Pakistan’s rating on four more of the 40 technical recommendations of the Financial Action Task Force (FATF) against money laundering and terror financing (AML/CFT) has been improved by the Asia Pacific Group (APG) on Money Laundering, leading to an aggregate of 35/40 recommendations rated as compliant or largely compliant.
According to officials from APG, “Pakistan has 35 recommendations rated compliant or largely compliant (C/LC).”
The third Follow-Up Report (FUR) on the Mutual Evaluation of Pakistan released by APG said that the country is “partially compliant” with three recommendations compared to seven in June of this year, and “non-compliant” with two which have remained unchanged since June.
“Pakistan has made good progress in addressing the technical compliance deficiencies identified in its Mutual Evaluation Report (MER) and has been re-rated on R.10, R.18, R.26, and R.34,” the APG said.
Moreover, Pakistan has also achieved the rating of largely compliance/compliance in all big six recommendations of the FATF which includes R.3 (money laundering offense), R.5 (terrorist financing offense), R.6 (targeted financial sanctions related to terrorism & terrorist financing), R.10 (customer due diligence), R.11 (record keeping) and R.20 (reporting of suspicious transactions).
After this upgrade, Pakistan is well placed in technical compliance in comparison to many other countries. For example, compared to G20 countries, Pakistan is 4th after Italy (38), Saudi Arabia (38), and UK (38), according to a statement by APG.
“Pakistan is now in the top tier of countries that have achieved a rating of C/LC for over 35 of the 40 FATF Recommendations,” according to the finance ministry.
Pakistan has also addressed deficiencies with respect to the employee screening requirements for banks and DFIs with nine new provisions in SBP and SECP Regulations. Amendments have been passed in the CDNS and Pakistan Post Regulations to provide enforceable AML/CFT requirements.
However, the report also said that Pakistan will remain on Enhanced Follow-up, and will continue to report back to APG regarding their progress on strengthening the implementation of AML/CFT measures. Minor deficiencies remain with the SBP Regulation coverage of requirements for financial groups.
The APG noted that deficiencies remained in recommendation 26 with respect to obligations for financial groups and a lack of explicit provisions for SBP to revise risk assessments of REs or financial groups in response to developments in their management and operations. It was still re-rated to the category of “largely compliant”.
Similarly, on R-34, the APG said Pakistan conducted feedback sharing sessions with REs to support the implementation of their obligations. Minor deficiencies remain with respect to the limited sector-specific feedback, guidance issued to lawyers, and the quality of the red flag indicators issued to REs, but it was still re-rated to “largely compliant”.
This re-evaluation came about as Pakistan introduced comprehensive AML/CFT obligations for Central Directorate of National Savings (CDNS).
The fourth follow-up report is said to address the remaining gaps identified in the Mutual Evaluation Report-2019 and prompt Pakistan to seek upgrades in the remaining 5 recommendations.