ISLAMABAD: Even after ‘largely completing’ 26 of the 27 targets, Pakistan will remain in the grey list of the Financial Action Task Force (FATF) for at least another year and deliver on seven new parallel action points to address deficiencies in its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regime.

“Pakistan will remain in the increased monitoring list although it has made significant progress, showed stronger commitment and largely addressed 26 out of 27 action items it had committed in 2018 action plan,” said Marcus Pleyer, president of the Paris-based FATF, at a virtual news conference after a five-day plenary.

Mr Pleyer said Pakistan would need to complete the one remaining CFT-related item out of 27 by “demonstrating that TF (terror financing) investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups”, as well as the parallel six-point action plan given by the Asia Pacific Group (APG), regional affiliate of the FATF, for enhancing international cooperation.

Islamabad needs to complete one remaining CFT-related item, deliver on seven new parallel action points

Minister for Industries and Production Hammad Azhar, who is also top coordinator on inter-provincial and inter-agency efforts against money laundering and terror financing, however, said the APG had given seven additional action points under a parallel mutual evaluation mechanism under which Islamabad had largely completed 75 out of 82 action points.

Mr Azhar, who spoke at a news conference soon after Mr Pleyer’s announcement, said Pakistan would complete within three-four months the only remaining FATF target on speedy prosecution of the UN-designated terror groups’ leaders. He said the government had set a target for itself to complete APG’s seven action points within 12 months — a target most jurisdictions achieve in two years.

Marcus Pleyer made it clear that Pakistan’s delisting from grey list would not take place until both action plans were completed and the members then came to a conclusion that systems and efforts against financial risks were sustainable.

He said the rules were very clear and equally applicable that jurisdictions under increased monitoring list had to complete all action points and fully address the risks.

Responding to a question, the FATF chief explained that the grey list did not have any legal consequences as opposed to the blacklist under which jurisdictions faced financial sanctions and additional scrutiny. The grey list was kind of a public disclosure about some deficiencies in the financial systems, he added.

Mr Pleyer said the FATF recognised Pakistan’s progress and efforts to address these CFT action plan items and encouraged it to continue to make progress to address as soon as possible the one remaining CFT-related item.

He appreciated that since February 2021, Pakistan had made progress to complete two of the three remaining action items on demonstrating that effective, proportionate and dissuasive sanctions are imposed for TF convictions and that Pakistan’s targeted financial sanctions regime was being used effectively to targeted terrorist assets.

The FATF noted that in response to additional deficiencies later identified in Pakistan’s 2019 APG Mutual Evaluation Report, the country had made progress to address a number of the recommended actions in the MER and provided further high-level commitment in June 2021 to address these strategic deficiencies pursuant to a new action plan that primarily focused on combating money laundering.

Under the new action plan, Pakistan will have to address its strategically important AML/CFT deficiencies. These include enhancing international cooperation by amending the MLA law, demonstrating that assistance is being sought from foreign countries in implementing UNSCR 1373 designations and also that supervisors are conducting both on-site and off-site supervision commensurate with specific risks associated with designated non-financial businesses & professions (DNFBPs), including applying appropriate sanctions where necessary.

The new actions also require Pakistan to demonstrate that proportionate and dissuasive sanctions are applied consistently to all legal persons and legal arrangements for non-compliance with beneficial ownership requirements, show increase in ML investigations and prosecutions and that proceeds of crime continue to be restrained and confiscated in line with Pakistan’s risk profile, including working with foreign counterparts to trace, freeze and confiscate assets. Also, the government has to demonstrate that DNFBPs are being monitored for compliance with proliferation financing requirements and that sanctions are being imposed for non-compliance.

Hammad Azhar claimed credit for making robust progress on global commitments by passing 17 laws within a parliamentary year, besides making dozens of rules and regulations and a lot of related compliance actions with the support of all provinces and civil and military authorities.

Responding to a question, he said one of the outstanding items in the mutual legal assistance (MLA) pertained to international requirement to notify a suspected person against whom a foreign legal assistance was sought that could be addressed immediately. In addition, the government would now have to effectively regulator real estate and similar other businesses, improve monitoring of beneficial ownership and quickly investigate and prosecute UN-designated terrorists.

Separately, the finance ministry explained that the FATF discussed Pakistan’s progress report on 2018 action plan and post-observation period report (POPR) in its virtual plenary and focused on three main areas — technical compliance, ICRG action plan and POPR.

On technical compliance, it said, the FATF appreciated Pakistan’s commitment and efforts to seek upgrades in a number of recommendations and expected that the country would continue same momentum.

On 2018 action plan, the FATF recognised considerable progress and high-level commitment of Pakistan to complete 26 of the 27 action plan items. The FATF, after discussion, decided to retain status quo for Pakistan i.e. countries in increased monitoring. It hoped the remaining action item would be completed before the FATF’s next plenary scheduled for October.

Regarding POPR, the ministry said, the FATF acknowledged Pakistan’s significant progress and continuation of its high-level commitment. “A total of 82 deficiencies were highlighted in Pakistan’s 2019 MER which were included in POPR as 67 recommended actions in 11 immediate outcomes (IOs), on which Pakistan reported progress. As a result of the progress made since MER 2019, the FATF approved a seven-point ML centric action plan to be implemented by Pakistan,” the finance ministry said.

Published in Dawn, June 26th, 2021