The National Assembly’s Standing Committee on Finance and Revenue was recently apprised of Pakistan’s efforts to exit the FATF’s infamous grey list. The meeting also lambasted the inequitable attitude of the global watchdog which had removed other countries from the grey list despite lesser compliance whereas Pakistan was being relentlessly railroaded to ensure 100 per cent compliance for the purpose.
Whilst the political undercurrents of the FATF rigmarole are too palpable to be ignored, Pakistan must eliminate the twin evils of money laundering and terror financing from the complex warp and woof of its delicate financial fabric for its own sake. An efficient anti-money laundering (AML) and combating financing of terror (CFT) institutional arrangement must function as an overarching strategic paradigm. It should encapsulate an ordered system of intelligence gathering/complaint lodgement, a sharp investigative methodology, a solid asset seizure and clearance mechanism, a proficient prosecutorial structure and a capable judicial apparatus having a high case disposal capacity. All these facets of the arrangement should be inherently inter-linked. To achieve that, Pakistan needs to reevaluate, reconceive and fine-tune its AML/CFT laws and procedures.
In Pakistan, money laundering and terror financing are, inter alia, governed by the Anti-Money Laundering Act, 2010 (AMLA); the Anti-Terrorism Act, 1997; the Control of Narcotics Substances Act, 1997; the SBP’s Prudential Regulations M1 to M5, 2003/2016; and the SECP’s AML measures, 2002/2018. Additionally, the Protection of Economic Reforms Act, 1992; the Foreign Currency Accounts (Protection) Ordinance, 2000; and the Income Tax Ordinance, 2001 are also relevant due to their financial undertones.
The National Executive Committee, formed vide section 5 of the AMLA and headed by federal finance minister, should constitute a body comprising representatives of the Ministry of Law and Justice, SBP, NAB, ANF, the Financial Management Unit (FMU), Ministry of Finance, SECP, FBR, FIA, the four provincial police organisations and global law experts. It should examine Pakistan’s AML/CFT laws and recommend corrective legislative measures as per Pakistan’s atypical reality, international best practices and the FATF requirements.
The FMU, an autonomous body within the SBP, is the financial intelligence nucleus of Pakistan’s AML/CTF regime. It receives, assesses and disseminates suspicious transaction reports (STRs) and currency transaction reports (CTRs). It should be reconceived; made forensically penetrative and a highly-skilled data assessing outfit; and connected with all the relevant LEAs through self-propelling legal means.
NACTA’s National Task Force on CFT should be the go-to body for the resolution of all AML and CTF issues. It should collect, collate, assess and disseminate intelligence, particularly risk assessments over terror financing. It should focus on predicate crimes like drug-trafficking, corruption and smuggling and should have distinct institutional linkages with the FMU, FIA, NAB, ANF, the provincial CTDs, FBR, SECP and SBP. It should have the legal authority to receive data from LEAs on a quarterly basis so that it can assess their performance and steer them in the right direction.
Likewise, an AML/CTF Unit should be created in the FIA headed by an Additional DG and having several provincial directors. NAB already has an AML/CTF coordination cell which should be given a proper legal cover. CTDs should also have independent cells to handle obscure financial matters. All these organisations should be capable of converting financial intelligence into financial investigations which could result in court convictions. The officers in NACTA, FIA, NAB, CTDs, FBR, SBP, SECP, prosecution services and judiciary should be imparted training in Pakistan and abroad.
Investigators must have forensic financial investigation skills. Without an enormous capacity-building exercise, the AML/CFT system will remain dysfunctional. A well-thought-out, highly-coordinated effort is required to rid Pakistan of its AML/CTF demons. It is time to act.
Published in The Express Tribune, November 13th, 2019.