Pakistan’s efforts to evade FATF


Reema Shaukat

IN a recent move one of National Assembly’s panel
approved a bill suggesting amendments in money
laundering and foreign exchange regulation laws. According to experts, this will facilitate government as a further step to meet requirements of FATF which will finally review its decision about Pakistan’s position in coming September. FATF, the global body working to curb money laundering and terrorism financing has placed Pakistan on grey list since February last year. In September, the FATF will take a decision about whether to further keep Pakistan on its watch list.
Financial Action Task Force (FATF) was formed in1989 during the G-7 Summit to deal with the growing issue of money laundering. The task force at that time was charged with studying money laundering trends, monitoring legislative, financial and law enforcement activities taken at the national and international level, reporting on compliance, and issuing recommendations and standards to combat money laundering. After 9/11 this watchdog extended its work parameters to terror financing and related funding of terrorist organizations. The FATF also works in close cooperation with a number of international and regional bodies involved in combating money laundering and terrorism financing. Pakistan already remained on the watch-list for a period of three years from 2012-2015.
Pakistan is again on a move and trying its best to defeat a move initiated last year by the US to put Pakistan on a global terror-financing watch list with an anti-money-laundering monitoring group, whereas India being member of FATF always try to blame Pakistan and drags that it should be placed in black category. Pakistan has been mounting in recent months to forfend being added to a list of countries considered non-compliant with terrorist financing regulations by the Financial Action Task Force (FATF) — a measure that may hurt its already dwindling economy. Apart from Pakistan, other countries on FATF watchlist are Ethiopia, Iraq, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Vanuatu and Yemen. According to NA panel’s recommendations which if finally approved by Parliament, the State Bank of Pakistan’s permission will be obligatory for inland movement of foreign exchange valuing more than $10,000 by an individual. Further, it is for the first time that the central bank has been given powers to regulate inland movement of foreign currency to curb money laundering. In case of violation, the law enforcement agencies will be authorized to confiscate the currency and arrest the currency holders.
The National Assembly Standing Committee on Finance and Revenue approved the Foreign Exchange Regulations (Amendment) Bill 2019 and Anti-Money Laundering (Amendment) Bill 2019 with certain amendments aimed at addressing legal deficiencies pointed out by the FATF. The violation of the FERA law will involve “rigorous imprisonment for a term of up to five years or fine or both”. According to experts these restrictions on inland movement of currency have been proposed to end the business of Hawala and Hundi, which is also a source of money laundering
In another amendment, the Government has surrendered the federal cabinet powers to approve bilateral agreements between the financial intelligence units. According to another amendment, the financial institutions will be bound to promptly share information on money laundering with FMU as against the current limit of seven days. The Standing Committee also approved to empower the investigation officers to attach property involved in money laundering for six months as against the current period of three months. It is proposed that the courts could grant further extension in the attachment period of up to one year. According to the proposals, the banks would also be bound to file suspicious transactions report and on failing to do so, the persons concerned will be liable to five years of imprisonment and a fine of Rs 500,000. Under the newly approved bill, the money laundering will now be a non-bailable offence. The Standing Committee also approved to empower the investigation officers to attach property involved in money laundering for six months as against the current period of three months. It will also be mandatory to keep the record of suspicious transactions for 10 years, which is double the current period. This bill will surely curb the money laundering activities in Pakistan.
Recently a delegation also visited from USA to meet PM’S Adviser and team on finance and give necessary feedback. During the meeting the delegation asked Pakistan to show tangible and satisfactory actions against banned organisations and their leadership to pacify more countries towards supporting its case to move out of the grey list of FATF in future. It was briefed that the international partners helped Islamabad engage foreign consultants to support and prepare key stakeholders such as Securities and Exchange Commission of Pakistan, National Counter-Terrorism Authority, State Bank of Pakistan and Federal Board of Revenue to take actions and formulate reports keeping in view the international perspective.
The Finance Adviser emphasised the importance of bilateral engagement with the US and told the delegation that over the past three months, the Government had taken significant steps to bring financial discipline that include reduction in current account deficit, focus on increasing revenue generation, measures to reduce fiscal expenditure, reduce fiscal borrowings, efforts to enhance foreign exchange reserves through bilateral and multilateral support, arrangement of petroleum credit facility. Apart from combating terrorism and terrorist financing groups, Pakistan has taken due steps to evade FATF sanctions and as part of its institutional development initiative, the SBP and the FBR are being resourced and empowered. At the same time to facilitate economic growth and support the people below the poverty line, various programmes to support Pakistan’s export-oriented industries and health insurance schemes have been introduced for the poor.
— The writer works for Pakistan Institute for Conflict and Security Studies, a think-tank based in Islamabad.