Will Pakistan be blacklisted?
Despite having open knowledge of a handful of money transfer agents, the enforcement remains non-existent
A meeting of the FATF. PHOTO:FATF
If Pakistan was serious about getting out of the FATF’s Grey List, the head of Financial Monitoring Unit (FMU) — the institutional lynchpin of the country’s anti-money laundering and counter financing terrorism (AML/CFT) regime — would be a reputable professional with a profile as high as SECP chairman or governor of the State Bank. The hundi and hawala agents would be rare to find; we would have had a comprehensive registry of non-profits, trusts and charities; and the revelations about the falooda vendor, having billions in his account without his knowledge, would have led to rolling of a few heads amongst the custodians of our AML/CFT framework.
Early exit from FATF grey list unlikely
But the FMU remains understaffed and capacity starved. The hundi/hawala channels remain widely available. We remain clueless about thousands of non-profits working across the country. And despite accounts being opened in dead people’s names and moving billions with impunity, it is not clear where the system failed us. No one is questioning if these suspicious transactions were ever detected by the banks; if they were reported to the FMU or if the FMU ever acted on these reports.
It seems that the elaborate regulatory regime for AML/CFT with 20+ laws, three sets of regulations and 10 reporting formats along with a complex institutional framework with the National Executive Committee, general committee and the FMU have been useless in curbing money laundering and terrorist financing. Or else the country would not be where it is today.
If there was one message that came out of the recent visit by the FATF team, it was that Pakistan has not done enough on its AML/CFT obligations. If we do not act swiftly, we can very well be included on the Black List.
Our bureaucrats still fail to see the link between money laundering and terrorism financing and advocate that it’s only the latter that is the real problem. They are quick to link terrorism financing with security concerns and argue that curbing its flows does not depend on their performance. What they forget however is that money laundering is about keeping the conduits open to send ill-gotten money abroad. And while these taps remain open, the terrorism financing also finds its way through these conduits. Without tightening the AML regime, we can never be successful in eliminating terrorism financing.
Let’s think for a moment, where the ill-gotten money generally flows. It either has to be sent abroad through hawala/hundi, exchange companies or other means. Or else, it will be invested in real estate, diamonds, gold and other precious items. No wonder that both these areas reflect the weakest links in Pakistan’s AML/CFT regime.
On the one hand, despite having open knowledge of a handful of money transfer agents, the enforcement remains non-existent and on the other, the ‘designated non-financial businesses and professions’ — a term used for real estate agents, dealers of precious metals and other such categories — continue to operate under a regulatory vacuum.
APGML delegation arrives in Pakistan
If we continue to rely on the bureaucrats to fix this system, they are likely to suggest further meaningless changes to laws to signal their intent to reform without real reform and with no real impact.
But now it’s time to take the bull by the horns. The FMU needs to be strengthened and made independent with the right professionals. The supervising committees should involve the judiciary to ensure convictions and there should be indiscriminate enforcement. Eliminating corruption is central to the present government’s agenda. Corruption and money laundering however are directly linked, as money laundering is used to conceal proceeds of corruption. Implementing FATF recommendations therefore will not only help us in getting out of the Grey List but will also provide an effective shield against corruption and will facilitate detection, investigation and prosecution of corruption and the recovery of stolen assets.
Published in The Express Tribune, October 23rd, 2018.
Early exit from FATF grey list unlikely
But the FMU remains understaffed and capacity starved. The hundi/hawala channels remain widely available. We remain clueless about thousands of non-profits working across the country. And despite accounts being opened in dead people’s names and moving billions with impunity, it is not clear where the system failed us. No one is questioning if these suspicious transactions were ever detected by the banks; if they were reported to the FMU or if the FMU ever acted on these reports.
It seems that the elaborate regulatory regime for AML/CFT with 20+ laws, three sets of regulations and 10 reporting formats along with a complex institutional framework with the National Executive Committee, general committee and the FMU have been useless in curbing money laundering and terrorist financing. Or else the country would not be where it is today.
If there was one message that came out of the recent visit by the FATF team, it was that Pakistan has not done enough on its AML/CFT obligations. If we do not act swiftly, we can very well be included on the Black List.
Our bureaucrats still fail to see the link between money laundering and terrorism financing and advocate that it’s only the latter that is the real problem. They are quick to link terrorism financing with security concerns and argue that curbing its flows does not depend on their performance. What they forget however is that money laundering is about keeping the conduits open to send ill-gotten money abroad. And while these taps remain open, the terrorism financing also finds its way through these conduits. Without tightening the AML regime, we can never be successful in eliminating terrorism financing.
Let’s think for a moment, where the ill-gotten money generally flows. It either has to be sent abroad through hawala/hundi, exchange companies or other means. Or else, it will be invested in real estate, diamonds, gold and other precious items. No wonder that both these areas reflect the weakest links in Pakistan’s AML/CFT regime.
On the one hand, despite having open knowledge of a handful of money transfer agents, the enforcement remains non-existent and on the other, the ‘designated non-financial businesses and professions’ — a term used for real estate agents, dealers of precious metals and other such categories — continue to operate under a regulatory vacuum.
APGML delegation arrives in Pakistan
If we continue to rely on the bureaucrats to fix this system, they are likely to suggest further meaningless changes to laws to signal their intent to reform without real reform and with no real impact.
But now it’s time to take the bull by the horns. The FMU needs to be strengthened and made independent with the right professionals. The supervising committees should involve the judiciary to ensure convictions and there should be indiscriminate enforcement. Eliminating corruption is central to the present government’s agenda. Corruption and money laundering however are directly linked, as money laundering is used to conceal proceeds of corruption. Implementing FATF recommendations therefore will not only help us in getting out of the Grey List but will also provide an effective shield against corruption and will facilitate detection, investigation and prosecution of corruption and the recovery of stolen assets.
Published in The Express Tribune, October 23rd, 2018.