The Financial Action Task Force’s (FATF’s) Asia Pacific Group (APG) on Money Laundering has kept the country on “Enhanced Follow-up List” for its slow progress on the technical recommendations of the FATF to fight terror financing.
The first Follow-Up Report (FUR) on Mutual Evaluation of Pakistan released by APG — a regional affiliate of the Paris-based FATF — showed Pakistan improving its full compliance on two of the 40 FATF recommendations on the effectiveness of anti-money laundering and combating financing terror (AML/CFT) system.
It was compliant on one item exactly a year ago. Pakistan’s progress largely remained unchanged – non-compliant on four counts, partially compliant on 25 counts and largely compliant on nine recommendations.
“Pakistan will remain in enhanced (expedited) follow up, and will continue to report back to the APG on progress to strengthen its implementation of AML/CFT measures,” concluded the APG in its 12-page report.
According to the report, “Whilst Pakistan published a National Risk Assessment (NRA) on Money Laundering and Terrorism Financing in 2017, the mutual evaluation report (MER) identified gaps in the process of developing and identifying threats, vulnerabilities and risks. The assessment of terrorist-financing risk was identified as “perfunctory only”.”
“The MER also found that the 2017 NRA had not yet been widely circulated to private sector stakeholders and that sectors assessed as higher risk or higher vulnerability in Pakistan were not yet subject to comprehensive Anti-money Laundering and Terrorist Financing (AML/CFT) measures,” the statement said.
However, Pakistan has made some progress in addressing the technical compliance deficiencies, identified in its mutual evaluation report and has been re-rated on one recommendation.
Based on this progress, Recommendation-29 has been re-rated to ‘compliant’. This improvement is based on amended Income Tax Ordinance 2001 (section 216) which now allows Financial Monitoring Unit (FMU) to have access to tax records and information maintained by Federal Board of Revenue (FBR). Also, the provincial counterterrorism departments (CTD) have been designated as investigation and prosecution agencies under AML Act. This would allow the FMU to disseminate information to the CTD without a court order.
Pakistan has been in the FATF’s grey list since June 2018 and the government was given a final warning in February to complete the remaining action points by June 2020. Another review meeting will be held later this month.
The FATF extended the June deadline to September due to the spread of coronavirus that disrupted the FATF plenary meetings.
Pakistan is facing the difficult task of clearing its name from the FATF grey list.
The report further said that Pakistan had taken a number of steps to more comprehensively identify and assess the money laundering and terror financing risks by conducting a Terrorist Financing Risk Assessment (TFRA) and a sectoral risk assessment on cash smuggling. This will be upgraded every two years. Finally, in November 2019, Pakistan issued a confidential paper on transnational terror financing threat profiles of key terrorist organisations. However, the risk assessments associated with Designated Non-Financial Business and Professions (DNFBPs) as well as legal persons and legal arrangements are still very general in nature and appear to be based on limited data.
The virtual FATF plenary scheduled for October 21-23 will decide if Pakistan should be excluded from its grey list, based on a review of Islamabad’s performance to meet global commitments and standards on fight against money laundering and terror financing.