PAKISTAN AND TERRORISM FUNDING:
At the end of June of this year, Pakistan was added to the “grey list” of countries deemed by the Financial Action Task Force as not yet having taken sufficient steps to thwart opportunities for money laundering and finance for terrorism, as defined by international conventions and regulatory requirements.
An Action Plan was agreed with time-bound tasks corresponding to each of the weaknesses identified by FATF.
Last week, Pakistan received a follow up cum pre-evaluation visit by a six-member delegation of the Asia Pacific Group (APG), that is responsible for our geographical region.
The Financial Action Task Force (on Money Laundering) (FATF), is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
In 2001 its mandate expanded to include terrorism financing.
It monitors progress in implementing the FATF Recommendations through “peer reviews” (“mutual evaluations”) of member countries.
The FATF Secretariat is housed at the OECD headquarters in Paris.
The FATF is an intergovernmental body established to combat money laundering, terror financing and other related threats to the integrity of the international financial system.
Pakistan was added to the “grey list” of countries involved in providing monetary assistance to terrorism and related causes after a Financial Action Task Force meeting in Paris in June 2018.
Terror financing involves collection of funds to support acts of terror or terrorist organisations. In financing terrorism, funds may come from legitimate sources, such as donations from the ordinary citizen, but the purpose has to be a crime.
IMPACT OF GREY-LISTING
- It will endanger Pakistan’s handful of remaining banking links to the outside world, causing real financial pain to the economy.
- It will squeeze Pakistan’s economy and make it harder to meet its mounting foreign financing needs, including potential future borrowings from International Monetary Fund (IMF).
- It will lead to downgrading of Pakistan’s debt ratings by international banking and credit rating agencies, making it more difficult to tap funds from international bond markets.
- It will also suspend international funds and aid to Pakistan such as Coalition Support Funds (CSF), money which US owes to Pakistan for military operations.
The Asia/Pacific Group on Money Laundering (also known as the APG) is the FATF-style regional body for the Asia-Pacific region.
It is an inter-governmental (international) organisation founded in 1997 in Bangkok, Thailand.
The APG consists of 41 member jurisdictions and a number of observer jurisdictions and international/regional observer organisations.
Jurisdictions that join the APG, either as members or as observers, must commit to implement the international standards against money laundering, the financing of terrorism and proliferation financing (WMD), in particular the Recommendations of the Financial Action Task Force (FATF).
The APG has a number of roles as stated in its strategic plan including:
- assessing APG members compliance with the international anti-money laundering/combating the financing of terrorism (AML/CFT) standards through a programme of mutual evaluations;
- supporting implementation of the international AML/CFT standards, including coordinating multi-lateral and bi-lateral technical assistance and training with donor countries and agencies;
- conducting research and analysis into money laundering and terrorist financing trends and methods;
- participating in, and co-operating with, the international AML/CFT network and contributing to global policy development of the standards through associate membership in the FATF; and
- engaging with the private sector to raise awareness in the region on AML/CFT issues. Private sector engagement includes interacting with financial and non-financial institutions, academia and the media.
The APG conducts mutual evaluations of its members to determine whether they comply, or to what extent they comply, with their obligations to implement the global anti-money laundering and anti-terrorist financing standards. Some of these reports are conducted jointly with other AML/CFT bodies such as the FATF, the International Monetary Fund, the World Bank and the Group of International Financial Centre Supervisors.
Highlighting deficiencies in Pakistan’s legal framework, the visiting APG team pointed out that this could hamper Pakistan’s effective response on requests of mutual legal assistance by foreign countries in money laundering cases, officials said.
Stressing the need for strengthening domestic legal framework by October, members of the APG team an on-site inspection would be carried out by the regional body after this period. It also urged the authorities concerned to give predicate offence monitoring powers to the Securities and Exchange Commission of Pakistan (SECP) and National Accountability Bureau (NAB).
The group’s other areas of concerns were activities by non-profit organisations, narcotics trafficking and proceeds of crimes.
The team comprises officials from the US, Turkey, China and the UK. Officials from the US Treasury and the UK’s New Scotland Yard are part of the delegation.
The APG’s Mutual Evaluation report can play a critical role in retaining or removing Pakistan from the list after September next year.