Pakistan will be retained on the ‘grey list’ during the FATF’s crucial plenary meetings this month as the country has complied with just one the 40 recommendations set by the global anti-money laundering watchdog at the time of the country’s inclusion in the list, according to a report by the Asia Pacific Group (APG).
The APG released 228-page ‘Mutual Evaluation Report’ on Saturday, days ahead of the key Financial Action Task Force’s (FATF) plenary meeting, which will give its decision on Pakistan’s ‘grey list’ status.
Asia Pacific Group report said that Pakistan has complied with just one of the 40 recommendations set by the global anti-money laundering watchdog and Pakistan faces high risks of money laundering and terror financing.
Pakistan was placed on the grey list by the Paris-based watchdog in June last year and was given a plan of action to complete it by October 2019, or face the risk of being placed on the black list with Iran and North Korea. APG report specifically mentions that Pakistan has not taken sufficient action against ’terrorist groups operating in the country such as LeT, JuD and JeM’. Considering the fact that more has been done against these groups than ever before due to pressure from the FATF and yet the action is unsatisfactory, should be cause for concern. This ‘action’ was one of the central points of PM Imran UN speech apart from the operative Kashmir bit.
Comments on the legal system and its “major technical shortcomings” are also highlighted as a deficiency that makes money laundering and terror financing easier. Pakistan has been on the FATF’s grey list for a little over a year and during this time has made considerable efforts to curb terror financing but clearly a lot more needs to be done to satisfy the FATF and time is not on our side. Perhaps all those years of actively lobbying to keep the likes of Masood Azhar off UN’s designated terror list or framing easily bailable charges against JuD chief Hafiz Saeed has culminated in the air of mistrust with which the FATF is observing Pakistan.
The report said, the private sector has a mixed understanding of the risks that Pakistan faces due to money laundering and terror financing. While banks and exchange companies have a better understanding of these risks whereas non-banking finance institutions have a limited understanding and are at the initial stages of implementing a risk-based approach.  Government dismissed the impression that Pakistan is not doing enough to deal with money laundering and terror financing.
Pakistan to show improvement to APG was October 2018 and the Pakistani authorities insisted that they made a lot of progress during the past year.
The report advised that Pakistan should significantly enhance the use of financial intelligence in money laundering, terror financing, and predicate crime cases, particularly the use of financial intelligence to target terrorist groups and higher- risk predicate crimes.
The capacity of law enforcement agencies to fight money laundering and terror financing leaves a little to be desired. Other than progress on FATF recommendations, there is lots of politics in the task force circles. Earlier, the Indian external affairs ministry said that Pakistan would be put on blacklist in the Paris meeting, prompting a strong reaction from the Foreign Office. Of course, politics and lobbying are involved in the task force. Pakistan should also initiate effective lobbying in the FATF circles.
Pakistan has a mixed level of technical compliance with relevant FATF recommendations and major improvements are needed in Pakistan’s international cooperation actions against criminals and their assets while china presiding over the FATF may provide us with some relief but that may not be enough as there are 38 other members to win over. This includes India that is a strong proponent of Pakistan being placed on the black list and will use all its leverage to achieve this in the coming weeks.