June will be here before we know it
FATF evaluation follows similar series of processes requiring roughly a year
The writer is a development professional working at a Pakistani NGO in Islamabad. She can be reached at Karen.Janjua@communityworldservice.asia
June will be here before we know it, and then, it is back onto the FATF grey list we go. In late February, when the US, the UK, France and Germany sought to move a resolution against Pakistan at the FATF plenary meeting, we were given a second chance of sorts to demonstrate compliance — up until June — to put improvements in place. Unless we can demonstrate that we are pursuing a course of substantive improvement along the key technical standards, referred to as “recommendations,” as well as the effectiveness standards, or “outcomes” on which all jurisdictions are evaluated, we could be there longer than the year that some pundits have mentioned.
By claiming that the FATF country ratings are “politically determined,” or that being on the list or off of it can be managed through diplomacy alone, some members of national entities could be delivering a distraction that only results in deprivation of the time which we do have at our disposal to act in the most effective ways.
The evaluation’s ratings are evidence-based and framed largely as a time-barred, scheduled series of activities having related sub-tasks, including a desk study, opportunities for responses and an in-country evaluation or inspection. Imagine a sort of mixed academic/business analogy for the in-country evaluation. It is a bit like a university degree programme and its sub-departments are scheduled for a two-week management audit by a group of professors from neighbouring countries’ universities. Subsequently, a comprehensive report is published and then the evaluated departments and scholars defend their positions. To anticipate doing well, those who are evaluated will need to know the details of the evaluation process in advance; they need to know, not only the jargon of their own discipline, but also that of the visiting auditors. They will need to be ready to perform as per the accepted rules of their degree programmes and the Higher Education Commission and have capacities to defend their positions well in writing.
The FATF evaluation follows a similar series of processes requiring roughly a year. During this year of activities, Pakistan will need to demonstrate that it has put technical regulations in place that comply with FATF requirements and that it is ensuring their effective implementation. Further, Pakistan must be ready to communicate effectively about compliance. Similarly, for those technical standards where specific exercises like sector reviews and risk assessments are required for compliance, Pakistan will be judged first, to have either done the task or not and secondly, whether the efforts have produced the desired effects, or, in the case of unintended results, what those responsible are doing about it.
Others might argue that there really isn’t enough time to make a difference at this point. In the last Mutual Evaluation Report dated 2009, Pakistan received low ratings on two-thirds of the 49 standards upon which it was evaluated and went onto the FATF grey list. It took more than four years to put sufficient changes in place to get off it.
Furthermore, the rules have changed since the last evaluation, so a lot more is involved besides just continuing to implement the actions recommended in the last mutual evaluation report to get a better technical rating. Since 2014, countries’ technical compliance is additionally being evaluated along with 11 effectiveness standards. In 2016, the FATF updated their assessment methodology. Several of the 40 recommendations, or technical standards and their interpretive notes have also been revised or significantly updated in recent years.
One way to work towards a better evaluation result would be to practise greater inclusion, beyond those institutions already participating in preparation for the evaluation.
The rationale is that each and every recommendation, on which Pakistan earns a good rating is important as it contributes towards the cumulative rating. The numbers of good ratings do matter, as they determine whether or not we will immediately be placed onto an “enhanced follow up regimen,” and for how long. In our current situation, even though the clock is ticking, we should bear in mind that just as some of the 40 standards involve a broader inclusion of sectors than financial, counter-terrorism/security and governance, a broader group of stakeholders can and ideally should be involved in the preparations for the evaluation.
Take, for example, recommendation 8, the standard concerning non-profits. In February, prior to the Paris Plenary meetings, a presidential resolution was enacted in regard to criminalising offenders and their organisations which are on the UN terrorist watch list, in a bid to avoid being placed on the black list. This decision corresponded to a recommended action in the 2009 mutual evaluation report and was likely to have been viewed as a step towards improvement, buying Pakistan some time, and delaying a decision on placement on the watch.
It should be pointed out, however, that while this is positive, there are other, more recent requirements for compliance with recommendation 8 that date from the standard’s substantive revision in 2016, and which we also need to address.
Between now and June, Pakistan should have at least started work on the three technical tasks which are now mandatory under recommendation 8: The sector review for the non-profits sector, the risk assessment for non-profits, and the related outreach specific to the need for non-profits to comply with counter-terrorism and anti-money laundering regulations. Furthermore, in order to now receive a higher-level “effectiveness” rating, we need to ensure that the implementation of the technical standards already in force, as well as the methodology utilised for the new review and assessment tasks, are consistent with FATF requirements.
