effective implementation of TFS through sanctioning noncompliance among reporting entities and demonstrating a better understanding of UN sanctions.

In the last few decades the UAE has evolved into a premier global hub for finance and trade, a transformation poised to have marked influence on the world’s financial landscape. This evolution is expected to have a profoundly positive effect on the global financial system, instilling greater confidence in markets worldwide.

The UAE’s steadfast commitment to preserving the integrity of its financial framework and adhering to international norms of transparency and accountability is unmistakably steering in the right direction. This trajectory not only reinforces UAE’s position as a beacon of financial stability but also underscores its pivotal role in fostering global economic resilience and sustainability.

In addition to the UAE, FATF has also removed Barbados, Gibraltar, and Uganda from its watch-list of jurisdictions under increased monitoring. FATF commended these countries for their proactive approach in swiftly implementing action plans to address the identified deficiencies within agreed-upon timeframes.

The upcoming June plenary is of vital importance as FATF is expected to finally approve India’s long-awaited Mutual Evaluation Report, originally slated for release in 2020 but delayed due to the impact of Covid-19. Beyond concerns over human rights violations, India faces serious allegations of sponsoring cross-border terrorism, as openly recognized by the Canadian Prime Minister and affirmed by India’s neighboring countries. Moreover, it has been identified as a hotspot for money laundering, with numerous media reports highlighting such incidents.

Prior instances of uranium leakage have also raised alarms, prompting both Transparency International and the United Nations to express apprehensions about the India’s treatment of minorities and civil society, particularly concerning the misuse of terrorist financing laws. The expected Mutual Evaluation Report of India, in the upcoming plenary, will determine the global watchdog’s reactions regarding these severe violations of global standards.

Pakistan is presently undergoing a transitional phase with the imminent formation of a new government amidst which it must place significant emphasis on its adherence to FATF regulations and earnestly tackle matters identified during the technical compliance assessment.

Enhancing effectiveness of its compliance measures, particularly addressing the 10 out of 11 immediate outcomes where performance remains subpar, is imperative. By practically visible improvements in compliance standards, Pakistan can position itself to formally apply for FATF membership.

Copyright Business Recorder, 2024

Dr Ikramul Haq

The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS) as well as member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). He can be reached at [email protected]

Huzaima Bukhari

The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS), member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). She can be reached at [email protected]

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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KU Mar 01, 2024 10:59pm
How difficult it could be for FATF to trace the wealth beyond means of politicians when this money and assets are in US and EU? Bankrupt countries and poverty is a reality apart from terror financing.
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