Pakistan ‘largely-compliant’ to FATF action points

Published: January 7, 2020


ISLAMABAD: Pakistan on Monday hoped to win a “largely-compliant” rating from the Financial Action Task Force (FATF) on the implementation of its 27 action points, which might help the government get more time from the watchdog for full compliance.

For the Feb plenary meeting of the FATF “our target is to be largely complaint on most of the action points”, Director General of Financial Monitoring Unit (FMU) Mansoor Siddiqui told a parliamentary panel.

Siddiqui was speaking during a meeting of the Senate Standing Committee on Finance, which convened to approve amendments to the Anti-Money Laundering (AML) Act and the Foreign Exchange Regulations Act.

Committee Chairman Senator Farooq H Naek did not take up the proposed bills after the government could not satisfy the committee about the need of these amendments.

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Siddiqui’s statement comes two days before the submission of Pakistan’s last progress report on the implementation of the FATF Action Plan to the Joint Group of the FATF. Pakistan and the Joint Group will meet in Beijing on Jan 21 and 22, Siddiqui said.

Pakistan will be judged by an FATF plenary next month on the basis of the Joint Group’s report, Siddiqui added. “In the past six months, we have won the support of a number of countries and also made significant progress in implementing the Action Plan,” he added.

In Jan last year, Siddiqui said, “we were largely compliant only on one action item” but by October “we were largely complaint on five action points”. In the Feb 2020 report, Pakistan will still be “partially” compliant on some of the points but most action points will be largely addressed.

For exiting the grey list, Pakistan needs to show full compliance on all the action points by Feb 2020, according to the FATF statement issued in Oct last year.

Siddiqui said they were hopeful because Pakistan had made “major progress” by completing national risk assessment report, developing an effective interagency coordination framework and conducting a review of the risk-based supervisory policies by the regulators and the law-enforcement agencies.

He said decisive actions had been taken against the entities concerned and mapping and supervision of non-profit organisations had been completed.

The authorities gave contradictory statements about the need for bringing changes in the Anti-Money Laundering Act of 2010 and Foreign Exchange Regulations Act 1947.

Additional Finance Secretary Kamran Afzal said that these changes were proposed to bring transparency in the laws, while the DG said that the changes were proposed to meet the requirements of the FATF and the Asia Pacific Group.

The committee chairman directed that the government present the agreements with the FATF before the committee, so that it might judge whether the proposed changes were needed.

“The committee would support any legal change that is desired by the FATF but my apprehensions are that the government is using the FATF name to get its own things done,” Naek said.

He added that the government was making half-hearted attempts, which was also evident from the absence of Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh and Finance Secretary Naveed Kamran Baloch’s from the meeting.

The DG gave a presentation on the FATF Action Plan and its implementation status. The plan focuses on curbing terror financing through terror financing risk assessment and supervisory actions, terror financing risk in cash couriers and countering actions, terror financing inquiry and investigations and application of targeted financial sanctions.

According to the DG, there were risks for remaining on the grey list. The probable risks related to grey listing of Pakistan include enhanced due diligence of financial transactions and opening of accounts in foreign jurisdictions, he said, adding that it took one and half month to a Pakistani ambassador to open bank account abroad.

There are difficulties in banking relationships and higher compliance cost for financial institutions, the DG said. Similarly, there are negative impact on foreign direct investment and international trade. It takes longer time to open letter of credit and the cost is also high, he added. It risks affecting pricing of multilateral transactions, said the DG.

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In 2018 and 2019 the UN Security Council passed resolutions that made implementation of the FATF recommendations binding and in case of deficiencies, sanctions could be imposed that may carry economic cost, said Siddiqui.

In order to remove legal obstacles to effectively curb the money laundering and terror financing, he said, five laws are being amended, which are at various stages of approval at present. The Anti-Money Laundering Act 2010 and Foreign Exchange Regulations Act 1947 are before the Senate committee for approval after being endorsed by the National Assembly standing committee.

The Mutual Legal Assistance Act has been introduced before the National Assembly while the amendments are being proposed to the United Nations Security Council Act 1948 and Anti-Terrorism Act 1997.

Nine amendments are proposed to the AML Act to make it consistent with the FATF standards and enhance punishments to make them effective.

Pakistan is also undergoing a separate scrutiny process by the Asia Pacific Group that has found Islamabad’s compliance to only 10 recommendations out of 40. Similarly, out of 11 effectiveness indicators, Pakistan is found at moderate effective level only against one indicator.

Pakistan has also made a national strategy to avoid blacklisting by the AGP and it will submit the first implementation report on Feb 1, 2020, the DG said.

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