It might be tempting for the authorities to turn these tasks over to one of the quasi-governmental, non-profit entities. That, in retrospect, might seem as a miscalculation, since contracting to such entities would appear to the evaluators to be morally equivalent to a physician giving his/her patient a “referral” to himself/herself. Likewise, the “outreach to civil society” task, in order to meet technical compliance and effectiveness standards, must be broad, accessible to as many non-profits as possible, and inclusive. Not one quasi-governmental agency has that kind of reach or the time to figure it all out. Outreach will have include civil society as implementers of outreach.
So, why doesn’t Pakistan consider doing as a few brotherly countries have recently done in regard to preparing improved compliance for their own mutual evaluations? These countries requested the support of external experts having substantive track records of success across multiple jurisdictions. Such experts bring experience, long-term relationships with inter-governmental organisations, FATF-endorsed methodology and the capacities needed to identify and engage the appropriate government, private sector and civil society stakeholders that must be involved.
This approach is practical, as government offices here and abroad do not have the fleets of personnel necessary to read, digest and manage the information necessary, nor can they abandon their ongoing regular work for extended periods. The best option is often to accept the offers of training for key officials and become better prepared to make requests for the particular technical assistance that their own country’s situation requires and subsequently, oversee the requisite processes. Farming out bits of the work is also practical.
Despite how one may view the results of the FATF plenary in Paris last February, there are two basic facts we should be focusing on now:
Firstly, the results of the stock-taking within the mutual evaluation coming at the end of the year will examine how many of the standards corresponding to FATF’s 40 recommendations are in place or in process and how effectively they are producing the desired outcomes. The evaluators will also examine whether or not the regulatory efforts are producing unintended or negative outcomes for legitimate stakeholders in Pakistan.
Secondly, there are countries that want Pakistan to do well, and of those, some would very much like to help us, but we have to ask for it. It is also a fact that Nacta has acquired the necessary skilled people and resources to work more effectively than at any previous time. They and the inter-agency task force they chair have never taken their eyes off the ball, so to speak. Even so, it probably couldn’t hurt to draft a few more international players, as well as engage civil society players in the stands who want their sector to fully comply with Counter-Terrorism/Anti-Money Laundering standards. That may be the best way to ensure that all the bases are covered.
Published in The Express Tribune, April 17th, 2018.
By claiming that the FATF country ratings are “politically determined,” or that being on the list or off of it can be managed through diplomacy alone, some members of national entities could be delivering a distraction that only results in deprivation of the time which we do have at our disposal to act in the most effective ways.
The evaluation’s ratings are evidence-based and framed largely as a time-barred, scheduled series of activities having related sub-tasks, including a desk study, opportunities for responses and an in-country evaluation or inspection. Imagine a sort of mixed academic/business analogy for the in-country evaluation. It is a bit like a university degree programme and its sub-departments are scheduled for a two-week management audit by a group of professors from neighbouring countries’ universities. Subsequently, a comprehensive report is published and then the evaluated departments and scholars defend their positions. To anticipate doing well, those who are evaluated will need to know the details of the evaluation process in advance; they need to know, not only the jargon of their own discipline, but also that of the visiting auditors. They will need to be ready to perform as per the accepted rules of their degree programmes and the Higher Education Commission and have capacities to defend their positions well in writing.
The FATF evaluation follows a similar series of processes requiring roughly a year. During this year of activities, Pakistan will need to demonstrate that it has put technical regulations in place that comply with FATF requirements and that it is ensuring their effective implementation. Further, Pakistan must be ready to communicate effectively about compliance. Similarly, for those technical standards where specific exercises like sector reviews and risk assessments are required for compliance, Pakistan will be judged first, to have either done the task or not and secondly, whether the efforts have produced the desired effects, or, in the case of unintended results, what those responsible are doing about it.
Others might argue that there really isn’t enough time to make a difference at this point. In the last Mutual Evaluation Report dated 2009, Pakistan received low ratings on two-thirds of the 49 standards upon which it was evaluated and went onto the FATF grey list. It took more than four years to put sufficient changes in place to get off it.
