ISLAMABAD: Pakistan is likely to remain on the so-called grey list of the Financial Action Task Force (FATF) for another four months — i.e. until June — for a couple of unmet targets under the additional criteria.

The concluding session of the plenary meeting of the FATF, a Paris-based global money laundering and terrorist financing watchdog, is due on Friday (today) and includes Pakistan’s review on the agenda.

Pakistan is now targeting the full completion of the 2021 action plan on anti-money laundering and combating terror financing (AML/CFT) by the end of January 2023.

Pakistan has been on the grey list for deficiencies in its counter-terror financing and anti-money laundering regimes since June 2018.

In October 2021, the FATF acknowledged Pakistan’s progress on a 27-point action plan on completion of 26 items but retained the country on its “increased monitoring list” to exhibit terror financing investigations against and prosecutions of top cadres of UN-designated terror groups.

At the time, FATF President Dr Marcus Pleyer said Pakistan had to complete two concurrent action plans with a total of 34 items. “It has now addressed or largely addressed 30 of the items,” he said.

The most recent action plan of 2021 on money laundering from FATF’s regional affiliate — the Asia Pacific Group (APG) — largely focused on money laundering and had found serious deficiencies. In this new action plan, four out of the seven items now stood addressed or largely addressed.

In October, FATF encouraged Pakistan to continue to make progress in addressing the one remaining CFT-related item as soon as possible by continuing to demonstrate that terror financing investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups.

In response to additional deficiencies later identified in Pakistan’s 2019 APG Mutual Evaluation Report in June 2021, Pakistan provided further high-level commitment to address these strategic deficiencies pursuant to a new action plan that primarily focuses on combating money laundering.

The FATF had asked Pakistan to “continue to work to address its other strategically important AML/CFT deficiencies, namely by: (1) providing evidence that it actively seeks to enhance the impact of sanctions beyond its jurisdiction by nominating additional individuals and entities for designation at the UN; and (2) demonstrating an increase in ML [money laundering] 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”.

The completion of APG’s action plan for the effectiveness of AML/CFT is also a structural benchmark of the International Monetary Fund (IMF) for end-March.

Recently, the IMF asked Pakistan to complete the last remaining item in the 2018 AML/CFT action plan on the effectiveness of terror financing investigations and prosecutions of senior leaders of UN-designated terrorist groups, and promptly address the deficiencies identified in Pakistan’s Asia Pacific Group on Money Laundering Mutual Evaluation Report under the 2021 AML/CFT action plan.

The government has given a commitment to the IMF to review the implementation of AML/CFT controls by financial institutions by the end of June with respect to the tax amnesty programme for the construction sector and promised to “meet the timelines for the implementation of APG’s 2021 action plan, including on the mutual legal assistance framework, AML/CFT supervision, transparency of beneficial ownership information, and compliance with targeted financial sanctions for proliferation financing”.

The government has also committed that with respect to the construction sector’s tax amnesty scheme, the State Bank of Pakistan, by the end of June, will conduct a thematic inspection of banks’ compliance with AML/CFT obligations (such as customer due diligence, recordkeeping, and suspicious transaction reporting) on funds received under the programme through the designated bank accounts (including a random sampling of beneficiaries).

“By end-September 2022, the key findings and recommendations of the thematic inspection will be shared with the banking sector through the compliance forum and relevant competent authorities through the General Committee under AML Act, and appropriate enforcement actions will be undertaken including changes in the regulatory framework, as appropriate,” the government said.

Published in Dawn, March 4th, 2022