FATF and Pakistan

Updated 14 Oct, 2020

According to a Business Recorder exclusive, the government has hired a lobbyist, Linden Strategies, a Texan firm, to seek support from the Trump administration for removal of Pakistan's name from the Financial Action Task Force (FATF) grey list. This was no doubt prompted by the report compiled by the Asia Pacific Group (APG) dated 30 September 2020 and uploaded on the FATF website titled 1st follow up mutual evaluation of Pakistan report (MER) wherein it stated that overall Pakistan has made some progress in addressing the deficiencies identified in its 2019 MER.

The report then proceeded to maintain that Pakistan has been re-rated from partially compliant to compliant only on one recommendation made in the 2019 MER - number 29 which refers to the Financial Intelligence Unit (FIU). Be that as it may, the 2020 MER notes with respect to recommendation 29 that "Pakistan has no standalone data protection or privacy legislation. Some laws have data protection provisions but there are specific exceptions where disclosure is required by law. In addition, the Anti Money Laundering Act 2010 being a special law has the effect of overriding other laws. While there is no proactive cooperation between authorities to ensure compatibility of AML/CFT requirements and data protection provisions, there are no impediments to such cooperation and given there are no conflicts between the AML/CFT requirements and data protection provisions this is considered a minor deficiency."

A senior government official however maintained that Pakistan was fully compliant with 21 recommendations out of the 27 listed in the FATF action plan and partially compliant on the remaining six points which are at an advanced stage of compliance adding that compliance is an ongoing process. However, the September 2020 MER on Pakistan rated twenty four recommendations by the October 2019 MER as partly compliant including: (i) even though obligations have been imposed on CDNS and Pakistan Post under the new AML/CFT rules yet these instruments are not considered enforceable as no penalties for non-compliance have been specified; and (ii) the FMU is authorized to provide broad range of international cooperation in relation to ML, predicate offences and TF related to virtual assets; however, it is unclear whether other competent authorities have the same ability.

Four 2019 MER recommendations were rated non-compliant, including the recommendation that designated AML/CFT regulator/supervisor shall ensure sanctions are available to deal with DNFBP (designated non-financial businesses and professions) non-compliance; however, no such sanctions have been specified and therefore do not constitute enforceable means.

The shortcomings in complying with the 2019 recommendations detailed in the October 2020 MER, no doubt, explain the need for hiring an expensive lobbying firm given the concerns that Pakistan maybe placed on the 'black list' leave alone being taken out of the 'grey list' which would have severe repercussions on the country's fragile economy. To get Pakistan out of the 'grey list' would require support from at least 12 other countries, support that was available previously but that may have been compromised due to the evolving geo-political considerations in the Middle East. However, putting Pakistan on the 'black list' is not an option as the country has consistently strived and shown progression towards meeting the required standards besides having secured the requisite voting strength to preempt any such move.

Copyright Business Recorder, 2020

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