Furthermore, the rules have changed since the last evaluation, so a lot more is involved besides just continuing to implement the actions recommended in the last mutual evaluation report to get a better technical rating. Since 2014, countries’ technical compliance is additionally being evaluated along with 11 effectiveness standards. In 2016, the FATF updated their assessment methodology. Several of the 40 recommendations, or technical standards and their interpretive notes have also been revised or significantly updated in recent years.
One way to work towards a better evaluation result would be to practise greater inclusion, beyond those institutions already participating in preparation for the evaluation.
The rationale is that each and every recommendation, on which Pakistan earns a good rating is important as it contributes towards the cumulative rating. The numbers of good ratings do matter, as they determine whether or not we will immediately be placed onto an “enhanced follow up regimen,” and for how long. In our current situation, even though the clock is ticking, we should bear in mind that just as some of the 40 standards involve a broader inclusion of sectors than financial, counter-terrorism/security and governance, a broader group of stakeholders can and ideally should be involved in the preparations for the evaluation.
Take, for example, recommendation 8, the standard concerning non-profits. In February, prior to the Paris Plenary meetings, a presidential resolution was enacted in regard to criminalising offenders and their organisations which are on the UN terrorist watch list, in a bid to avoid being placed on the black list. This decision corresponded to a recommended action in the 2009 mutual evaluation report and was likely to have been viewed as a step towards improvement, buying Pakistan some time, and delaying a decision on placement on the watch.
It should be pointed out, however, that while this is positive, there are other, more recent requirements for compliance with recommendation 8 that date from the standard’s substantive revision in 2016, and which we also need to address.
Between now and June, Pakistan should have at least started work on the three technical tasks which are now mandatory under recommendation 8: The sector review for the non-profits sector, the risk assessment for non-profits, and the related outreach specific to the need for non-profits to comply with counter-terrorism and anti-money laundering regulations. Furthermore, in order to now receive a higher-level “effectiveness” rating, we need to ensure that the implementation of the technical standards already in force, as well as the methodology utilised for the new review and assessment tasks, are consistent with FATF requirements.
It might be tempting for the authorities to turn these tasks over to one of the quasi-governmental, non-profit entities. That, in retrospect, might seem as a miscalculation, since contracting to such entities would appear to the evaluators to be morally equivalent to a physician giving his/her patient a “referral” to himself/herself. Likewise, the “outreach to civil society” task, in order to meet technical compliance and effectiveness standards, must be broad, accessible to as many non-profits as possible, and inclusive. Not one quasi-governmental agency has that kind of reach or the time to figure it all out. Outreach will have include civil society as implementers of outreach.
So, why doesn’t Pakistan consider doing as a few brotherly countries have recently done in regard to preparing improved compliance for their own mutual evaluations? These countries requested the support of external experts having substantive track records of success across multiple jurisdictions. Such experts bring experience, long-term relationships with inter-governmental organisations, FATF-endorsed methodology and the capacities needed to identify and engage the appropriate government, private sector and civil society stakeholders that must be involved.
This approach is practical, as government offices here and abroad do not have the fleets of personnel necessary to read, digest and manage the information necessary, nor can they abandon their ongoing regular work for extended periods. The best option is often to accept the offers of training for key officials and become better prepared to make requests for the particular technical assistance that their own country’s situation requires and subsequently, oversee the requisite processes. Farming out bits of the work is also practical.
Despite how one may view the results of the FATF plenary in Paris last February, there are two basic facts we should be focusing on now:
Firstly, the results of the stock-taking within the mutual evaluation coming at the end of the year will examine how many of the standards corresponding to FATF’s 40 recommendations are in place or in process and how effectively they are producing the desired outcomes. The evaluators will also examine whether or not the regulatory efforts are producing unintended or negative outcomes for legitimate stakeholders in Pakistan.
Secondly, there are countries that want Pakistan to do well, and of those, some would very much like to help us, but we have to ask for it. It is also a fact that Nacta has acquired the necessary skilled people and resources to work more effectively than at any previous time. They and the inter-agency task force they chair have never taken their eyes off the ball, so to speak. Even so, it probably couldn’t hurt to draft a few more international players, as well as engage civil society players in the stands who want their sector to fully comply with Counter-Terrorism/Anti-Money Laundering standards. That may be the best way to ensure that all the bases are covered.
Published in The Express Tribune, April 17th, 2018.